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With trillions of dollars of investable wealth, the Gulf states have identified Africa as a profitable investment destination. This is excellent news for a continent poised for rapid economic growth.
Brics states are already the largest investors in Africa and a mega-deal between new members the United Arab Emirates (UAE) and Egypt indicates a growing interest in African investments that go beyond the energy and mining projects typically favoured by countries such as Russia and China.
After joining Brics at the beginning of last year the UAE pledged a whopping $35bn towards a new development in Egypt, another new Brics member state that joined the grouping in 2024.
The deal is both the biggest inter-Brics investment and the largest foreign direct investment in Egypt’s history. Financed by Abu Dhabi’s ADQ sovereign wealth fund, the commitment is more than three times larger than Egypt’s total net foreign investments and equates to an estimated 7% of the UAE’s annual economic output.
The agreement sees the development of a cutting-edge city in Ras al-Hekma, a popular coastal tourist spot 200km west of Alexandria. Structured to address immediate financial concerns, the deal involves an $11bn deposit with Egypt’s central bank, a figure surpassing Egypt’s recent $8bn IMF bailout — without the conditions. This suggests Brics co-operation extends beyond trade to include financial stability, while avoiding political interference.
The remaining $25bn will go towards constructing the new city, which is planned to include various amenities, from theme parks to infrastructure such as airports and marinas. Spanning about 170km², construction has already commenced this year.
Once the project has been completed the UAE will relinquish its deposit with Egypt’s central bank, with the initial $11bn figure effectively acting as both a retainer and a bailout for the strained Egyptian fiscus.
With Egypt retaining a 35% stake in the Ras al-Hekma project, prime minister Mostafa Madbouly envisions investment in Ras al-Hekma eventually reaching as much as $150bn, transforming the area into a fully functional urban community rather than just a beach resort.
Transformative investments
This is an example of the kind of transformative investments taking place within Brics, with developing countries no longer having to rely solely on Western financial support.
Critics will argue that this is exactly the sort of mega-project that has precipitated Egypt’s woes to begin with. Ambitious plans, including the construction of a new administrative capital, have increased Egypt’s national debt without generating commensurate economic returns.
This is a fair concern. A major issue with relying on big construction projects to fuel economic growth is that interest must be paid on these debts even when projects are yet to be completed.
However, if foreign investors are contributing cash to finance projects, Egypt stands to benefit economically without accruing debt or assuming significant risk. As such, the partnership with the UAE may prove more economically viable compared to the new administrative capital as it stands to attract tourists and international property investors with the UAE taking on the risk.
While the UAE-Egypt deal is groundbreaking in both scale and character, most of the Brics-led investments into Africa remain focused on the mining and energy sectors. This remains crucial as roughly half the continent still lacks access to electricity. Saudi and Emirati investment have begun to rival Chinese projects, while Russia remains focused on nuclear and natural gas.
This is certainly evident in SA with Russia’s Gazprombank and PetroSA reaching an agreement to restart its gas-to-liquids refinery in Mossel Bay. The refinery (offline since 2020 after running out of feedstock) can produce 46,000 barrels of fuel a day when operational.
The deal has attracted plenty of scrutiny, with 19 of 20 bidders disqualified as a result of strict criteria, which favoured Gazprombank. Concerns have also been raised that SA could face secondary sanctions by working with a sanctioned entity.
That said, the arrangement does have some technical merit. Gazprom is the largest natural gas producer in the world and in addition to refurbishing the refinery the gas giant plans to provide PetroSA with gas condensate to run the plant until natural gas becomes available from local sources. This forms part of the ANC’s strategy to avoid an over-reliance on the West.
Nuclear energy
SA has also announced plans to build more nuclear plants, with Russia expected to be the ANC-controlled government of national unity’s preferred partner. This remains a contentious issue for a state balancing the need for electricity with crucial Western trade ties. That said, many analysts still view nuclear as an important component of the decarbonised energy systems of the future.
It remains to be seen if such large projects with Russia ever get off the ground, especially in light of the new coalition government. However, SA might not end up being that important to Russia’s nuclear ambitions on the continent, with several other African countries, including Burkina Faso, Mali, Zimbabwe, Rwanda, Burundi, Ethiopia and Egypt, having all inked nuclear power agreements with the Russians.
While Russia focuses on natural gas and nuclear co-operation, the Gulf states have recently emerged among the largest investors on the African continent with their interest directed at the renewable energy sector.
Until a few years ago China was the undisputed leader in this space, developing more than 10GW of clean energy capacity across Africa since 2000, with more than $13bn in investments. But states such as the UAE and Saudi Arabia are emerging as new front runners.
These states are committing financial resources towards renewables as part of a hedging strategy as forecasted declines in global oil demand threaten their primary source of revenue. For these Brics-aligned Gulf states, Africa represents a golden opportunity to finance energy projects, gain access to critical minerals and boost oil demand through higher levels of economic growth.
Amea Power, based in Dubai, plans to expand renewable projects in more than a dozen African nations, aiming to invest $1bn, while Masdar, another UAE company, acquired a share in Lekela Power, one of Africa’s leading green energy firms.
Meanwhile, Riyadh-based ACWA Power has signed a memorandum of understanding to invest $10bn in SA’s renewables sector over the coming decade.
With copper, lithium and cobalt from Africa remaining crucial to the green-energy transition, competition for these strategic resources is producing a modern day scramble for Africa. This has attracted the interest of oil producers determined to diversify their economies.
Africa is also one of the few remaining regions still forecast to experience increased oil demand, which means investment-led economic growth in Africa could create multiple revenue streams for these Gulf state investors.
• Shubitz is an independent Brics analyst.
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