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Africa Focus: Winter 2022

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Embarking on a period of unprecedented growth and opportunity

Africa 2023: A continent coming of age?

Our ninth edition of Africa Focus shows Africa embarking on a period of unprecedented growth and opportunity.

We open this issue with a closer look at Article 6 of the Paris Agreement, which holds much promise for the African continent. Article 6 allows countries to voluntarily cooperate with each other to achieve emission reduction targets set out in their nationally defined contributions. The COP26 negotiations in Glasgow led to a set of agreed rules to help put Article 6 into practice. COP27 reaffirmed the previously agreed principles of Article 6, but sadly, challenges in reaching agreement on some contentious issues led to part of this being deferred to COP28 in 2023. The relevance of the Article 6 to community-based agriculture—an area of particular importance in Africa—is highlighted by our guest contributor, Dan Collison, Chief Executive of Farm Africa.

Natural synergies between the Middle East and Africa—geographic proximity, well-developed logistical networks and close political and economic ties—are key features in this edition. We ask the question, "Can the Middle East—with its vast capital and a booming Islamic finance market—provide the much-needed boost to the underserviced Muslim population in Africa?" Focusing on the Gulf Cooperation Council states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, we explore the growing investment and trade flows between the GCC states and Africa. Recent years have seen these ties expand south to include sub-Saharan Africa, and from an almost exclusive focus on oil and petrochemical-related products to a broad spectrum of other sectors.

Cross-border investors are always sensitive to the risk of wrongful conduct that the state hosting their investments, and that state’s organs, can inflict upon them. Many African countries have vowed to promote and protect foreign investments, and have taken steps to modify the investor-state dispute settlement system. One of our articles explores the current state of investment treaties in Africa and efforts to protect foreign investments in Africa as well as African investments abroad.

In many ways, Africa has emerged as a pioneer in financial services—a good market in which to do business and realize profits—beyond just the development projects. The way its people move money around the continent on their mobile phones is far ahead of even the more developed markets. Africa has long been of interest to private equity investors, and rounding off the range of topics covered in this edition, we have an interview with Bryce Fort, Chief Executive Officer of Emerging Capital Partners, who was the driving force behind the recent listing of IHS Towers, an African mobile telecommunications company, on NYSE. The interview explores current developments in private equity in Africa.

We hope that you will find the new edition of Africa Focus a thought-provoking read.

Africa has emerged as a pioneer in financial services—a good market in which to do business and realize profits—beyond just the development projects

 

 

Article 6 of the Paris Agreement: Opportunities for Africa

The possibility of climate markets has finally materialized into the draft stage at COP27, but many crucial decisions that would allow for carbon trading to begin in earnest were deferred to COP28.

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Investment treaty protection: How to safeguard foreign investments in Africa

Prudent African investors—and investors within Africa—can ensure that their foreign investments are protected from wrongful conduct that the state and its organs can inflict.

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Middle East and Africa corridor: The perfect partnership for funding Africa's growth

For African economies living on the edge, can the Middle East provide the much-needed boost to the under-serviced Muslim population in Africa?

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Africa's coming of age: An interview with Bryce Fort

Bryce Fort, Managing Director and Founding Partner of Emerging Capital Partners (ECP) shares his insights on the current state of private equity funds in Africa.

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Africa and the Gulf States herald a new era in trade and investment relations

Strong diplomatic and economic ties have long existed between the Gulf Cooperation Council (GCC) states and North Africa but there are other levers at play for deepening economic relations.

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Credit where credit's due: Who's benefiting from the voluntary carbon market?

Projects that protect and restore the environment improve carbon storage and strengthen the livelihoods of smallholder farmers, says Dan Collison, Chief Executive of Farm Africa.

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Africa

Africa and the Gulf States herald a new era in trade and investment relations

Strong diplomatic and economic ties have long existed between the Gulf Cooperation Council (GCC) states and North Africa but there are other levers at play for deepening economic relations.

Insight
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4 min read

Over the past decade, the UAE has emerged as one of the largest investors into Africa among the GCC states

The interests of the GCC countries in cooperation with Africa have historically been shaped by their relatively one-sided and short-term economic goals. But propelled by the COVID-19 pandemic, food supply issues and the changing regional geopolitics in recent years, the dynamics have been shifting toward deeper, longer-term—and mutually beneficial—commitments between the Gulf States and the African continent. Currently, all GCC States, barring Saudi Arabia, have signed and ratified bilateral investment treaties—BITs—with African countries, strengthening economic ties while pursuing diversification strategies beyond traditional sectors and addressing current critical issues, such as food security.

