Seen by many as a sign of a new business trend, Gulf Arab companies are increasing their direct investments in Africa with an eye on the continent’s huge untapped resources and rapidly expanding rising middle-class with increasing disposable incomes. The new interest in the African markets by GCC nations is seen as a shift away from their traditionally preferred markets such as the United States and Europe.
The latest in this new trend is news about Dubai-based conglomerate Al Futtaim Group’s first major foray into the sub-Saharan African market when it took full control of Nairobi-listed car retailer CMC Holdings in September 2014. Although Al Futtaim operates approximately 100 companies across 20 markets, this is the first major investment for the conglomerate in the emerging markets of Africa. It was one of the biggest cross-border investment deals in Kenya in 2014.
Dubai is currently undergoing a trade and tourism driven economic revival and is keen to position itself as a hub for the emerging market in sub-Saharan Africa region. Already, many countries like China and India are using Dubai as a springboard for developing sales and distribution networks across Africa.
CMC holds the distribution rights for many internationally-acclaimed automobile brands such as Ford, Volkswagen, Mazda, Suzuki, CNH, MAN, Eicher and UD. The acquisition includes sale, service and maintenance of new and used vehicles, machinery and equipment, in addition to the supply of genuine parts and accessories.
CMC also has all the necessary infrastructure in place which includes automobile showrooms and service facilities. As a result, Al-Futtaim Group has the advantage of acquiring fully working operations in the East African market without any major investments to develop additional facilities. The acquisition includes sale, service and maintenance of new and used vehicles, machinery and equipment, in addition to the supply of genuine parts and accessories.
“We are pleased with this opportunity to add value and synergy to East Africa’s automotive industry through CMC Holdings, a firm with rich heritage, just like the Al-Futtaim group,” said Marwan Shehadeh, group director of corporate development at the Al-Futtaim group. “This is our first investment in sub-Saharan Africa, and we are looking forward to working with CMC for the long haul.”
Countries like China and India are using Dubai as a springboard for developing sales and distribution networks across Africa
The Al-Futtaim Group sees immense potential not only in the new car market in East Africa but is also exploring opportunities for selling heavy commercial vehicles and farm machinery in the region. “The Kenyan market accounts for approximately 17,000 new vehicles, of which 80 per cent is made up of commercial vehicle types,” said Mark Kass CEO at CMC. “Under our stewardship, CMC will not suddenly try and gear the market towards new car ownership — it won’t work even with GDP growth rates of 7 per cent, and more African economies have been witnessing as it’s all about affordability.”
Together with the its sister companies in the Group, such as Al Futtaim Finance, the company is also exploring possibilities of offering tailor-made finance packages for vehicle ownership by partnering with leading African banks.
“The CMC acquisition is the catalyst for our entire strategy across East Africa and not limited to Kenya,” says Mark Kass. “Africa is going to be our China. Apart from East Africa, there could be possibilities in sub-Saharan territories. It’s where we see a substantial part of our growth will come from by 2020 and beyond.”
