The African investment landscape faces a major shift as Gulf Co-operation Council (GCC) member States — especially Saudi Arabia, the United Arab Emirates (UAE) and Qatar — increase their footprint on the continent, largely under the control of the Chinese investors.
A new report by the Economist Intelligence Unit (EIU), the research and analysis division of The Economist Group, shows that GCC companies and institutions are targeting a larger share of Africa’s resource industries of oil and gas, mining and agriculture, while consolidating their strong position in transport infrastructure and logistics services, and expanding into renewable energy, digital infrastructure, manufacturing ventures and financial services.
The report titled The Gulf Co-operation Council’s Expanding African Footprint: Strengthening Ties and Increased Investment shows that Saudi Arabia, UAE and Qatar are already major investors and traders in African ventures and appear intent on expanding their footprint across the continent.
“The GCC and African States have strong incentives to build closer commercial and political ties, which from an African perspective include the vast amounts of finance available in the GCC and the willingness of GCC companies and investors to place their bets on Africa,” the report says.
The GCC brings together six Arab countries- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
China has maintained a substantial presence on the continent for over two decades, but the growing interest of Western powers in Africa could impact China’s Belt and Road investment (BRI) plan that was launched in 2013.
The US and the European Union have announced intentions to enhance investments on the continent.
In 2022, the US joined other G7 nations in a $600 billion Partnership for Global Infrastructure and Investment (PGII) and Brussels announced a new Africa policy.
According to the EIU, the GCC is reported to have invested over $100 billion in Africa over the past decade, or about 30 percent of its total outward Foreign Direct Investment (FDI).
In 2022, UAE pumped $50 billion worth of FDI in Africa to overtake China and the USA as the continent’s largest investor, according to a survey report by consultant firm Ernst & Young.
The investment, which is seven times more than the amount committed by the US investors, was mostly channelled to Egypt and South Africa, which made up 95 percent of the continent’s total capital inflows from Abu Dhabi.
The report shows that China and US’s share of FDI into Africa is shrinking, with UAE significantly boosting its presence on the continent.
“Cumulative FDI between 2016 and 2022 sees China ranked fourth by projects, while it comes second by capital investment, behind the UAE,” according to the Africa’s Attractiveness report titled ‘A Pivotal to Growth.’
China is a major infrastructure financier in sub-Saharan Africa, with a total investment of $155 billion over the past two decades.
UAE has taken a lead in developing closer ties with the African transport sector and has a controlling stake in numerous African ports.
Together, Dubai-based DP World and Abu Dhabi-based AD Ports Group have secured concessions, often on a multidecade framework, to develop and operate key seaports and inland ports in Algeria, Egypt, Sudan, Eritrea, Somaliland, Somalia, Tanzania, Mozambique, South Africa, Angola, the Democratic Republic of Congo, Congo-Brazzaville, Rwanda, Nigeria, Guinea and Senegal.
In October 2023, DP World and the Tanzanian government signed a deal for the Emirati logistics company to manage two-thirds of Dar es Salaam port for the next 30 years.
The following month, AD Ports signed an agreement with the Egyptian government to develop a multipurpose terminal at Safaga seaport, and the Abu Dhabi company is leading a mega project in Sudan to build and operate the Abu Amama port and economic zone.
Bilateral trade in goods between the two regions (Africa and GCC) grew by a compound annual growth rate of eight percent in the 10 years to 2022, which included a notable acceleration in growth in the value of bilateral trade in 2021 and a record high of $154billion in 2022.
“This record level of bilateral trade with Africa places the GCC far ahead of the US ($74 billion) and India ($99 billion) in 2022 and has closed the gap with the other major trading partners of China ($289 billion) and western Europe ($244 billion),” says EIU.
“Oil and gas sales remain the bedrock of GCC exports to Africa, and mining sector output is a key component of GCC imports from Africa, but trade beyond these traditional sectors is flourishing and will continue to grow on the back of the GCC’s cumulative and increasingly diversified investment on the continent.”
According to the EIU, investing in port infrastructure, operating key transport nodes and partnering with or investing in African transport and logistics companies will remain a key strategy for GCC states.
In particular, the UAE has taken a lead in developing closer ties with the African transport sector and has a controlling stake in numerous African ports.
UAE forays into the African port sector are supplemented by the outreach of its airline companies to the continent.
“An overarching aim is to leverage rapidly growing intra- and extra-African trade and secure the UAE’s tight grip on Africa’s key import-export nodes— specifically the logistics routes connecting Africa with the Middle East, Asia and Europe,” the EIU report says.
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Britam half-year net profit hits Sh2bn on higher investment income
Insurer and financial services provider Britam posted a 22.5 percent jump in net earnings for the half-year ended June 2024, to Sh2 billion, buoyed by increased investment income.
The rise in half-year net profit from Sh1.64 billion posted in a similar period last year came on the back of net investment income rising 2.5 times to Sh13.27 billion from Sh5.3 billion.
“We are confident in the growth and performance trend that Britam has achieved, supported by its subsidiaries in Kenya and the region. Our business is expanding its revenue base while effectively managing costs,” Britam Chief Executive Officer Tom Gitogo said.
“Our customer-centric approach is fueling growth in our customer base and product uptake, particularly through micro-insurance, partnerships, and digital channels.”
The investment income growth was fueled by interest and dividend income rising 34 percent to Sh9.1 billion, which the insurer attributed to growth in revenue and the gains from the realignment of the group’s investment portfolio.
Britam also booked a Sh3.79 billion gain on financial assets at a fair value, compared with a Sh1.8 billion loss posted in a similar period last year.
The increased investment income helped offset the 12.7 percent decline in net insurance service result to Sh2.13 billion in the wake of claims paid out rising at a faster pace than that of premiums received.
Britam said insurance revenue, which is money from written premiums, increased to Sh17.8 billion from Sh16.6 billion, primarily driven by growth in the Kenya insurance business and regional general insurance businesses, which contributed 30 percent of the revenue.
The group has a presence in seven countries in Africa namely Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique, and Malawi.
Britam’s insurance service expense hit Sh13.6 billion from Sh11.3 billion, while net insurance finance expenses rose 2.6 times to Sh12.3 billion during the same period.
“Net insurance finance expenses increased mainly due to growth in interest cost for the deposit administration business driven by better investment performance. This has also been impacted by a decline in the yield curve, which has led to an increase in the insurance contract liabilities. The increase has been offset by a matching increase in fair value gain on assets,” said Britam.
Britam’s growth in profit is in line with that of other Nairobi Securities Exchange-listed insurers, which have seen a rise in profits.
Jubilee Holdings net profit in the six months increased by 22.7 percent to Sh2.5 billion on increased income from insurance, helping the insurer maintain Sh2 per share interim dividend.
CIC Insurance Group posted a 0.64 percent rise in net profit to Sh709.99 million in the same period as net earnings of Liberty Kenya nearly tripled to Sh632 million from Sh213 million, while Sanlam Kenya emerged from a loss to post a Sh282.2 million net profit.
