By Goolam Ballim
Over the past decade, the Gulf Cooperation Council (GCC) has emerged as a major investor across Africa, with a growing number of trade deals that significantly benefit both regions.
Foreign Direct Investments from the GCC into Africa from 2012-2022 saw $101.9 billion (R1.8 trillion) invested in 628 projects, while African investment in the GCC over the same period was $3bn in 141 projects.
The GCC – especially the UAE – has an expanding number of partnerships with African nations. In 2018 alone, the Abu Dhabi Fund for Development financed over 66 projects in 28 African countries, totalling $16.6bn.
This investment has helped drive Africa’s development agenda, create jobs, improve infrastructure, and boost economic activity in 28 countries, profoundly impacting the continent's landscape, aligning with Agenda 2063: The Africa We Want - Africa's blueprint and wider target for inclusive and sustainable development.
Furthermore, the UAE is among the top ten importers of goods and commodities from ten African countries, illustrating the growing bilateral trade relationship.
The Middle East/Africa corridor presents a sound economic opportunity, with proximity, travel, and logistics playing a crucial role in facilitating the trade of goods and access to services.
African businesses are increasingly choosing the UAE as a base of operations, with 1,600 new African member companies registering with the Dubai Chamber of Commerce since October 2021, demonstrating the opportunities for such companies to use the UAE as a base for outbound engagement and a platform for utilising global export opportunities.
Energy and infrastructure are playing a pivotal role in these partnerships, and these business investments are also contributors to the aims of the UAE's wider Net Zero strategy.
An illustrative example of the energy challenges many African nations face is Zambia, where the country produces approximately 3 500 MW of energy, with 75% of it coming from hydro-power. However, a significant drop in water levels in Lake Kariba has severely impacted the country's energy production, leading to the government's implementation of electricity rationing.
To address this issue, the UAE recently signed a deal with Zambia to develop solar projects that will generate an additional 2000 MW of electricity for the Zambian people.
Despite the inability due to a lack of financing for some African nations to make a rapid transition to cleaner forms of energy, there is a sizeable opportunity here for alternative energy companies and investors.
Africa is an ideal destination for green investments in renewable energy technologies, and the potential for micro- and off-grid renewable systems is immense. The solution to Africa's energy challenges, however, goes beyond government intervention.
A commissioned analysis by the UN High-Level Climate Action Champions revealed that the private sector could deliver up to 70% of the total global investments required to achieve net zero goals.
Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and COP 28 President-designate, recently called for a major boost to public and private finance to help Africa battle climate change. He rightly pointed out the huge potential for low-carbon growth and sustainable development in Africa, but the lack of available, accessible, and affordable finance is hindering progress. It’s not an overlooked investment opportunity - a lack of finance is putting the world’s climate goals and Africa’s sustainable development at risk.
Along with energy, the UAE and other GCC countries, including Saudi Arabia and Qatar, have also made significant investments in sectors that include agriculture, mining, telecommunications, infrastructure, real estate, and hospitality sectors, as well as established banking and financial institutions in Africa.
Substantial land acquisitions have reshaped the economic landscape, bringing new opportunities to GCC countries. Notable among these deals are Saudi Arabia's acquisition of 500000 hectares in Tanzania and the UAE's purchase of 400 000 hectares in Sudan. Another notable agreement saw Qatar securing 40000 hectares from Kenya in exchange for a $2.5bn loan aimed at supporting the construction of a second deep-water port.
The UAE, heavily reliant on food imports that make up a staggering 89% of its consumption, has taken note of the pressing issue of food security. By establishing trade ties with Kenya, a land of agricultural abundance, the UAE aims to address its vulnerabilities while presenting opportunities for Kenya to leverage its agricultural prowess.
Kenya has long been dependent on agriculture which is at the centre of this economic transformation. With the agricultural sector contributing approximately 33% to its gross domestic product (GDP), the country's fortunes have been intertwined with its ability to harness the potential of its fertile lands.
Consequently, the growth of trade between Kenya and the UAE has surged nearly ten-fold over the past decade, with agricultural products, including tea, coffee, spices, fruit, and nuts, all heading to the UAE and Kenya being able to grow GDP.
Two of the main factors hindering socio-economic development in Africa are domestic buying power and limited access to capital. Initiatives such as the UAE-Africa Investment Forum and the UAE-Africa Business Summit have facilitated dialogue, networking, and business collaborations, and now, bilateral trade with the GCC is playing an increasing part in changing that. Africa has the youngest, fastest-growing, and fastest-urbanising population in the world, with an estimated one billion people, that is set to double before 2050. The GCC is poised to play a huge part in their future.
Goolam Ballim is the chief economist of Standard Bank.
BUSINESS REPORT