By Dr. Suleiman Walhad
October 6th, 2023
I call the Horn of Africa States the last and final frontier for international investments. Would the region ever appeal to and engage international investors? It is a big question, but we will attempt here to explore this possibility. The region has not so far attracted any of the major international investors for probably known reasons which most people would point out, namely instability of the region, its continuing violence, absence of any previous experience with international investors, and perhaps the difficulties of doing business in the region due to lack of the required infrastructures.
The region has all those issues in its basket. But weren’t most countries like that barely two hundred years ago? There were, indeed, insecurities, almost impossible challenges such as unknown geographies, unknown peoples and cultures, and hence unknown and unfathomable risks. In the recent past, there were ideological differences in many parts of the world, but businesses and entrepreneurs have overcome all those obstacles and taken advantage of the opportunities of those uncertainties, making in the process great wealth and profits.
There is a great difference between great entrepreneurs and simple opportunists who generally take the easy way out. The latter would think in terms of a few Factors including among others available conditions and infrastructures, ease of running away when the going gets tough, and availability of financial instruments and securities to buy and sell or trade. They do not generally involve the harder work of opening new markets or finding new sources of products that are necessary for the lifestyles, communications, and warfare of today. Indeed, most international investors wait for intrepid investors to pave the way for them, who absorb the initial costs not only financially, but also legally, cultural acclimatization, laying down the physical infrastructures, and so on.
It was inconceivable for international investors to go into China some fifty or sixty years ago and equally difficult for them to go to India, which currently some of the international investors are exploring to replace China. They look at the market size, the technologies, and the skills of the people, but not really the actual sources of most of the products that are to be transformed through those skills. Perhaps, international investors should also look at investing in the sources of those products, which would not only help reduce the cost of transportation (raw materials to far off transformation facilities and finished products back to the final markets), lower wage levels, and avoid future competitors of their countries. Both China and India and indeed other countries pose such possibilities. The source countries, mostly in Africa, do not pose such threats in the foreseeable future.
The African source countries of most raw materials their sizes, their markets, their influences, and relations would not cause major competitive challenges to Western countries, at least, in the foreseeable future. The Horn of Africa States is one of those regions in Africa that have not been touched by Western capital. The other regions in the continent with the most natural resources include the East Africa Community, now including the DR Congo, the Southern Africa Development Community, and ECOWAS. North Africa, which, for other than oil and gas, is not counted much among the major sources of raw materials, except for Morocco which is one of the largest producers of phosphates in the world.
The Horn of Africa States, despite owning a significant mineral base remains untapped, and is probably the last frontier in the continent to become a major producer of any mineral. The region owns energy sources such as coal, oil, and gas, ferrous metals minerals such as iron, nickel, cobalt, and manganese, non-ferrous metals such as copper, lead, tin, bauxite, precious metals such as gold, silver, and platinum, and non-metallic minerals including mica, sulphur, potash, granite, marble, limestone, gypsum, and many others.
The mineral base of the region is large and remains one of the regions in the world where exploitation is limited. The minerals of the region include uranium, thorium, molybdenum, and different types of precious and semi-precious stones including among others, emeralds, ruby, amethyst, tourmaline, garnets, and others. The region is reported to have cadmium, feldspar, zinc, titanium, silica sand, kaolin, cement materials, sulphides, tantalum, niobium, diamonds, lithium brines, beryllium, and others.
The region does not offer only its potential mineral base but also its geostrategic location as it overlooks the Suez Canal, the Red Sea, Bab El Mandab, and the Gulf of Aden waterway to the Indian Ocean. It is, indeed, significantly important for global trade, and especially for the transmission of an equally significant portion of the oil and gas produced in West Asia. The region is not only important as a trade route but also offers its long coast, which is pristinely fresh, and unpolluted and would offer a major opportunity for international businesses involved in the tourism industry, which can develop tourist resorts all along its white and beautiful beaches, which stretch for some 4,700 km along the Red Sea, the Gulf of Aden, and the Indian Ocean. The tourist industry would make great wealth should it decide to invest in the region, which would probably attract millions of Europeans currently crowded in the Mediterranean coasts and other regular destinations.
Building ports, ship repair yards, bunker fuel, and indeed, water sports facilities in the region’s beautiful water spaces would create great fortunes for international investors. Scuba diving and watching water life in the region is another major money maker that investors would be able to invest in. With a major exclusive economic zone, the region owns a potentially huge blue economy which would include fishing in a naturally self-sustaining environment.
There are, indeed, two thought processes with respect to investing in difficult environments such as the Horn of Africa States currently presents, where one asserts that investing in such a region would only exasperate conflicts, uphold dictatorships, and hence enhance government repression and corruption, and the other asserts that investments would develop the economy, create jobs and hence reduce tensions and conflicts, as the economic pie grows and keeps people earning more and more, looking after their families, their health and education and concentration is pulled out of activism which results in violence.
It is the latter thought process that investments in the region should follow for, indeed, the region offers many opportunities that would not only benefit the investors but also help settle the root causes of the conflicts in the region, which is, in the main, the small economic pie over which people fight. Investments would thus participate in creating peace in the region, although it may lead to others also participating in keeping the peace. In this globally shrinking world, one should take advantage of available opportunities and forgo the traditional national enclaves. The larger the market, the bigger the economic pie and the less the selfishness that used to cause conflicts.
The Horn of Africa States is a beautiful region, which owns plateaus, plains, valleys, and high mountains with differing and varied climes and hence an assortment of ecosystems from deserts to temperate zones. The region offers large arable lands and sufficient waters to sustain commercial agriculture not only to feed the region but also to be exported where agricultural development would always be limited such as the Arabian Peninsula opposite the region. This is again another opportunity for international investors to look into and investigate.
It is clear that major international investors in the world like BlackRock, JP Morgan, and/or Deutsche Banke would find the region an unlikely place for their attention, but then, why would it hurt them if they can invest several hundred billion dollars to create a new potentially large new frontier to exploit. It would, indeed, add to their trillions some more trillions of dollars. Indeed the 600 to 700 billion barrels of hydrocarbons in the region should be worth their interest and those of other smaller investors. The gold and uranium reserves of the region are also worth more than just looking at but exploiting to make billions and billions more.
The region owns copper, cobalt, lithium, manganese, and, indeed, some rare earths that are important for the oncoming technological age, where digital and electronic money are expected to dominate, where cars and indeed all machines are to be electrified to replace oil and gas. Indeed, electric vehicles are to become dominant, and they will need a lot of wiring and other electronic components. The Horn of Africa region owns most raw materials for the technological revolution underway. For investors like Elon Musk and his space industry, the region offers opportunities to create a spaceport, being on the equator, where his corporations can track and monitor his many satellites with ease. But this would also be good for the region in job creation, skill development and preparation for the future. It would be a win-win for both parties.
There is no doubt that the Horn of Africa States region is not only marginal at present but off the grid when it comes to the size of its economy compared to some of the largest corporations and countries in the world. This, however, does not negate the fact that its potential resources which if properly explored and exploited could at least put it on the map. Its geostrategic location already puts it on the map, but its economic pie needs international investors to help create wealth. There is a large youthful population of some 160 million, and a significantly large resource base including its maritime exclusive exploitation zone of nearly a million square kilometers, in addition to its 1.9 million sq, km surface area. It is perhaps time international investors glanced in the direction of the region, which represents itself as the last and final frontier with a significant resource base for economic expansion.