Explore the significant growth and future potential of GCC-Africa trade relations as highlighted in the latest Economist Intelligence Unit report, revealing an 8% CAGR in bilateral trade and substantial investments in diverse sectors.
Trade between the Gulf Cooperation Council (GCC) and Africa has experienced robust growth over the past decade, achieving a compound annual growth rate (CAGR) of 8% from 2012 to 2022. This significant expansion is poised to continue, driven by diversified investments and strategic partnerships across various sectors. A recent Economist Intelligence Unit (EIU) report sheds light on the dynamics of this burgeoning trade relationship and its implications for both regions.
Record high bilateral trade
According to the EIU report, bilateral trade in goods between the GCC and Africa reached a record high of USD 154 billion in 2022. This milestone places the GCC far ahead of the United States (USD 74 billion) and India (USD 99 billion), and closer to major trading partners like China (USD 289 billion) and Western Europe (USD 244 billion). The backbone of GCC exports to Africa remains oil and gas, while Africa’s mining sector is a critical component of GCC imports. However, trade is expanding beyond these traditional sectors, underpinned by the GCC’s cumulative and increasingly diversified investments on the continent.
Strategic investments and greenfield projects
Over the past decade, the GCC has invested over USD 100 billion in Africa, accounting for about 30% of its total outward foreign direct investment (FDI). Greenfield FDI announcements from the GCC reached a record USD 60 billion in 2022, with an additional USD 53 billion in 2023. These figures outstrip commitments from Asia, North America, and Western Europe. For instance, China-based companies announced USD 35.5 billion in greenfield FDI in Africa in 2023, while Western Europe and the US announced USD 38 billion and USD 10 billion, respectively.
GCC companies are targeting significant growth in Africa’s resource industries, including oil and gas, mining, and agriculture. Concurrently, they are consolidating their strong positions in transport infrastructure and logistics services, and expanding into renewable energy, digital infrastructure, manufacturing ventures, and financial services.
Transport and logistics: A key focus
Investing in port infrastructure and operating key transport nodes are central to the GCC’s strategy in Africa. The UAE, in particular, has established a strong presence in the African transport sector. Dubai-based DP World and Abu Dhabi-based AD Ports Group have secured long-term concessions to develop and operate seaports and inland ports across the continent. These investments are designed to enhance trade connectivity and logistics efficiency, fostering deeper economic integration between the two regions.
Food security and renewable energy initiatives
Food security remains a paramount concern for GCC states, prompting significant investments in Africa’s agricultural sector. Countries like Angola, Egypt, Ethiopia, and Sudan are engaging in long-term land lease deals with GCC states, aimed at bolstering food production and ensuring sustainable food supply chains. Despite some local concerns about the impact on farming communities, these deals are expected to play a crucial role in the GCC’s long-term development plans.
In addition, the GCC’s commitment to energy transition is evident in substantial project financing for Africa’s renewable energy industry, particularly in solar and green hydrogen projects. The UAE and Saudi Arabia are leading investors in African renewables, with plans to expand their footprint significantly by 2030.
Technology and future market potential
The information and communications technology (ICT) sector in Africa is another key investment focus for GCC-based companies. Building ICT capacity aligns with the GCC’s diversification agendas, tapping into Africa’s fast-growing markets and vibrant regional economic communities. The GCC states are positioning themselves to benefit from future market potential created by pan-African initiatives, offering vast amounts of finance with relatively few strings attached compared to Western financial institutions.
The EIU report underscores the growing importance of GCC-Africa trade relations, highlighting the substantial investments and strategic initiatives driving this partnership. As the GCC continues to diversify its investments across various sectors in Africa, both regions stand to benefit from enhanced economic ties, fostering sustainable growth and development.
The report can be found here.
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