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  1. Newstatesman Gibraltar
29 September 2014updated 06 Oct 2014 3:28pm

Trade of the titans

Gibraltar sits close to the point where Africa and Europe (almost) meet. Gareth Jones considers Africa’s appeal to European businesses, and Gibraltar’s role as a gateway

By New Statesman

“I think that time must pass wherein we are looked at as subjects: we are told who must come and who must not come.” So said the South African president, Jacob Zuma, as he cancelled his trip to April’s EU-Africa Summit in Brussels, following the failure of event organisers to invite Robert Mugabe’s wife, Grace.

Aside from highlighting the difficulties of compiling international diplomatic guest lists, Zuma’s sudden withdrawal was yet another hitch in the two continents’ long-running trade negotiations. Although the stand-off will ultimately go down as a mere footnote in history, it is one of the more colourful examples of the difficulties Europe has encountered in reversing the long-term diminution of its importance as a trading partner for Africa.

As the end of colonialism gathered mom­entum in 1960, two-thirds of sub-Saharan Africa’s trade was with countries that today are in the European Union, according to Renaissance Capital. However, by 1989 the proportion had fallen to half, and by 2011 it stood at just a quarter, putting the EU at the same level as Asia. Although this year a number of African subregions have ended lengthy free-trade negotiations with the EU by signing economic partnership agreements (EPAs), so few products were previously subject to tariff controls that the EPAs are unlikely to have a significant impact on overall levels of business.

Africa’s surging economic performance has heightened the desire to increase trade. This year, the World Bank has forecast that overall economic growth in sub-Saharan Africa will increase from 4.7 per cent in 2013 to 5.2 per cent in 2014. A few years ago, figures from the IMF indicated that the region would be home to seven of the world’s ten fastest-growing economies between 2011 and 2015, namely Ethiopia, Mozambique, Tanzania, Congo, Ghana, Zambia and Nigeria. Meanwhile, McKinsey has said that Africa offers the world’s best return on foreign investment.

Most of this growth can be found within manufacturing, internal services, telecommunications and entertainment, and no country exemplifies this more than Nigeria, which now has the largest economy in the region.

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“Nigeria offers tremendous opportunity in virtually every field, from setting up manufacturing plants, to real estate, to oil and gas,” says Anver Versi, editor of the London-based African Business magazine. “There are more and more gas discoveries, and each one of these generates a lot of opportunities in terms of things like catering, specialised services and construction work.”

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One reason cited for this growth is a change to the way Nigeria’s GDP is calculated, which Versi reckons has brought to prominence what has always been a big economy, thanks to the country’s expansive population of 170 million. “The demand for virtually everything is massive,” he explains. “For example, a Singaporean company called the Tolaram Group has been selling packets of noodles. Nigerians didn’t eat noodles for centuries, but somehow Tolaram converted them and now it is their biggest market.”

Yet while there are clearly many opportunities to take advantage of, doing business in Africa is far from easy. Versi emphasises how one of the secrets of Tolaram’s success was its willingness to tailor products to African tastes. “Africa is very different from Europe, and all African countries are different from each other,” he says. “The only way you can do business in Africa is to spend time in a particular country, having decided what sector you want to go into, understanding how it works and how people interact with each other.”

He adds: “Many people are hard-wired to Europe and are used to things happening in a certain way. They go somewhere else, expect the same things to happen and get frustrated when they don’t.

“Things in Africa may not work the way they do in Europe, but they do work. You just have to learn how, go with the flow and find local partners.”

Gibraltar, of course, sits almost at the pivot between Europe and Africa. So what role might it play in maintaining and growing business relations between the two?

The Gibraltarian government is keen to highlight the value the territory can offer, citing its EU membership, stable currency, sturdy legal system, multicultural but English-speaking environment, and low levels of corporate tax as benefits. In particular, Gibraltar’s ability to distribute competitively priced VAT-free goods and services into both the EU and Africa offers much potential for exports and imports.

Edward Macquisten is chief executive of the Gibraltar Chamber of Commerce, which has been promoting the Rock’s businesses since 1882. He emphasises the role Gibraltar can play as a middleman, particularly for companies that want a bridgehead between, say, America and Europe. “In terms of having a senior management team in a safe English-language jurisdiction, it’s a good staging post between here and Africa,” he says. “You can get down to West Africa from here in two to three hours.”

While much of Gibraltar’s trading activity is with and within other EU countries, it does also have businesses working in African markets. Indeed, Macquisten says that economic conditions are pushing the Rock’s business people to look south.

“In the absence of promising growth in mainland Europe, a trading community like Gibraltar is always looking for new markets, whether they’re physical or online. Gibraltar has a 300-year history of being highly opportunist and turning things like that to its advantage. It is very good at spotting opportunities and making a buck out of them. Parts of West Africa and North Africa are the likely markets.”

Morocco, of course, is Gibraltar’s closest African neighbour, and inevitably there are strong trading links between the two. Indeed, a Gibraltar and Morocco Business Association (GAMBA) was set up last year to develop this relationship. Some years ago, its president, Clive Reed, had taken part in a semi-official trade mission to Morocco, and at the time he had been keen to create a fully fledged trade association – until he encountered obstacles that prevented him from doing so. The idea was resurrected when it became clear that the importation of raw materials into Gibraltar was being adversely affected by Spain’s tightened border controls.

Reed says that there has been a clear increase in the number of Gibraltarians and Moroccans looking to establish new trade routes, not just because of the Spanish border issues but also following an increase in the volume and type of products and services the two countries can offer each other. “Fresh vegetables and fish have long been imported into Gibraltar from Morocco. The Moroccans have also always provided hard-working labour support over many years. However, recently there has been an increase in the supply of building materials, including rock and sand, and this is deemed to be an area where there will be a large increase in the foreseeable future.

“Tourism is also on the increase, with many Gibraltarians who would normally spend a week or weekend away on the Costa del Sol now worried that they will face lengthy border queues.”

GAMBA holds regular trade missions and fairs in both Gibraltar and Morocco, and is setting up a networking service for its members. It is also looking across the Atlantic. “There are already large numbers of American firms established in Morocco, and more are looking to move in,” Reed says. “One of the ideas that has been discussed is to open up a triangular structure between Gibraltar, Morocco and the USA, where each partner can benefit from the products and services that the others provide.”

Gibraltar’s core industries are financial services and gaming. Indeed, it is home to KaiRo, which provides assistance to casinos, electronic gaming rooms and online sports betting services that operate throughout Africa. “Gibraltar has a well-established gaming industry,” Reed says. “At the same time, there has been an upsurge in the computer gaming industry in Morocco, with many large companies such as Ubisoft setting up there to develop new titles. Casinos are also an increasing attraction.

“Morocco may be an Islamic nation, but most forms of gambling are legal there,” Reed says. “While the industry is still small by international standards, there have been signs in recent years that the government is open to expanding opportunities – at least for the benefit of tourism, if not for local gamblers.”

It is clear that Africa as a whole offers a wide range of opportunities for businesses in Gibraltar and the rest of the EU, especially for those that take the time to learn about the continent’s unique cultures and practices. Just don’t forget to invite the wives of local dignitaries to any trade summits you hold.

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