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Africa and the Gulf States herald a new era in trade and investment … – JD Supra

White & Case LLPStrong diplomatic and economic ties have long existed between the Gulf Cooperation Council (GCC) states and North Africa but there are other levers at play for deepening economic relations.
Over the past decade, the UAE has emerged as one of the largest investors into Africa among the GCC states
The interests of the GCC countries in cooperation with Africa have historically been shaped by their relatively one-sided and short-term economic goals. But propelled by the COVID-19 pandemic, food supply issues and the changing regional geopolitics in recent years, the dynamics have been shifting toward deeper, longer-term—and mutually beneficial—commitments between the Gulf States and the African continent. Currently, all GCC States, barring Saudi Arabia, have signed and ratified bilateral investment treaties—BITs—with African countries, strengthening economic ties while pursuing diversification strategies beyond traditional sectors and addressing current critical issues, such as food security.
Over the past decade, the UAE has emerged as one of the largest investors into Africa among the GCC states, and is the fourth-largest investor globally into Africa—after China, Europe and the United States. In 2018 alone, the Abu Dhabi Fund for Development also financed more than 66 projects in 28 African countries, valued at US$16.6 billion. Between January 2016 and July 2021, the UAE invested US$1.2 billion into sub-Saharan Africa, a staggering 88 percent of the GCC total during that period.
Saudi Arabia—another big investor into Africa—has also made significant investments in energy and mining projects, and particularly into Africa’s agribusiness, in response to growing food security concerns in the region.
Food security remains a major concern for the region and GCC states have historically been exploring agriculture projects in Africa for at least a decade. The capital-rich and financially robust GCC countries have been adept at managing and mitigating their food supply risks. But the 2007-08 food crisis—during which more than 30 countries imposed food export restrictions—and the current disruption of global food supplies caused by Russia’s actions in Ukraine, have changed this. Climate change is also expected to add further pressure on the Gulf’s food supplies. Against this dire canvas, Africa—with its vast amounts of arable land—could double or triple its cereals and grains output, which would add 20 percent to worldwide output. Similar increases are possible with horticulture crops and livestock.
Zambia and Kenya have been devising terms for land use that meet both local and investor needs. Saudi Arabia has also invested heavily in Africa’s agribusiness, especially in East Africa, with a portfolio thus far of roughly two million hectares.
Africa—with its vast amounts of arable land—double or triple its cereals and grains output, which would add 20 percent to worldwide output
While agro-investments remain a priority for the GCC, investors are looking at numerous other sectors. Africa’s growing infrastructure and energy needs offer excellent opportunities to GCC investors. As part of its €300 billion (US$321.9 billion) Global Gateway strategy, the EU seeks to partner with the UAE to accelerate Africa’s energy transition and infrastructure development. Abu Dhabi–based Tabreed recently contracted to provide energy services to CapitalMed, Egypt’s new healthcare mega-project. Roughly 15 percent of Ghana’s electricity comes from a power station jointly owned by Ghana’s Volta River Authority and Abu Dhabi’s TAQAR Group. Dubai-based Yellow Door Energy is the largest distributed solar developer for commercial and industrial businesses in southern Africa. The QIA has forged an alliance with Italian utility Enel (Enel Green Power) to finance, build and operate renewable energy projects in sub-Saharan Africa.
Besides sovereign investments, recent years have seen GCC corporates investing in assets that align well with their businesses. Qatar Airways invested US$1.3 billion in 2020 to acquire 49 percent of RwandAir and a 60 percent stake in the new Bugesera International Airport near Kigali, its planned pan-African hub.
The Qatar Investment Authority anchor US$250 million investment into the Virunga Africa Fund I is further evidence of Qatar’s growing interest in Africa. In 2021, Qatar also acquired a 50 percent stake in 800 MWs of renewable projects in South Africa and Zambia, and made a US$200 million investment in fintech platform Airtel Mobile Commerce.
DP World operates seaports in Angola, Djibouti, Egypt, Morocco, Mozambique, Senegal and Somaliland. DP World and Britain’s development finance agency CDC Group have announced intent to jointly invest up to US$1.72 billion in logistics infrastructure in Africa, including port modernization.
Abu Dhabi Ports, collaborating with Hutchison Port Holdings, is searching for projects in Africa, too. As a starting point, their focus is to elevate the Port of Dar es Salaam in Tanzania as a world-leading trade hub.
Ranked the 15th-largest mobile network in the world, UAE’s E& (previously known as Etisalat), operates across Benin, Burkina Faso, Central African Republic, Egypt, Gabon, Ivory Coast, Niger and Nigeria. Qatar-based Qtel operates networks in Algeria and Tunisia. Saudi Arabia has also announced a US$1 billion investment initiative in Africa, focusing on industry, finance, agriculture, fishing, mining, transportation, regional security and energy.
Given that the GCC states need to diversify away from hydrocarbons, and Africa’s increasing appeal, it seems likely that investment between the Gulf countries and Africa investment is likely to continue to grow.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.