Dubai: Gulf based entities including private companies and aid agencies together have funded more than $30 billion (Dh110 billion) worth of infrastructure projects in the last decade in Africa, which amounts to about 10 per cent of total inflows, according to a study by Dubai Chamber of Commerce and Industry and Economist Intelligence Unit (EIU).
While direct investments constitute about $15 billion, the remaining has come from Gulf development agencies.
The study expects annual contributions from Gulf investors to Africa infrastructure about $5 billion (about 10 per cent) of inflows into this sector during the next few years.
Historically, Gulf funding for African infrastructure has focused on North Africa, which has received the bulk of aid (about 65 per cent of the total) and about 60 per cent share of the direct private investment.
Gulf aid and investments are diversified among different infrastructure projects in Africa. According to the study, more than half of Gulf aid has gone to transport projects, mainly road building, with about 30 per cent on power (ranging from hydroelectric dams to rural electrification) and 15 per cent on water projects, but very little on telecoms infrastructure.
By contrast, the telecoms sector has been the main infrastructure focus of the GCC private sector, followed by ports and increasingly power generation. Gulf investors have been less involved with roads and water infrastructure because of a lack of potentially profitable projects.
In 2012, Arab funding, both public and private, was equivalent to over 10 per cent of total external funding. This was comparable to funding from European donors and more than the $4billion from the World Bank. However, it was dwarfed by Chinese spending of $13billion.
“Opportunities are not limited to public and large companies, small companies are also well positioned to invest. Dubai Chamber’s study has revealed that given the perceived risks associated with mega-projects in several African markets, smaller-scale projects have becoming increasingly more appealing, especially in the energy industry,” said Hamad Bu Amim, President and CEO, Dubai Chamber.
Chinese entities have invested far more in African infrastructure. For Chinese companies, infrastructure deals in Africa are often part of broader commercial engagements with an eye on African resources. “As such, the infrastructure is often a sweetener to win resource concessions. But Africa’s natural assets are not of such vital interest to Gulf countries,” the Dubai Chamber-EIU study said.
However, the study said that there are abundant commercially viable investment opportunities in the infrastructure sector across Africa that can be tapped by GCC investors and due to cultural and historical ties to Africa, GCC investors are well positioned to invest in infrastructure in Africa.
“Gulf investors must take care to differentiate between the region’s many countries, rather than view them as a homogenous African market. The Africa Global Business Forum, organised by Dubai Chamber will further highlight the economic and investment realities and opportunities in the different African markets,” said Bu Amim.
