GOOLAM BALLIM: Gulf Co-operation Council poised to play big role in Africa’s future

Over the past decade, the Gulf Co-operation 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 2012-22 saw $101.9bn invested in 628 projects, while African investment in the GCC over the same period was $3bn in
141 projects. 

The GCC — especially the United Arab Emirates (UAE) — has an expanding number of partnerships with African nations. In 2018 alone, the Abu Dhabi Fund for Development financed more than 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, 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 10 importers of goods and commodities from 10 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 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 using 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 example of the energy challenges many African nations face is Zambia. To address the issue, the UAE recently signed a deal with Zambia to develop solar projects that will generate an additional 2,000MW 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.

Sultan Al Jaber, minister of industry & advanced technology and COP28 president-designate, recently called for a major boost to public and private finance to help Africa battle climate change. He mentioned the potential for low-carbon growth and sustainable development in Africa, but the lack of available, accessible and affordable finance is hindering progress.

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 500,000ha in Tanzania and the UAE’s purchase of 400,000ha in Sudan.

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, the UAE aims to address its vulnerabilities while presenting opportunities for Kenya to leverage its agricultural prowess.

Two of the main factors hindering socioeconomic 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 a part in changing that. Africa has the youngest, fastest-growing and fastest-urbanising population in the world, with an estimated 1-billion people that is set to double before 2050. The GCC is poised to play a huge part in their future. 

• Ballim is Chief Economist of Standard Bank.