A recent agreement between Africa and the Gulf could usher in a new era, with the latter potentially challenging Europe and Asia as the continent's dominant investor.
At the recent Special Meeting on Global Cooperation, Growth and Development Energy held in Riyadh, several African heads of state and ministers agreed to further agreements on diversification, investment and sustainable development between countries.
The latest agreement aims to increase foreign direct investment (FDI) from the Gulf Cooperation Council (GCC), namely the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman.
The agreement, characterized by geographical proximity, focuses on addressing key issues such as food security, energy transition and infrastructure development.
Companies from GCC countries announced 73 FDI projects worth more than $53 billion (Sh7 trillion) in Africa last year, according to the latest FDI market data.
This is down from $10 billion (Sh1.3 trillion), the lowest in almost a decade.
Over the past decade, GCC countries have collectively invested more than $100 billion (Sh13.2 trillion) on the African continent, and the new agreement aims to boost that figure in the medium to long term.
The UAE invested $59.4 billion (Sh7.8 trillion).
Saudi Arabia and Qatar invested $25.6 billion (Sh3.4 trillion) and $7.2 billion (Sh953.2 billion) respectively.
Total imports and exports for the current period Between the UAE and sub-Saharan Africa for example, Increased by more than 30 percentand trade between Saudi Arabia and sub-Saharan Africa is now 12 times larger than it was 10 years ago.
Notably, during this period, the UAE was Africa's fourth largest foreign direct investor after China, the EU and the US.
According to the United Nations Trade and Development (UNCTAD), European investors remain the largest holders of FDI stocks in Africa.
This is led by the UK ($60 billion), France ($54 billion) and the Netherlands ($54 billion).
Notably, FDI inflows to Africa fell to $45 billion in 2022 from a record high of $80 billion in 2021, according to the 2023 World Investment Report.
A new perspective and focus on the Arab market, with the Continental Free Trade Area acting as a catalyst, seeks to avoid a decline in numbers.
“The African Continental Free Trade Area (AfCFTA) will accelerate this outlook by providing GCC businesses with greater access to a larger, unified African market,” the World Economic Forum said in a statement.
“Officially launched in 2021, the AfCFTA will create a single market that is expected to grow to 1.7 billion people and $6.7 trillion in consumer and business spending by 2030.”
It added that the preferential trade agreement will increase international exports and intra-African trade, opening up significant opportunities for local and global businesses to enter and expand into new markets across the continent.
In March, Kenya signed a memorandum of understanding (MOU) with the United Arab Emirates on a comprehensive framework for investment cooperation in digitalization and technology.
