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Gulf Greenfield FDI Investment Into Africa Smashes Records

The Gulf Cooperation Countries delivered 156 greenfield FDI projects, valued at $113 billion, in 2022 and 2023. The significant uptick is striking and due primarily to Saudi Arabia's and the UAE's desires for greater food security, to tap into Africa's growing consumer market, and to remain relevant by securing access to the energy transition metals that Africa has in spades. To put these figures in context, in 2023 US Africa investment was only $10 billion of greenfield FDI in Africa, its highest figure since 2018. China Africa Investment in 2022 was a record $38.5 billion, and the Western European nations weren't far behind China was $38 billion in greenfield commitments.

In 2023, the Gulf Cooperation Countries delivered 73 investment greenfield projects worth more than $53 billion in Africa. This figure represents a slight decrease from 2022 when the Gulf countries invested $60 billion across 83 greenfield projects. 90% of that foreign direct investment ("FDI") came from the UAE and Saudi Arabia. According to data from fDi Markets, the uptick in investment is striking.

It's not just the Arab nations plowing capital into Africa, the Western European countries invested $38 billion in FDI in 2023 into the Continent. Total FDI by Hong Kong- and China-based companies in 2023 reached an all-time high reaching $38.5 billion. The laggards are the Americans who took on only $10 billion worth of greenfield FDI commitments in Africa in 2023, its highest FDI into Africa since 2018.

Some notable investments and announcements are the DP World $442 million investment to expand Somalia's port which includes building a new container terminal and expanding existing facilities. Saudi's Aramco plans to invest $8 billion in Mozambique to build a 1,700-mile (i.e., 2,800-kilometer) gas pipeline to South Africa. The Abu Dhabi Fund for Development has pledged $1 billion over several years to build renewable energy infrastructure in several countries including Rwanda, Senegal, and Mali. Late last year the $700 billion Saudi Public Investment Fund committed $533 million for Africa with signed agreements with Nigeria, Senegal, Chad and Ethiopia announced for energy cooperation.

The main investors, UAE and Saudi Arabia, have been active in Africa since 2021 pursuing bilateral trade agreements. Africa offers food security, as well as a place to invest to tap into a rapidly growing consumer market. The energy landscape is changing and for the Gulf nations to remain relevant they must secure energy transition minerals which are scattered throughout Africa.

In 2021, the UAE launched the Africa Trade Gateway to promote and facilitate trade between Africa and the UAE. Investment promotion agreements were signed with Ethiopia, Rwanda, and Uganda. The Saudis established the Saudi-African Cooperation Fund that same year with a $10 billion commitment and signed MoUs with several African nations in the areas of mining, infrastructure, and agriculture.

In 2022, the UAE committed $10 billion to an investment plan for renewable energy investments in Africa, joined the Africa Continental Free Trade Area ("AfCFTA"), and signed comprehensive partnership agreements with Ethiopia and Rwanda. Saudi Arabia committed $1.5 billion in humanitarian aid to Somalia and other East African countries, launched the Green Saudi Arabia - Green Africa initiative, and signed several MoUs with a handful of African nations in sectors covering tourism, technology, and logistics.

In 2023, UAE opened an embassy in Malawi and hosted the inaugural UAE-Africa Investment Forum in Dubai. Saudi Arabia launched the Saudi-African Business Council to promote further investment and signed an MoU with South Africa for energy cooperation.

The figures presented in this article are greenfield FDI which is a type of foreign investment that builds new operations from scratch in the foreign country. Measuring this type of FDI is a more telling gauge of genuine investor interest and long-term commitment. The development potential of this type of investment is also highest for the country receiving the investment. Knowledge transfer, job creation, and infrastructure development are all generally higher when greenfield projects are involved. Greenfield projects carry higher risk for the investor so the growth of this type of FDI also signals that investors perceive that Africa is becoming less risky.




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