Qatar a missed opportunity 

Source: Qatar a missed opportunity – The Zimbabwe Independent May 18, 2018

LAST week President Emmerson Mnangagwa was on a three-day official state visit to the Arabian peninsula city-state of Qatar, hot on the heels of his regional trips and more recently a state visit to China.

The Brett Chulu Column

The per capita GDP of Qatar is US$61 000 (US$124 000 on a purchasing power parity basis), 61 times that of Zimbabwe — that is the economic gulf between the 2,7 million (population) Gulf littoral state and our 15 million landlocked nation.

Accompanied by a seemingly high-powered delegation comprising our economic cluster cabinet ministers for Finance and Economic Planning, Mines and Mining Development, Lands, Agriculture and Rural Resettlement, Industry Commerce and Enterprise Development and the Reserve Bank of Zimbabwe governor, one would have expected a show of business savvy.

I was keenly following the developments in Qatar for one thing: a mere mention of the Qatar Investment Authority (QIA), the Qatari government’s premier investment state enterprise. The QIA was not even given a passing reference, not a whiff of it from the state media. President Mnangagwa’s Facebook posts on his Qatari engagements are equally mute over the matter.

The QIA, the Qatari government’s sovereign wealth fund, had US$335 billion worth of investments under its management at the end of 2017. The sheer enormity of the assets under the stewardship of the QIA is impressive.

The value of its assets is practically the size of South Africa’s Gross Domestic Product (GDP) and twice the size of Qatar’s US$166 billion GDP.

The market capitalisation of the Zimbabwe Stock Exchange (ZSE) oscillates around the US$10 billion mark.
The QIA needs to liquidate a mere 3% of its portfolio to buy every company on the ZSE, highly overvalued, for that matter. Put differently, the assets under the QIA can buy 33 Zimbabwe Stock Exchanges and two Qatar Stock Exchanges. If one is hunting for Qatari investment and is not parleying with the QIA, it casts a pall on the international business acumen and financial nous of our economic emissaries.

Granted that the Qatari government has development financing arms, its willingness to fund social development projects in Zimbabwe after our government submits formal proposals cannot attract acclamation. The high-powered delegation did not go to Doha to get handouts. The QIA is the real McCoy.

What Qatar wants

The Qataris are interested in diversifying their national income streams beyond exports of crude oil and liquefied natural gas.

The Qataris are keenly aware that their 25 trillion cubic metres of natural gas reserves and 25 billion barrels of oil reserves will not last forever. It is estimated that at the current rate of oil extraction, the reserves will run out in the next 56 years. This reality is what prompted the setting up of the QIA in 2006, a year before the global financial crisis hit.

If there is a lesson our government should learn from the Qataris it is that a wise government whose economy is commodity-based needs to turn part of the commodities income into other asset classes. Diamonds are forever but they do not last forever. The Qataris are very much alive to this truism.

The Qatari petro-gas dollars are being piled into equities (equity funds, equity derivatives, publicly traded equities in developed and emerging markets), credit and fixed income assets (bonds, structured credit products, fixed income funds), private equity (unlisted equity, private equity funds), real estate (commercial, residential, real estate funds) and real assets (physical or tangible assets such agricultural land, timberland or physical commodities).

The QIA’s asset footprint reveals its investment priorities. In the UK it owns premier real estate assets such as London’s Canary Wharf (bought in 2015), the Shard skyscraper, the HSBC tower, the Harrods departmental store and the Savoy Hotel. It is the largest shareholder in J. Sainsbury, with a 22% stake. It holds a 20% stake in the Heathrow Airport and owns 20% of British Airways owner (IAG South Africa).

In Russia, it owns 24,9% of the St. Petersburg airport. In the USA, it owns the famed United States filmmaker Miramax and also 10% of the Empire State Building.

The QIA is interested in big ticket asset acquisitions. It has set aside US$35 billion to increase its asset base in the US as part of its latest geographic diversification strategic thrust.

It begs the question why the Qatari Emir would invite our president for a state visit, given that Zimbabwe does not provide the sort of scale the country requires as spelt out by the QIA to meet its investment diversification goals.

The QIA policy for equity investment is that it acquires equity assets in emerging and developed economies; Zimbabwe does not fit this billing. In terms of credit and fixed income assets, Zimbabwe’s elevated credit risk is outside the QIA’s risk appetite.

Put simply, let us forget about loans from Qatar — there is no way a savvy investor like the QIA can take chances with a country that is not rated by Fitch, Moody’s and Standard & Poor’s.

There is an outside chance that they might be interested in diamond mining and diamond value-addition unless they have ownership of the asset.

That calls for equity investment. If the Qataris are to buy unlisted equities in our diamond sector, it would mean that the QIA must take a new strategic direction to invest in frontier markets; for now the QIA’s equity investment policy is confined to emerging and developed markets.

This leaves us with one asset class that the Qataris could be seriously interested in. It is the real assets class; agricultural land and physical commodities. Qatar imports 90% of its food supplies.

Its agricultural impotence is showcased by its mere 130 square kilometres of land under irrigation; compare that with Zimbabwe’s 1 764 square kilometres, The Netherlands’ 4 000 square kilometres and South Africa’s 16 000 square kilometres of land under irrigation.

Qatar’s food security was seriously threatened following the four-nation blockade that cut routes for its food import supplies. During the blockade, Turkey played a major role in stabilising Qatar’s food security.

The QIA’s subsidiary Hassad Food is tasked with agro-based investments. It recently acquired Turkey’s largest poultry producer. It bought a majority stake in an Indian basmati rice company for US$100 million.

In Australia, it owns Hassad Australia, which runs a 300 000-hectare farming portfolio. Hassad Australia recently sold 18 000 ha of prime cropping and livestock land for US$80 million to mobilise cash to diversify into value-added food chain assets. It is not a far-fetched postulation that the Qatari government’s main interest in Zimbabwe is most likely agro-based assets.

Qatar would want to acquire land to produce strategic crops and livestock to diversify its sources of food to meet its 90% food import requirements.

That is why I am disappointed that a Qatari blue-chip agribusiness investor was not mentioned in the official state visit to Qatar last week. Our stumbling block to attracting Qatari agribusiness investment dollars is the current tenure that does not allow freehold tenure in commercial farminland.

I doubt that the finance-savvy technocrats at the QIA will be happy to invest in leased land given that food security is a major strategic issue for the Qataris.

The uncertainties of a leasehold tenure may not be within the risk-appetite of the Qataris. The Qataris would rather splash US$263 million to acquire soccer superstar Neymar as they are assured of a better return on investment.

What happened last week is a sorry affair; a whole entourage of economic cluster ministers went hunting for grasshoppers and missed the big game.

Chulu is a management consultant and a classic grounded theory researcher who has published research in an academic peer reviewed international journal. —