Gulf states deepen African investment, but beware the cost – Arabian Gulf Business Insight

Legal disputes and infrastructure challenges could test long-term trust
Africa has an economy worth $2.8 trillion, a population of 1.4 billion, 65 percent of the world’s arable land and a third of the world’s mineral wealth. 
Unsurprisingly, the Gulf states have come to regard the mother continent as crucial to their economic, food and security interests. 
However, arguably, Africa has just as much to gain – if not more – from increased collaboration with GCC governments and investors.
While Africa’s potential has been recognised for many years, governments across the region are finding it difficult to fund infrastructure projects. 
The Africa Development Bank (AfDB) estimates that the continent requires $402 billion a year to meet development goals.
Foreign investment will be critical to fund large-scale transport infrastructure, energy, technology, education, housing and utility projects.
At a time when Western lenders are regarded as increasingly unreliable and even Chinese investment has reduced substantially, GCC companies – encouraged by their governments – have been happy to lend money to support African development. 
The UAE, now the fourth largest foreign investor in Africa, has made investing in transport infrastructure a priority. DP World, its port-to-logistics group, has led the charge, committing $3 billion in new infrastructure spending over the coming five years. 
Rival Abu Dhabi Ports has been in Guinea since 2013 and has won concessions to run terminals in Congo and Angola. All this investment is sorely needed. 
The AfDB claims that African ports are 50 percent more expensive than in other parts of the world, suffering from lack of capacity, long waiting times, congestion and slow handling.
GCC businesses not only bring capital but also know-how, technology and efficiencies, all of which are in short supply throughout the region. 
In return, improving Africa’s ports has the potential to bring long-term returns to investors, not only from the economic growth that follows but also from the reduced cost of shipping critical resources and foodstuffs to the Gulf. 
Consulting company PwC has estimated in the past that China has gained $13 in trade revenues for every $1 it has invested in new port infrastructure. In this respect, Gulf investors are following a well-trodden path.
Beyond building a network of ports, significant investment has been directed at the airport and airline sector, with the same aim in mind. 
In Rwanda, Qatar Airways has established Kigali as its African hub and acquired a 49 per cent stake in RwandAir and a 60 per cent holding in the country’s Bugeresa International Airport. 
Emirates SkyCargo has agreed with Astral Aviation, one of Africa’s leading cargo airlines, to market services across its intra-African network of 50 destinations jointly. Fresh fruit, vegetables and pharmaceuticals will be among the top products shipped.
However Gulf investors are not immune to many of the challenges that have put off western and Chinese financiers.
In 2018, Djibouti’s government seized back control of Doraleh Container Terminal, which had been built and operated by DP World, claiming that the terms of the deal had been unfair. A protracted legal battle ensued, with courts finding on multiple occasions in favour of the UAE port operator.
In 2024 damages were estimated to amount to more than $700 million and the case led DP World to accuse the country of showing contempt for the rule of law. It warned other would-be investors to steer clear. 
Companies also complain of endemic corruption, lack of training, poor employee relations, weak security and unreliable technology and energy networks, all of which have compromised the region’s potential.
In an increasingly multipolar world, African governments welcome capital from outside the usual sources of the US, Europe and China to fill an ever-widening investment gap. 
Many African countries see the Gulf states as a “third way”, which enables them to avoid picking sides between the west and China while offering a viable model for development. 
However unless the failings of the underlying investment environment are addressed, there is the risk that Gulf investors come to view Africa with the same level of mistrust as their western and Chinese counterparts.
John Manners-Bell is CEO of Transport Intelligence Insight and founder of Foundation for Future Supply Chain
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