By Majella Mark
- ADQ, Abu Dhabi’s sovereign investment fund, invested $35B in Egypt’s Mediterranean coast to avert an economic crisis
- There has been a growing trend where Africa saw substantial investment in megaprojects, with six of the top 15 projects worldwide valued at over $10B each
The UNCTAD’s World Investment Report 2023 revealed a significant decline in Foreign Direct Investment (FDI) for Africa, dropping to $45 billion in 2022 from $80 billion in 2021, representing 3.5% of the global FDI. Despite this decrease, greenfield project announcements increased by 39%. Greenfield investments are often seen as a way for companies to enter new markets, gain access to local resources, or diversify operations and Africa saw substantial investment in megaprojects. With six of the top 15 projects worldwide valued at over $10 billion each.
Why This Matters: In recent years, the United Arab Emirates (UAE) and other Gulf nations have steadily emerged as significant drivers of African foreign investment growth, marking a substantial shift in global investment dynamics. Notably, the UAE stands out as a frontrunner in this trend, poised to become one of the largest sources of investment on the African continent over the next five years. Between 2016 and 2021, UAE investments in sub-Saharan Africa alone represented a staggering 88% of the Gulf Cooperation Council’s (GCC) total regional investment, indicating a strategic focus on expanding economic ties with African nations. A lot of the investment is through global greenfield FDI projects. In many African countries, there is direct investment in tangible assets such as land.
Abu Dhabi’s most minor significant sovereign investment fund, ADQ, invested $35 billion in Egypt’s Mediterranean coast. In 2022, the UAE committed $52.8 billion in foreign direct investment (FDI), surpassing China’s contributions by 20 times and the US by seven times. Although the figure decreased to $44.5 billion in 2023, it remained nearly twice as much as China’s, which ranked second in FDI contributions for that year.
Global opportunities
By positioning themselves as gateways into Africa for global powers such as Russia, China, and Western countries, the UAE and its counterparts aim to solidify their role as key players in shaping Africa’s future. African countries can leverage the expertise and resources of the UAE, Saudi Arabia, and Qatar to accelerate their own development agendas. This could involve partnerships in areas such as renewable energy, technology transfer, and capacity building. It will now be up to African leaders to carefully navigate this evolving landscape, ensuring that partnerships align with their national interests and contribute to sustainable growth. By fostering mutually beneficial relationships, African nations can harness the benefits of Gulf investments while maintaining their agency and sovereignty.
Situational Awareness: Investing in Africa, especially at the global trajectory presents intense shifts of sociological instability and government dismantling. It could bring a significant payoff to many willing to take the risk. Joining funds such as The Commonwealth Funds (CAFRX), Growth Africa, and Prosper Africa are manageable ways of building an FDI portfolio. You may even be as bold as to travel to Africa and engage with UAE businesses, like energy company AMEA Power LLC, for potential partnerships or collaboration. The UAE has money to spend, and with the right idea from an ambitious entrepreneur, that money can work for business ventures that could make many very wealthy.
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