How Mauritius can support Middle East efforts in Africa

According to Bank One, a joint venture between CIEL Finance Limited and I&M Group PLC, Mauritius could become a conduit for project funding into sub-Saharan Africa by forming a league with financial institutions in the Middle East

The Bank has adopted a long-term strategy to expand its footprint and position itself as ‘Africa’s preferred gateway’. In order to do so, and unlock the massive deal flows on the ground to sustain economic growth in the region – which it stated are “definitely” there – the organisation met with key financial sector players in the Gulf.

“At Bank One, we were recently privileged to meet with key players from the Gulf region and explore the financial landscape in the Middle East through an expert eye,” remarked Thavin Audit, deputy head of corporate and investment banking at Bank One. “This has helped the Bank One leadership team form a nuanced view of what this region means to us, and we are keen to impart insights to other banks or financial institutions who would like to explore this region. Indeed, we view collaboration among various financial sector stakeholders as key to realising the potential of the Mauritius-Middle East partnership.”

From the insights gleaned at the meetings, bank representatives believe the time is now ripe for Mauritius to explore deeper affiliations with financial institutions across the Middle East to best leverage opportunities and support sub-Saharan Africa.

“While Middle Eastern banks have traditionally been engaged in offering Sharia-compliant products, the excess liquidity such banks are currently encountering has substantial implications for their involvement in syndication and trade finance deals. Indeed, Emirati banks have lately been beating Wall Street at its own game, with a 10-year US$3.25 billion loan having been syndicated by regional banks to finance an impactful education sector deal for Dubai’s GEMS. When a consortium led by Canadian fund manager Brookfield was looking for funding for one of the largest private school operators on the planet, it was four Gulf banks who confidently stepped in to help” added Audit.

With Africa home to 11 out of the world’s 20 fastest growing economies in 2024 (according to the African Development Bank), the continent is fertile ground for syndication deals. Meanwhile, the Middle East is the world’s fastest-growing regional market in terms of banking and capital market sectors. At a broader level, reports abound that Gulf banks presently have more liquidity in comparison with many of their foreign peers mainly due to the higher interest rates in Europe and further afield. As such, they face a pressing necessity to match funding to projects and transactions that constitute economic and geographic diversification. However, Emirati banks looking at emerging economies such as those in Africa need to partner with other banks that have the competence, skill, access, and knowledge of the hopeful continent.

African industries in focus

According to Bank One, there is a concentration of deals primarily focused on the oil and gas sector, as well as wider infrastructure.

In the case of the former, oil and gas has immense potential on the continent with reserves nearly equivalent to the US. Once a discovery is made, however, the biggest challenge for African governments and commercial partners is finding sources of finance to develop projects.

In the latter, the pace of infrastructure development in Africa is beginning to increase based on rising deals in transport, energy and telecommunications. As such, there is a huge demand for funding in those areas with AfDB estimating between US$130bn and US$170bn will be required each year to meet infrastructure needs.

Mauritius to take a leading role

This promising environment is a formidable opportunity and Bank One identified a number of developments which is playing into this space.

First, in February 2024, the UAE was removed from the grey list after two years of being on the FATF’s radar, signifying its commitment to combatting money laundering and terrorist financing. This development is likely to boost investor confidence in the UAE's regulatory framework, and it is expected that this move will be accompanied by greater foreign capital inflows and reduced compliance costs and costs of borrowing. Bank One has welcomed this development and has seen Middle Eastern banks confidently looking to channel funding into Africa.

Second, there are promising talks of key DFIs joining forces with financial institutions in the Middle East. Recently, the AfDB, European Investment Bank (EIB), and the OPEC Fund for International Development (OFID) announced support for the African Capitalization Fund, a new private equity fund to be created by the IFC’s Asset Management Company (AMC). The Fund will seek to capitalise on systemically important private sector commercial banking institutions in Africa to spur economic recovery and job creation. The Abu Dhabi Fund for Development (ADFD) also announced that a commitment to the fund is under due consideration.

Finally, systemic efforts are being made to stimulate investments from the Middle East to Africa. With a Comprehensive Economic Partnership Agreement being signed between Mauritius and Dubai which was announced in December 2023 as the first of its kind between the Emirates and an African country. Bank One is keen to explore the full potential of the agreement which is expected to pave the way for increased trade, investment, and private-sector cooperation between the countries.