Why the UAE is a catalyst for economic progress in Africa

As the world’s attention increasingly turns toward emerging economies, Africa stands at the centre, drawing significant interest as an investment landscape and continent for ambitious vision. It is the last remaining frontier market in terms of dynamics and growth and it’s also an increasingly essential one. The United Arab Emirates has emerged as an important player and driver of that investment growth. From a regional standpoint, between January 2016 and July 2021, UAE investment into sub-Saharan Africa represented 88% of the GCC (Gulf Cooperation Council) total during that period.

In the last three decades, there has been a surge in foreign direct investment, and the UAE’s role in African development and its historic relationship with Africa – notably its investment flows – have positioned it favourably among global and regional peers.

Compared to other investors such as China and Europe, the UAE offers strong competitive advantages as an investor in the continent. The proximity of sub-Saharan Africa to the GCC speaks to regional multilateralism; because of that proximity, they are and will continue to be a significant investment partner. The experience in logistics, people mobilities, government, and commercial management make GCC nations suitable partners. International diplomacies also come with a clean slate and no historical baggage that hinders or taints commercial activity on the continent.

Key sectors in Africa that GCC country investors are targeting include energy and infrastructure, logistics and transportation, and agriculture.

The UAE’s involvement in those sectors has delivered wide-ranging benefits, by empowering local communities, promoting knowledge exchange, and fostering entrepreneurship, the UAE has become an important catalyst for positive change.

The continent has shallow industrial capacity, and the absence of heavy industry is down to a shortage of sufficient power. Partnering with state-owned companies (SOCs) in various countries, including South Africa and Kenya, reflects the recent increasing interest for the private sector to participate. Energy, infrastructure and power are key factors. In some African countries including Kenya, Ethiopia, Ghana, Senegal, and Rwanda, the current and proposed ways to provide access to modern energy services must outpace population growth. One-in-two people added to the world population between now and 2040 are set to be African – but more than two-thirds of people without access to electricity in the world currently live in sub-Saharan Africa.^[i]

Africa’s growing energy and infrastructure requirements also align with the goals of GCC investors as well as overall visions and governmental plans for GCC countries. The UAE’s sovereign wealth funds and other institutional investors have substantial financial resources and the capacity to undertake large-scale investments. This growing requirement presents attractive investment opportunities for energy, banking, telecommunications, manufacturing, affordable housing, and agriculture.

The ongoing commitment to enhancing food and water security in Africa has also proven instrumental in ensuring sustainable development and addressing growing challenges. The Gulf imports 85% of its basic food requirements; [ii] with a focus on food security, the UAE’s investments in African agriculture will drive mutual economic growth and create trade opportunities in the region in addition to accelerating the advancement of local food production methods and technologies across the continent, East Africa being to date the region in which the UAE has invested the most through buying and/or leasing land from private businesses and foreign government contracts. As an example, a recent survey by the Dubai Chamber of Commerce saw 61% of respondents say agriculture represented the most lucrative area for investment in sub-Saharan Africa.

Empowering African communities and providing opportunities for thousands of individuals has resulted in the transfer of technology and skills contributing to a boost in local capabilities, driven innovation, and facilitated knowledge sharing. The long-term hand-up-not-a-hand-out approach goes as far as to include initiatives such as offering scholarships to African students, enabling them to pursue higher education in UAE-based universities.

However, no investment comes without its challenges (including regulatory), but the good news is that they are being addressed in country by policymakers. Overcoming these challenges will continue to require strong partnerships, mutual understanding, trust, and innovative approaches to address specific market dynamics; collaboration with people and institutions on the ground is essential.

Globally, one could almost say that we have evolved from the Western to the Asian Century. To that effect, UAE-Africa relations are growing stronger as more partnerships are formed and the outlook for the UAE’s economic ties with African countries evolves, it is estimated that the UAE’s total non-oil trade with Africa is now worth $25 billion per annum. With a focus on sustainable development and inclusive growth, the UAE’s impact on African economies will continue to contribute positively to economic prosperity and global integration, fostering a mutually beneficial relationship between the UAE, wider GCC, and African nations, in a strong win-win dynamic.

Rassem Zok is CEO, Middle East and North Africa at Standard Bank Group.