Why multinational interest in Africa’s key gateways is rising

Dar es Salaam. India’s Adani Group is seeking to make a substantial investment at Jomo Kenyatta International Airport (JKIA) in Nairobi in the latest development that shows the increasing interest of multinationals in Africa’s transport and logistics sector.

Adani Group, through Adani Airport Holdings Limited, has proposed to invest $1.85 billion to expand JKIA under a concession deal that, if accepted, could earn it an 18 percent annual return over three decades, according to Kenya’s Business Daily.

The paper reported that Adani’s privately-initiated proposal to JKIA manager Kenya Airports Authority (KAA) shows that the Indian firm would upgrade the airport – including constructing a second runway and a new passenger terminal – under a 30-year build-operate-transfer (BoT) contract at a fee to be determined by the two parties.

“The investment in JKIA infrastructure development necessitates substantial and low-cost funds at the earliest by large private players, such as the proponent (Adani) herein, and PPP offers an avenue to achieve this objective,” Adani said in its proposal to KAA, noting that it targets financing the project through debt and equity, according to Business Daily.

Adani’s financial proposal shows $750 million will be spent on developing a new terminal building, an associated apron and taxiway system, and two rapid exit taxiways.

This is expected to be completed by 2029. A further $92 million will be used to improve the taxiway network system, set up two more rapid exits, and construct other related facilities like additional remote aircraft parking stands. This phase is to be completed in 2035.

Adani is also proposing to spend $620 million on developing new facilities, with the firm adding that this will be done carefully to ensure seamless integration with the existing infrastructure.

The Indian firm proposes city-side development that would consist of hospitality, business hubs, and other amenities accessible by travellers and city residents.

“The perceived ease will not only boost traffic at the airport but also contribute to the nation’s economy by providing additional facilities to travellers as well as city residents,” reads the Adani proposal.

This comes within one month after the Indian conglomerate, under its ports arm Adani Ports and Special Economic Zone (APSEZ), won a concession to operate a container terminal at Tanzania’s largest cargo gateway, Dar es Salaam Port, for 30 years.

The deal is a progression of a joint-venture Adani established with AD Ports (Abu Dhabi Ports) in 2022, known as East Africa Gateway.

“Dar es Salaam is a gateway port with a well-connected network of roadways and railways,” said APSEZ in June, adding that the Adani Ports-led consortium will acquire the project company in Tanzania, which houses all port handling equipment and employees, for $39.5 million.

According to industry observers, the allure for port-related investment in Tanzania largely stems from its “gateway access” to volumes moving in and out of the six land-locked countries of Malawi, Zambia, Democratic Republic of Congo, Burundi, Rwanda and Uganda.

Analysts say the multinationals’ interests in Africa’s transport and logistics sector stems from their belief that the continent’s economy was on the rise and that it would continue to do well.

“Multinationals look beyond a country’s borders. When they talk about the SGR (standard gauge railway), for instance, they look beyond travelling between Dar es Salaam and Dodoma. They look at how they can get business by transporting goods on the SGR from the Democratic Republic of Congo (DRC) to or Burundi to the port and beyond,” said Prof Semboja Haji of the Zanzibar University.

He said the focus my multinationals was a global phenomenon should not be mistaken for a scramble for Africa’s resources as some analysts would want it to be viewed.

“What it means is that those who have the money and the expertise will come and grab a business opportunity wherever it is,” he said.

In a globalised world, said Prof Haji, transport and logistics was key to business continuity.

“As such, every company that needs to make money will go where the prospects of getting it are…They also need sustainability and that is why they will sign concessions for at least 30 years…,” said Prof Haji.

A Dar es Salaam-based economic and business expert, Mr Oscar Mkude, shared similar sentiments, saying Africa’s economic growth prospects were promising and attractive to multinationals.

Even the loans that African countries receive on commercial and on concessional terms, Mr Mkude said, are part of what the global worlds decides to invest in the continent after a thorough analysis of the economic growth prospects.

“The positive economic trends in Africa have led financial institutions to increasingly approve loans for investors in the region. It is a significant shift as foreign financial institutions previously hesitated to lend to African investors,” he said, cautioning against taking loans that carry exorbitant interest rates.

Africa, said Mr Mkude, has immense potential to drive economic growth for decades to come.

With its fertile land suitable for production and abundant natural resources, including minerals, many parts of the world are eager to engage in business on the continent.

“As such, strengthening the transportation sector is crucial in facilitating this…The concept of globalization cannot be fulfilled without robust transportation infrastructure. Beyond its natural resources, Africa also presents a promising market for exports, necessitating efficient transportation networks,” said Mr Mkude.

The new move by Adani reminds just how major global maritime investors, including Maersk, Bolloré, CMA-CGN, China’s COSCO, DP World, Adani, International Container Terminal Services, and Hutchison Port Holdings, have significantly increased their investments in Africa.

A report by Agility earlier this year found that over 47 percent of surveyed logistics executives worldwide plan to increase their investments in Africa.

Experts attribute the growing investment interest in Africa's freight and logistics sector partly to the increasing demand for the continent's critical minerals.

“There is no question that Africa's resources hold global significance. As global demand for these resources continues to rise, more companies are increasingly interested in understanding how to transport them efficiently,” Mr Silvanus Aswani, a supply chain manager at the port of Lamu, told the bird story agency recently.

The critical minerals market doubled in five years, between 2017 and 2022, reaching $320 billion, according to the 2023 Critical Minerals Market Review report by the International Engergy Agency. Africa hosts substantial portions of these critical mineral resources.

The demand for these metals is projected to increase sharply, more than doubling by 2030 and quadrupling by 2050. Annual revenues are projected to reach $400 billion, the IEA report detailed in an article published recently by bird agency.