Africa seeks GCC-like economic trust at US summit

Africa's leaders will aim at this week's summit in Washington to galvanize US support for the continent in the form of bilateral trade and investment, as many African countries are turning to their Eastern neighbors, including the Gulf Cooperation Council (GCC) states where relations have been growing in the last few years.

Leading up to the three-day event, President Joe Biden’s administration has played down its concern over the rising influence of foreign players investing strategically as supply chain costs rise amid the Ukraine-Russia war. 

Russia was the continent’s largest arms dealer from 2017–2021, accounting for 44% of major arms imports, reported the Stockholm International Peace Research Institute Sipri. 

China is Africa’s largest trading partner and saw its trade value rise 35% in 2021 from the year before to reach $254 billion according to China’s customs agency. 

The investing giant is building infrastructure in a variety of logistics and energy sectors along with heightened military defense to protect its financial assets. 

Since the country’s last summit of its kind in 2014, US foreign direct investment (FDI) in Africa dropped from $69 billion to $44.81 billion in 2021, reported Statista. 

On the other hand, despite having lesser overall trade values, Africa-GCC relations have continued to grow over the years.

The United Arab Emirates was the fourth largest investor in Africa in 2021, with 71 projects valued at about $5.64 billion, according to the Emirates News Agency (WAM) and research consultancy Knight Frank. 

The federation of monarchies is investing in logistics, infrastructure, energy and more within its neighboring continent.

Looking to rise in the ranks is the Middle East’s largest economy, Saudi Arabia pledged to invest $15 billion in South Africa following a number of agreements signed in October, mainly within the energy sector. 

That same month, the kingdom’s Public Investment Fund (PIF) said it would target Sudan with billion-dollar investments, along with Egypt before that. 

Bilateral trust 

According to some African business owners, “Africa, for Africa” is the motto many are adopting when looking to do business globally, and the Gulf nations are onboard. 

Unlike former President Donald Trump’s “America first,” it means that African nations are seeking mutually beneficial relationships rather than ones that take advantage, said Prince Franklin Omene, a UAE-based Nigerian businessman and CEO of global consultancy group Omene Holdings. He believes the Biden team should embrace this transactional philosophy at the DC summit. 

“The biggest fear, which I have and I believe most Africans have, is entrapment. You use those fancy loans to entrap the nation,” Omene told Al-Monitor, which he said is a typical practice of the International Monetary Fund (IMF), World Bank and other Western institutions when dealing with African nations, which limits real growth. 

The West should take a page out of the GCC's book, Omene said, and seek joint growth from investment rather than seeking gains from high interest rates. 

“The so-called Islamic way of funding, it’s a bit different,” he explained, saying it is culturally similar to the practices of African nations of various religions, relying on strict adherence to long-term growth rather than one-sided, short-term gains. 

Similar to the United States, Chinese investment is following the path of self-interest, particularly with its 2013 Belt and Road Initiative (BRI), said Omene, which is building railway and logistics infrastructure to have access to coveted minerals. 

“They give with the right hand and take it back with the left hand,” said Omene, who sees this method as more of a takeover rather than a collaborative investment.

Despite these concerns, there will always be trust with the United States and China, said the Nigerian CEO ahead of the summit. “We need all our partners, but we have to be very selective in what we’re doing.” 

This is especially true as the GCC is investing in select African countries, and the reach of the United States and China is vast. 

Why Africa? 

Africa is already known as an attractive investment destination for its plentiful natural resources ranging from diamonds and cobalt to fossil fuels and cocoa, but its fast-growing youth and consumer populations have investors looking at the continent differently, according to the Ernst & Young 2021 Africa Attractiveness Report. 

Africa as a whole is one of the fastest-growing economies globally, with Libya and Niger among the top five. Egypt, Morocco and then South Africa were considered the continent’s preferred investment destinations globally, according to the RMB Where to Invest in Africa 2021 report. 

Despite this, Africa received one of the lowest inflows of FDI of $83 billion globally, only second to Oceania at $0.1 billion, according to the United Nations (UN) 2022 World Investment Report. 

To return to its pre-pandemic economic growth, the global institution recommends that it will need to increase its GDP to about 6% by 2023, which is unlikely. 

The continent has an infrastructure gap valued at $100 billion annually by the UN, in need of FDI to build air and seaports, digital and physical infrastructure, and a stable political landscape, amongst other foundational needs.