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United Arab Emirates Vie To Invest In Africa

Adesola Bolaji by Adesola Bolaji
March 23, 2024
in Business, News, Politics
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In pursuit of geopolitical clout, in 2021 the United Arab Emirates made a promise to expand aggressively into markets beyond its usual horizons.

Since then, the United Arab Emirates have pledged more investment in Africa’s economies than any other country and now jockeys for influence with established players like China and France.

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The wealthy Gulf states are piling in both through its government and private sector.

It swooped in last month to save Egypt’s economy with a $35 billion deal — a figure representing 7% of the UAE’s annual economic output.

The United Arab Emirates would also be willing to invest a similar amount in a different African country if a new opportunity arises, according to an official familiar with the Egypt bailout who asked to remain anonymous.

While these Foreign Direct Investment numbers count money pledged and not necessarily spent, based on the deals it’s witnessing, Africa’s largest bank, South Africa’s Standard Bank Group said it is also confident that the UAE will grow into one of the biggest sources of foreign investment on the continent over the next five years.

According to the chief executive officer of Standard Bank Group Ltd Middle East and North Africa Rassem Zok, he said that growth is not linear.

As Chinese infrastructural funding wanes off and Western engagement falters, Abu Dhabi’s cash flows have been coupled with a concerted diplomatic push: an approach mirrored to a lesser extent by its neighbors Saudi Arabia and Qatar.

These ambitions have taken the UAE beyond the Gulf states’ historic North-African sphere of influence and from the nearby Horn of Africa into every corner of the African continent.

Andreas Krieg, a lecturer in Middle Eastern security issues at King’s College in London, said what the UAE’s been practicing through these deals is a kind of “network-centric statecraft.”

The UAE pledged $52.8 billion in foreign direct investment in 2022, when it first topped FDI rankings, which exceeds Beijing’s contributions by 20 times and those of the US by seven, according to data from fDi Markets.

That figure fell to $44.5 billion in 2023 — still nearly twice that of China, which came in second.

These investments are focused mainly in renewable energy, logistics, technology, real estate and agriculture. After the Covid pandemic, the market “got rebased, in terms of valuations, so there is a very interesting entry point for a lot of investors now,” Standard Bank’s Zok added.

Financial lifeline

Last month’s Egyptian bailout extended the UAE’s strategy of offering African nations major financial lifelines, after it previously came to the aid of Sudan and Ethiopia.

Alongside these deals, Abu Dhabi has signed a dozen investment treaties since 2019 with countries further afield, like Zambia, Zimbabwe and Democratic Republic of Congo.

Beyond investment flows, the UAE has also played a role in Africa’s domestic political affairs. It backed Khalifa Haftar in the war for Libya, Ethiopian President Abiy Ahmed in his war against Tigray rebels, and, according to a leaked UN report, the Rapid Support Forces militia in Sudan, where a brutal civil war has created the world’s biggest internal displacement crisis and drawn accusations of war crimes. The UAE denies supplying the RSF with weapons.

They include Egypt, Morocco, South Africa and Kenya, which in February became the sixth country to sign a special free-trade agreement with the UAE, following economic heavyweights like India and Indonesia.

Dubai-based AMEA Power LLC, which is developing projects in more than a dozen African countries, plans to spend $1 billion on renewable projects on the continent this year.

The UAE is not the only Gulf nation pushing to expand its influence in Africa. Saudi Arabia and Qatar have made similar efforts in recent years, marshaling both state resources and the private sector. ACWA Power, a Riyadh-based company, has signed a memorandum of understanding to invest $10 billion in South Africa’s renewables industry over the next ten years.

It’s the country’s most visible presence in Africa, signing its first deals in the mid-2000s and inking its latest with Tanzania in October. In 2022, it bought South African firm Imperial Logistics for $890 million, providing it with access to logistics channels and warehouses across sub-Saharan Africa.

But the UAE has also looked to Africa to compensate for its weaknesses, including its reliance on food imports.

As part of efforts to become food secure, Emirati companies have scooped up agricultural land in Sudan, Zimbabwe and Angola, where Dubai Investments and Abu Dhabi-based E20 Investments in July signed a deal to develop 3750 hectares of rice and avocado farms — an area equivalent to around 5 500 football fields.

Tags: AfricaUnited Arab Emirates
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