Diversifying to Africa: Gulf countries to pump $30 billion into the continent

Published October 1st, 2014 - 07:11 GMT
It also revealed that Gulf funding for African infrastructure has focused on North Africa, which has received the bulk of aid (about 65 per cent of the total).
It also revealed that Gulf funding for African infrastructure has focused on North Africa, which has received the bulk of aid (about 65 per cent of the total).

 A study expected that annual contributions are likely to average $5 billion in the coming years, which equates to at least 10 per cent of the total average annual inflows to this sector. 

A study by the Dubai Chamber of Commerce and Industry has revealed that Gulf entities have provided at least $30 billion of funding, at current prices, to African infrastructure over the past decade, which amounts to between seven and 10 per cent of total inflows, of which approximately $15 billion in loans and grants from Gulf development agencies and approximately $15 billion in direct investments.

The study was announced on Monday during a Press conference held at the Dubai Chamber. Prepared in collaboration with the Economist Intelligence Unit ahead of the Africa Global Business Forum on October 1 and 2, the study expected that annual contributions are likely to average $5 billion in the coming years, which equates to at least 10 per cent of the total average annual inflows to this sector.

It also revealed that Gulf funding for African infrastructure has focused on North Africa, which has received the bulk of aid (about 65 per cent of the total) and also a large share of the direct private investment (60 per cent). There has been a focus on countries such as Djibouti and Senegal.

However, there are increasingly exceptions to this rule, seen for example with the Saudi electricity company Acwa Power focusing its efforts mainly in South Africa and telecom companies exploring increasing swathes of East and West Africa. To date, there has been relatively little Gulf investment in the continent’s fast-growing economies of Angola, Ethiopia and Nigeria, which have attracted considerable infrastructure funding from Brazilian and Chinese entities, as well as in the case of Nigerian companies based in the US and Europe.

Gulf aid and investments are diversified among different infrastructure projects in Africa. According to the study, more than half of Gulf aid has gone to transport projects, mainly road building, with about 30 per cent on power (ranging from hydro-electric dams to rural electrification) and 15 per cent on water projects, but very little on telecoms infrastructure. By contrast, the telecoms sector has been the main infrastructure focus of the GCC private sector, followed by ports and, increasingly, power generation. Gulf investors have been less involved with roads and water infrastructure because of a lack of potentially-profitable projects.

Hamad Buamim, president and CEO of the Dubai Chamber, noted this study highlights key facts about the economic reality in Africa and business opportunity. And due to cultural and historical ties to Africa, GCC investors are well positioned to invest in infrastructure in Africa.

He said: “Opportunities are not limited to public and large companies, small companies are also well positioned to invest. The Dubai Chamber’s study has revealed that given the perceived risks associated with mega-projects in several African markets, smaller-scale projects have becoming increasingly more appealing, especially in the energy industry.”

“Gulf investors must take care to differentiate between the region’s many countries, rather than view them as a homogenous ‘African’ market. The Africa Global Business Forum, organised by Dubai Chamber, will further highlight the economic and investment realities and opportunities in the different African markets.”


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