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No longer taboo.

As South Africa becomes a respectable partner for trade and investment, Middle Eastern countries are rushing to exploit new commercial opportunities. Mushtak Parker surveys the rapidly growing links between South Africa, the Arab world and Turkey.

SOUTH AFRICAN businessmen are relishing potential trade opportunities in the Middle East, in particular the Gulf states, as the country continues to open up to the world. Following the success of the first-ever South African Products Fair in Dubai late last year, South African agricultural and industrial products are increasingly finding their way into GCC markets.

Nowadays, it is no longer a taboo for Arab trade delegations to visit South Africa and missions from Bahrain, Abu Dhabi and Egypt have already visited the country. Despite the fact that the Arab League has been slow officially to lift its ban on trade relations with South Africa, a number of countries including the six GCC states, Egypt, Morocco and the Yemen, are enhancing governmental and business ties with the republic.

Turkey, which already has a preferential trade agreement with South Africa whereby the two countries export to each other under a preferential 3% tariff, and Iran have a head start on their Arab counterparts in the region. The Middle East countries are keen too on capitalising on new opportunities in South African markets and in attracting foreign investment and technology transfer. Since the Single European Market came into force in January 1993, Gulf and Maghreb states are concerned at growing protectionism for petrochemicals and limited access for agricultural products.

The three Arab states spearheading trade links with Pretoria are the UAE, Bahrain and Morocco. Both Dubai and Abu Dhabi have direct air links with Johannesburg and South African firms see Dubai as the most important entrepot for their products for neighbouring markets in the region - especially Saudi Arabia, Kuwait, Turkey and Iran.

Prosper Cutlery of South Africa, for instance, is establishing a production plant in Dubai's Jebel Ali Free Zone. The South African state-owned arms manufacturer, Armscor, has also supplied arms to Abu Dhabi, Qatar and other countries in the region. One South African Defence Force source told The Middle East that South African arms exports to the Gulf have increased significantly over the last two years. Even the Al Maktoum family of Dubai are entering the horsebreeding and racing market in South Africa.

Bahrain's minister of development and industry, Yusuf Shirawi, last November became the first Gulf minister to visit South Africa. Shirawi and South Africa's transport minister, Piet Welgemoed, signed the first aviation agreement between a GCC state and South Africa. After the Kuwait crisis, Bahrain is particularly keen to re-establish itself as the offshore banking centre of the region. The Associated Bank of South Africa has set up an offshore banking unit and others are expected to follow.

Bahrain is also aiming to become the gold centre of the Middle East and is looking for co-operation with South Africa to set up a gold exchange similar to Istanbul's.

Morocco also is set to improve its commercial links with South Africa significantly. Morocco's minister of foreign trade, investment and tourism, Hassan Abouyoub, confirmed during a recent visit to London that Morocco is keen to boost bilateral trade with Pretoria and to attract investment and joint-venture partners in the mining, hotel management and food-processing sectors. Abouyoub, who has already visited South Africa twice, also confirmed that he will be leading a trade mission to the republic in the first half of 1993 "to promote Morocco as a foreign investment location and to explore export markets for Moroccan goods there."

He claims that "South Africa is the best market in Africa for Morocco and the co-operation and joint development we can achieve with the country is absolutely fantastic. We see great potential for cooperation in tourism and downstream mining and agricultural industries."

South African-Moroccan trade last year totalled a meagre $18 million, but both sides acknowledge that the potential is much greater. South African exports, such as processed foods and mining equipment, comprised much of the trade. Morocco was one of the first Middle East states to receive President F W De Klerk following the launching of his "boerestroika" policy and the abandoning of statutory apartheid.

Morocco, Yemen, Saudi Arabia, Turkey and Iran are all keen to develop their mining and minerals sectors in an effort to diversify their economic base away from oil and gas or from primary agricultural production. They are keen to attract South African mining expertise and technology, which has an international reputation. Some South African-linked firms are already involved in Saudi Arabia's Mahd al Dahab gold mining project and in another project in Yemen.

Egypt too is a major interest for South Africa. Cairo is not only a leading member of the Arab League but also of the Organisation of African Unity. Egypt has a population of about 60 million and offers a huge consumer market. Potentially, it is both a political and economic asset to South Africa.

Private investors from the Gulf are also moving in. Real estate in prime locations on the coast, resort developments and banking offer the best opportunities. The number of Saudi or UAE flags flying outside major resorts or hotel complexes in Cape Town and elsewhere such as the Avalon Springs resort in Montagu is on the increase. Gulf visitors too are on the increase as tourism in both directions take off. South Africans now represent some of the largest groups to visit countries such as Egypt and Turkey. Yet the potential here has yet to be realised.

In the field of banking, the Jeddah-based Albaraka Group, headed by Sheikh Saleh Kamel of Saudi Arabia, is setting the pace with a joint venture bank, Albaraka Bank (SA) Ltd (ABLSA), set up in 1991 in Durban, with branches in Cape Town. According to ABLSA's chairman, the Jordanian-born Younes al Tamimi, "the bank has built up the necessary momentum and the challenge is to capitalise on this by developing the necessary products and services to meet the needs of its target market."

Albaraka claims that it is seeking opportunities to promote the socio-economic development of the two million-strong Muslim community in South Africa. "Our challenge is to present Islamic banking as an alternative system of banking," says Abdullah Sheikh, Albaraka's manager in Cape Town. "Albaraka is the first step in that direction. I am overwhelmed by the response of the Muslim community in Cape Town. We must be careful that the expectations we raise are realistic."

Such is the potential for Islamic banking in South Africa that Albaraka is planning to open further branches in Johannesburg and Pretoria. Even Albaraka's rival, the Geneva- based Dar Al Maal Al Islami (DMI), headed by Prince Mohammed al Feisal of Saudi Arabia, is exploring the market.

In the last two years South African government ministers such as the foreign minister, Pik Botha, have encouraged Islamic banks from the oil-rich Gulf states to set up subsidiaries in South Africa in an effort to attract petro-dollar investment. Botha has confirmed that there would be no problem for Islamic banks to operate in the country. Albaraka's chairman, Sheikh Saleh Kamel, confirms that he is optimistic about business prospects in South Africa although his group's expansion plans would depend on progress towards an interim government and the right investment climate.
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Title Annotation:Business and Finance; trade picks up between South Africa and Arab countries
Author:Parker, Mushtak
Publication:The Middle East
Date:Mar 1, 1993
Previous Article:Targetting the Gulf.
Next Article:Flight path to the Gulf.

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