Over the past decade, the UAE has emerged as one of the largest investors into Africa among the GCC states, and is the fourth-largest investor globally into Africa—after China, Europe and the United States. In 2018 alone, the Abu Dhabi Fund for Development also financed more than 66 projects in 28 African countries, valued at US$16.6 billion. Between January 2016 and July 2021, the UAE invested US$1.2 billion into sub-Saharan Africa, a staggering 88 percent of the GCC total during that period.

Saudi Arabia—another big investor into Africa—has also made significant investments in energy and mining projects, and particularly into Africa's agribusiness, in response to growing food security concerns in the region.

Food security

Food security remains a major concern for the region and GCC states have historically been exploring agriculture projects in Africa for at least a decade. The capital-rich and financially robust GCC countries have been adept at managing and mitigating their food supply risks. But the 2007-08 food crisis—during which more than 30 countries imposed food export restrictions—and the current disruption of global food supplies caused by Russia's actions in Ukraine, have changed this. Climate change is also expected to add further pressure on the Gulf's food supplies. Against this dire canvas, Africa—with its vast amounts of arable land—could double or triple its cereals and grains output, which would add 20 percent to worldwide output. Similar increases are possible with horticulture crops and livestock.
Zambia and Kenya have been devising terms for land use that meet both local and investor needs. Saudi Arabia has also invested heavily in Africa's agribusiness, especially in East Africa, with a portfolio thus far of roughly two million hectares.

Energy and infrastructure

Africa—with its vast amounts of arable land—double or triple its cereals and grains output, which would add 20 percent to worldwide output

While agro-investments remain a priority for the GCC, investors are looking at numerous other sectors. Africa's growing infrastructure and energy needs offer excellent opportunities to GCC investors. As part of its €300 billion (US$321.9 billion) Global Gateway strategy, the EU seeks to partner with the UAE to accelerate Africa's energy transition and infrastructure development. Abu Dhabi–based Tabreed recently contracted to provide energy services to CapitalMed, Egypt's new healthcare mega-project. Roughly 15 percent of Ghana's electricity comes from a power station jointly owned by Ghana's Volta River Authority and Abu Dhabi's TAQAR Group. Dubai-based Yellow Door Energy is the largest distributed solar developer for commercial and industrial businesses in southern Africa. The QIA has forged an alliance with Italian utility Enel (Enel Green Power) to finance, build and operate renewable energy projects in sub-Saharan Africa.

Airlines and airports

Besides sovereign investments, recent years have seen GCC corporates investing in assets that align well with their businesses. Qatar Airways invested US$1.3 billion in 2020 to acquire 49 percent of RwandAir and a 60 percent stake in the new Bugesera International Airport near Kigali, its planned pan-African hub.

The Qatar Investment Authority anchor US$250 million investment into the Virunga Africa Fund I is further evidence of Qatar's growing interest in Africa. In 2021, Qatar also acquired a 50 percent stake in 800 MWs of renewable projects in South Africa and Zambia, and made a US$200 million investment in fintech platform Airtel Mobile Commerce.

Seaports

DP World operates seaports in Angola, Djibouti, Egypt, Morocco, Mozambique, Senegal and Somaliland. DP World and Britain's development finance agency CDC Group have announced intent to jointly invest up to US$1.72 billion in logistics infrastructure in Africa, including port modernization.

Abu Dhabi Ports, collaborating with Hutchison Port Holdings, is searching for projects in Africa, too. As a starting point, their focus is to elevate the Port of Dar es Salaam in Tanzania as a world-leading trade hub.

Telecommunications

Ranked the 15th-largest mobile network in the world, UAE's E& (previously known as Etisalat), operates across Benin, Burkina Faso, Central African Republic, Egypt, Gabon, Ivory Coast, Niger and Nigeria. Qatar-based Qtel operates networks in Algeria and Tunisia. Saudi Arabia has also announced a US$1 billion investment initiative in Africa, focusing on industry, finance, agriculture, fishing, mining, transportation, regional security and energy.

Given that the GCC states need to diversify away from hydrocarbons, and Africa's increasing appeal, it seems likely that investment between the Gulf countries and Africa investment is likely to continue to grow.

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© 2022 White & Case LLP

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