GCC-Africa trade ties set for a major boost
Trade between the two region grew at a CAGR of 8%
Bilateral trade in goods between the GCC and Africa grew by a compound annual growth rate (CAGR) of eight per cent in the ten years to 2022, and looks set to remain intact in the years ahead, a study showed.
According to a report by the Economist Intelligence Unit, there was a a notable acceleration in growth in the value of bilateral trade in 2021 and a record high of $154 billion in 2022. This record level of bilateral trade with Africa places the GCC far ahead of the US ($74 billion) and India ($99 billion) in 2022 and has closed the gap with the other major trading partners of China ($289 billion) and western Europe ($244 billion). Oil and gas sales remain the bedrock of GCC exports to Africa, and mining sector output is a key component of GCC imports from Africa, but trade beyond these traditional sectors is flourishing and will continue to grow on the back of the GCC’s cumulative and increasingly diversified investment on the continent, the EIU said in a report.
The Gulf Co-operation Council (GCC) member states — especially Saudi Arabia, the UAE and Qatar — are already major investors in Africa and appear intent on increasing their exposure to the region. The GCC is reported to have invested over $100 billion in Africa over the past decade, or about 30 per cent of its total outward foreign direct investment (FDI).
GCC greenfield FDI announcements in Africa reached a record $60 billion in 2022 and a further $53 billion in 2023, according to fDi Intelligence, which far outstrip commitments from Asia, North America and western Europe. China-based companies announced $35.5 billion worth of greenfield FDI in Africa in 2023, western Europe-based companies announced $38 billion and US-based companies announced $10 billion. “GCC companies and institutions are targeting a larger footprint in Africa’s resource industries of oil and gas, mining and agriculture, while at the same time consolidating their strong position in transport infrastructure and logistics services, and expanding into renewable energy, digital infrastructure, manufacturing ventures and financial services,” the EIU said in its report.
Investing in port infrastructure, operating key transport nodes and partnering with or investing in African transport and logistics companies will remain a key strategy for GCC states, the EIU said. In particular, the UAE has taken a lead in developing closer ties with the African transport sector and has a controlling stake in numerous African ports. Together, Dubai-based DP World and Abu Dhabi-based AD Ports Group have secured concessions, often on a multi-decade framework, to develop and operate key seaports and inland ports across the continent.
Food security is a major concern for all GCC states and investment in Africa’s agricultural land, food production facilities and related export operations will remain a crucial pillar of their long-term development plans. Angola, Egypt, Ethiopia, Liberia, Sudan, Tanzania, Zambia, Zimbabwe and other countries have agreed or are negotiating long-term land lease deals with GCC states. More deals are said to be in the pipeline, despite local concerns over the potential impact on communities that are reliant on farming for most of their income.
Forays into renewables and technology
Energy transition is high on the agenda for GCC states, and FDI announcements point to Gulf states committing substantial project finance to Africa’s renewable energy industry, including solar and green hydrogen projects. The UAE and Saudi Arabia are among the largest investors in African renewables and plan to roll out various projects that will expand their footprint across the sector through to 2030. GCC states have an eye on Africa’s vast green hydrogen potential.
The information and communications technology (ICT) sector in Africa is another key area of investment focus for GCC-based companies and institutions. “Building ICT capacity and market potential in Africa sits well with GCC diversification agendas,” the EIU said.
The GCC states have an eye on Africa’s fast-growing national markets and vibrant regional economic communities and are positioning themselves to benefit from future market potential created by pan-African initiatives. “From an African perspective, the wealthy GCC states have vast amounts of finance and a willingness to spend in Africa at a time when Chinese loans and Western aid are less certain and appear to be dwindling. Moreover, the attractiveness of GCC finance is enhanced by the speed at which funds can be released and the relatively few strings attached—especially compared with Western financial institutions,” the EIU said.
