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Scramble for Africa: Why Gulf countries are leading the charge into the continent

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By Victor MUJIDU

The United Arab Emirates (UAE), being a wealthy and strategically positioned nation, has been expanding its economic interests globally and now joins China and the wider European nations including the US keen on potential business deals in Africa.

It’s possible that the UAE could have explored opportunities for business and investment in Africa, like many other nations have done.

Being the dominant provider of foreign direct investment (FDI) for Africa and the Gulf Cooperation Council (GCC) states, the UAE is deemed to have concentrated in Africa’s high-growth sectors, including infrastructure, energy, transport, logistics, and technology.

The oil – rich region has emerged as the fourth largest investor after China, Europe, and the US for the past ten years, according to a report from business, financial, and government institution, White and Case which is based in New York.

Joining in the market forces from China, Russia, India, the US as well as Abu Dhabi, greater rivalry will be experienced in Africa more so in the lucrative commercial sector.

In a span of 10 years (2012-2022), FDI flows from GCC (Bahrain, Kuwait, Oman, Saud Arabia, and the UAE) states to Africa totaled $101.9 billion on 628 projects, whereas FDI flows from Africa to the GCC states totaled $3 billion on 141 projects, according to White and Case.

FDI from the UAE to Africa totaled $59.4 billion during the time, with Saudi Arabia coming in second ($25.6 billion), followed by Qatar ($7.2 billion), Kuwait ($5 billion), and Bahrain ($4.2 billion).

Data reveals that the African continent is rapidly growing as one of Abu Dhabi’s major markets. In 2021, Abu Dhabi spent $5.6 billion on 71 projects on the continent, with The Agtech Park in Egypt ranking as the most significant.

Similarly, India has been on the edge, attempting to influence trade on the continent. For instance, in 2022 India organized a two-day investment conference in New Delhi that included around 40 African officials from 17 different countries to talk about how India and Africa might better improve trade and investment.

The United Arab Emirates (UAE) has been increasingly focusing on expanding its business and investment activities in Africa for several reasons:

Diversification of Economy: The UAE has traditionally relied heavily on oil exports for its revenue. However, the government has been working to diversify its economy and reduce its dependency on oil. Investing in Africa provides opportunities in various sectors like infrastructure, real estate, agriculture, and manufacturing, which align with the UAE’s economic diversification goals.

Growing African Markets: Many African countries have experienced steady economic growth and urbanization in recent years. This has led to a growing middle class and increased consumer demand. The UAE sees potential in entering these emerging markets to tap into the increasing purchasing power of African consumers.

Strategic Partnerships: The UAE aims to build strategic partnerships with African countries to enhance bilateral trade and investment. By investing in key sectors such as infrastructure, energy, and technology, the UAE can contribute to the development of African economies and gain a foothold in these markets.

Natural Resources: Africa is rich in natural resources, including minerals, agricultural products, and energy resources. The UAE, being a resource-poor country, sees opportunities in securing access to these resources to support its industries and economic growth.

Geopolitical Influence: The UAE’s engagement with African nations also enhances its geopolitical influence on the global stage. Building economic ties with African countries can lead to diplomatic benefits and opportunities to exert influence in international forums.

Investment Hubs: The UAE has positioned itself as a global business and financial hub, with cities like Dubai serving as gateways for companies seeking to access African markets. By establishing partnerships and investments, the UAE can strengthen its role as a conduit for international business activities between Africa and other parts of the world.

Infrastructure Development: Many African countries require significant infrastructure development to support their growing economies. The UAE has expertise in infrastructure projects, construction, and urban planning, making it an attractive partner for African nations looking to enhance their physical and digital infrastructure.

Trade Agreements: The UAE has been working on bilateral trade agreements and partnerships with various African nations to facilitate trade and investment. These agreements can provide preferential terms for UAE businesses, making it more attractive for them to engage in business activities in Africa.

Tourism and Hospitality: The UAE is known for its thriving tourism and hospitality sectors. By investing in African tourism destinations and hospitality projects, the UAE can benefit from Africa’s natural beauty and cultural attractions while also contributing to job creation and economic development in those regions.

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