Scramble for Africa 2.0
China and the Gulf States are pumping billions of dollars into Africa. Knight Frank’s Justin Eng (Senior Manager, Asia Pacific Research) and Taimur Khan (Research Manager, Middle East) review their influence in terms of trade, investment, and access.
Back in 2013 the African Union announced Agenda 2063, an ambitious 50-year strategy to improve the overall economic and social well-being of the continent via the acceleration and implementation of pan-African initiatives to drive growth and sustainable development.
In the same year, China announced its Belt and Road Initiative (BRI) – a new platform to help forge better multilateral co-operation with the Asia-Pacific, European and African regions via trade and commerce.
One of the major economic corridors identified as part of the BRI was a maritime route that would link South-East Asia and Oceania to India and then Africa and the Middle East. While independent of each other, Agenda 2063 and the BRI share many common objectives that bridge or further cement existing relations between China and the African nations.
China itself is no stranger to Africa and has had a long history of investing into the continent prior to 2013’s BRI. Taking the five years between 2009 and 2013 as an example, Chinese private and public enterprises invested $27.4 billion on average annually into various African economic sectors such as transportation, energy and real estate.
However, following the BRI announcement, the rate of investment has seen a marked increase with Chinese investments averaging $34.5 billion per annum – up 25% – for the five years between 2014 and 2018. China also now has more embassies and consulates in Africa than any other nation.
Within the BRI, infrastructure and real estate are big necessary features as they lay the foundations needed to drive investments into other sectors. These two sectors have accounted for more than half of all the investments since the BRI announcement.
Some notable deals struck under the BRI umbrella include the 2016 $6.7 billion rail contract awarded by Nigeria to China Civil Engineering Construction Corporation (CCECC) for the construction of a railway linking its economic capital Lagos to its second largest city Kano.
Another in the real estate space, was Egypt’s 2018 $3 billion contract to China State Construction Engineering Corp for the construction of a new CBD in Cairo, which will also house the continent’s tallest skyscraper.
Looking ahead, with the BRI and Agenda 2063 key policies for China and Africa, we expect Chinese investment activity, especially for the infrastructure and real estate sectors, to pick up momentum in the coming years, which will be a boon for Africa’s property markets.
The Gulf States – gateway to Africa
For centuries the Gulf States and Africa have traded enthusiastically with each other and the two land masses share a rich heritage. Historically, these ties were strongest with North Africa, however over the course of the last decade we have also seen links strengthen further with sub-Saharan Africa.
As a result, bilateral trade between the two regions has increased by more than nine-fold over the last two decades and as at 2018 stands at over $65 billion. The UAE has been a key contributor to this growth, with bilateral trade growing almost 4,000% over the same time period. Currently, the UAE accounts for over 50% of the Middle East’s trade with the African continent.
The catalyst of this growth has been the significant amount of capital invested into Africa’s relatively poor infrastructure. This has been the case across a range of countries and sectors. The scale of investment required is immense, the World Bank estimates that up to $96 billion per year is required to bridge Africa’s existing infrastructure gap alone.
Accordingly, Gulf States have been very active in the region over recent years with the likes of Kuwait, Qatar, Saudi Arabia and the UAE all being involved in significant agricultural, port and telecom investments across Africa. The Middle East has 33 FDI projects accounting for 5% of total FDI into Africa, but the UAE is leading the way by a considerable distance and is the ninth largest investor in Africa with 19 FDI projects in 2017. These projects have created an estimated 74,000 jobs, according to fDi Markets data.
Agricultural investments look set only to increase further given the lack of arable land across the Gulf States to service their growing populations – food security is becoming an increasingly paramount issue.
Dubai-based DP World, the global port operator, which operates across 40 countries and boasts a portfolio of 78 marine and inland terminals has invested considerable sums in its African business. Currently, DP World operates eight ports in Africa, which cover almost 200 hectares in total.
In addition to this, DP World continues to develop its broader portfolio across the continent with the addition of inland container depots, logistics facilities and Special Economic Zones. Essential investments given that maritime traffic is expected to increase from an estimated 300 million tonnes in 2017 to over two billion tonnes by 2040.
UAE-based airlines also fly to 20 African countries facilitating commerce with the rest of the world – via the Emirates a third of the world is accessible within four hours and two thirds of the world within eight hours.
Infrastructure investments and transport links such as these not only strengthen the historic ties between the Africa and the Gulf States but are crucial for the potential of Africa to be fully realised.
This article was first published in Knight Frank’s Africa Horizons report.