Gulf Countries To Invest Up To $5bn In Africa Annually – Study

Annual Gulf investments to African infrastructure are likely to average almost $5 billion in the coming years, according to a recent study by Dubai Chamber of Commerce and Industry (DCCI).

The study also revealed that Gulf states have provided funds worth $30 billion to support the development of African infrastructure over the last 10 years. Of that, approximately $15 billion was given in grants and loans from Gulf development agencies while $15 billion was provided via direct investments.

GCC funding for African projects has also been focused on the North Africa region, with countries such as Dijibouti and Senegal receiving the majority of investments, the report found.

In addition, Gulf aid and investments into the African economy were also found to be diversified.

According to the study, more than half of the aid has gone to fund transport projects, mainly for building roads, with about 30 per cent allocated for power projects that range from hydroelectric dams to rural electrification, and another 15 per cent given to water projects. Very little of the aid amount has been invested on telecoms infrastructure, the study said.

However, Africa’s telecoms sector received the majority of investments from the GCC’s private sector, followed by ports and power generation.

Gulf investors have been less involved with roads and water infrastructure because of a lack of potentially profitable projects, the report said. Moreover, Gulf firms also perceived the African markets as risky despite the opportunities there.

“Risks from operational problems, non-honouring of contracts, currency volatility, political risks and change of government and policies, especially relating to long-term projects, are among the main concerns for Gulf investors,” the DCCI study said.

But despite the challenges that waylay investments from the Gulf, the continent offers a large number of opportunities not just to large corporates but also to smaller firms, according to Hamad Buamim, president and CEO, Dubai Chamber.

“Our study has revealed that given the perceived risks associated with mega-projects in several African markets, smaller-scale projects have becoming increasingly more appealing, especially in the energy industry,” he said.

“Gulf investors must take care to differentiate between the region’s many countries, rather than view them as a homogenous “African” market.”

Recently, a number of GCC companies committed investments worth $19 billion in various infrastructure projects in Africa.

Major investments from the UAE included a commitment of $16 billion by Trojan General Contracting, which is part of the group owned by Sheikh Tahnoon Bin Zayed Al Nahyan and investment firm Earth Capital.