Citi Highlights Gulf Investments in Africa Keeping Bankers Busy -

Affluent investors from the Middle East are diligently pursuing opportunities in Africa, particularly in agricultural businesses, vital minerals, and renewable energy, according to a report by Citigroup.

They are focusing on countries like Kenya to enhance food security in the Gulf region and are looking into industrial collaborations and renewable energy initiatives in South Africa, aiming to broaden their economies beyond oil, as stated by George Asante, head of African markets at Citigroup.

“New deals are coming to light,” Asante shared during an interview, although he refrained from disclosing specific details. Citigroup operates in 15 African countries, with over 70 specialized sales and trading professionals committed to facilitating new financial influxes from various global markets into Africa.

Investors from the Middle East are partnering with firms from the US and China in their pursuits across the world’s second-largest continent, which boasts abundant minerals essential for the shift to cleaner energy and large areas of arable land suitable for grain and food production. The World Economic Forum reports that companies from the Gulf Cooperation Council invested $53 billion last year, in contrast to $100 billion over the previous decade.

In South Africa, Saudi Arabia’s Zahid Group and other investors are in discussions to acquire Barloworld Ltd., the Pan-African distributor of Caterpillar Inc. machinery, while Abu Dhabi’s Adnoc and Saudi Arabia’s Aramco are competing to buy Shell Plc’s downstream assets in the continent’s most developed market, as Bloomberg previously reported.

A notable decline in asset values in nations such as Egypt, Nigeria, and Angola offers a favorable entry for investors, noted Asante.

Investment from the US is on the rise, especially in the critical minerals sector. In the first half of 2024, the US government facilitated over 400 transactions totaling $32.5 billion, as per recent data from Prosper Africa.

However, political instability—such as unrest in gas-rich Mozambique—may deter some investors. The arrest of foreign executives in Nigeria and Mali poses additional challenges for businesses. Recently, four employees of Barrick Gold Corp. were detained by Mali’s military government amid rising tensions over local mining operations, while executives from Binance Holdings faced similar issues in Nigeria.

The continent faces an annual financing gap of around $402 billion through 2030, which is necessary to “speed up its structural transformation and align with high-performing developing nations in other regions,” according to the African Development Bank.

Foreign direct investment flows are aiding African countries in diversifying their financing sources, moving away from eurobonds and concessional loans, thus providing an opportunity for these nations to reduce reliance on dollar-denominated funding.

“The eurobond market is reopening for various African countries such as Cameroon, Kenya, Benin, and Ivory Coast; however, many nations are proceeding cautiously with their debt management in light of recent defaults,” Asante remarked.

He highlighted that accumulating debt in foreign currencies presents significant risks for nations. An increasing number of countries are choosing to convert their debt into currencies that are easier for them to manage.

Governments, in collaboration with the banking sector and significant institutions like the International Monetary Fund and the World Bank, must strive to reduce Africa’s dependence on foreign currencies, Asante stated.

“It is essential for African nations to develop frameworks and mechanisms to manage their foreign currency debt exposure and the volatility it brings to their financial standings,” Asante emphasized. “Prioritizing the dedollarization of debt is vital for these countries to avert potential debt distress if not addressed swiftly.”

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