The Middle East, particularly the Gulf Cooperation Council (GCC), has forged strong ties with countries across Africa and in crucial industries such as agriculture, healthcare and energy. Although many economies are still reeling from the impact of Covid-19, investment dynamics between the Gulf and Africa are showing great promise – underscored by both emerging regions’ postulated post-pandemic economic growth. This positive outlook builds on years of strong relations between the two regions.
The UAE, for instance, has emerged as one of the largest investing countries in Africa, pouring billions of dollars in development projects that support the continent’s infrastructure. A recent Dubai Chamber of Commerce report showed that the Gulf nation accounted for 88 percent of investment from the GCC to sub-Saharan Africa.
Saudi Arabia is also a big investor in Africa’s agribusiness – particularly tapping the massive potential of East African farmlands to address critical issues such as food security. The kingdom’s sovereign wealth fund has invested around $4bn in a variety of sectors across Africa, including mining, telecoms, and energy. This strong investment interest from the GCC is expected to continue given Africa’s growth outlook.
Although the pandemic caused a contraction in 2020, the continent was able to immediately bounce back, recording a 6.9 percent rise in GDP the following year. The growth is likely to continue through to 2022 as the oil industry, as well as the commodities market, pick up.
It makes sound business sense for Gulf investors to turn to Africa as an investment destination – underscored by the Middle East’s ongoing economic renaissance. These governments recognise the importance of deploying capital overseas in their income diversification strategies, and that approach has opened doors for many investment opportunities in a wide range of sectors in Africa.
In South Africa, which is also known as the gateway to Africa in business terms, the South African National Treasury noted real GDP growth bounced back to 4.9 percent in 2021.
This was driven primarily by a combination of base effects, strong commodity prices, and the gradual reopening of the economy after tight COVID-19 restrictions.
Energy, water and food security remain topical including Transportation in the economic growth of SA and broader SSA and this is huge potential for growth. As noted by the Standard Bank Group and the South African state-owned companies, the world’s top 300 investment firms have total assets slightly north of $50 trillion, yet only 3 percent investment in Africa.
The abundance of opportunities will drive energy security, food security, water security, transportation, and infrastructure. It is also important to note the ever-growing interest from investors to deploy capital to industries in Africa such as mining, tourism, healthcare, and financial services.
Household income in Africa has been on the rise, pushing the demand up for banking services. As a result of Africa’s young demographic make-up, the demand for digital and mobile solutions (financial technology) is also proving to be a promising investment opportunity for Gulf investors and we remain optimistic.
Leveraging our legitimacy which is premised on what makes Standard Bank Group unique with a footprint that covers 20 African countries and representation in 5 financial centres of London, Beijing, New York, Sao Paulo and Dubai, we are committed to a sustainable future.
As the largest banking group in South Africa and the continent, we recognise the impact of our business activities on the societies, economies and environments in which we operate. As we drive economic growth, Africa is also focused on digitisation efforts that will provide much needed technological developments, and the GCC has the ability to play a significant role in this regard.
Saudi Arabia announced more than $6.4bn in investments in future technologies and entrepreneurship in February 2022 to speed the kingdom’s digital transformation and grow its digital economy.
This theme has the potential to build strong and sustainable collaboration as well as improve investment flows for South Africa and the broader African continent.
In addition, research undertaken by the IFC recently has indicated that, investments in Africa’s internet infrastructure could increase the continent’s GDP by an estimated $180bn by 2025.
Another meaningful impact of the GCC investments in the Sub-Saharan Africa will be skills development, job creation as we close the infrastructure and energy gaps.
Africa is open for business with abundance of opportunities.