Citi Reveals Gulf Investments in Africa Are Keeping Bankers Engaged -

Investors with substantial wealth from the Middle East are actively pursuing opportunities in Africa, concentrating on agriculture, essential minerals, and renewable energy, as highlighted by Citigroup.

They are focusing on countries such as Kenya to enhance food security in the Gulf region, and examining industrial partnerships and renewable energy initiatives in South Africa to broaden their economic portfolios beyond oil, according to George Asante, Citigroup’s head of African markets.

“New deals are emerging,” Asante noted in an interview, although he refrained from disclosing specific details. Citigroup operates in 15 African nations, employing more than 70 sales and trading professionals dedicated to facilitating fresh financial investments from various global markets into Africa, he added.

Middle Eastern investors are teaming up with U.S. and Chinese companies as they explore ventures within the world’s second-largest continent, which is abundant in minerals essential for the shift to cleaner energy and has vast arable land suitable for growing grains and other food products. The World Economic Forum reported that Gulf Cooperation Council companies committed $53 billion in investments last year, compared to $100 billion over the preceding decade.

In South Africa, the Zahid Group from Saudi Arabia, along with other investors, is currently in talks to acquire Barloworld Ltd., the African distributor for Caterpillar Inc. machinery, while Abu Dhabi’s Adnoc and Saudi Arabia’s Aramco are vying to purchase Shell Plc’s downstream assets in the continent’s most developed country, as previously reported by Bloomberg.

A notable drop in asset values in countries like Egypt, Nigeria, and Angola has created a favorable entry point for investors, Asante remarked.

Investment from the U.S. is also on the rise, especially in the critical minerals sector. In the first half of 2024, the U.S. government facilitated over 400 deals valued at $32.5 billion, according to recent data from Prosper Africa.

However, political risks—such as the unrest in gas-rich Mozambique—may deter some investors. Additionally, the detention of foreign executives in Nigeria and Mali raises further concerns for businesses. Notably, four employees of Barrick Gold Corp. were arrested by Mali’s military government amid rising tensions regarding its local mining operations, and Binance Holdings executives were also detained in Nigeria.

The continent faces an annual financing gap of approximately $402 billion until 2030, which is necessary to “accelerate its structural transformation and catch up with high-performing developing countries in other regions,” according to the African Development Bank.

Direct foreign investment flows are assisting African countries in diversifying their funding sources away from eurobonds and concessional loans, creating an opportunity for nations to lessen their reliance on dollar-denominated financing.

“The eurobond market is reopening for several African countries, including Cameroon, Kenya, Benin, and Ivory Coast, although many nations are exercising caution with their debt management following recent defaults,” Asante noted.

He emphasized that accumulating debt in foreign currencies poses considerable risks for these nations. An increasing number of countries are choosing to convert their foreign debt exposures into currencies they can better manage.

Governments, alongside the banking sector and significant entities such as the International Monetary Fund and the World Bank, need to collaborate on reducing Africa’s dependence on foreign currencies, Asante remarked.

“It is essential for African nations to develop frameworks and tools to manage their foreign currency debt exposure and the volatility it brings to their balance sheets,” Asante stated. “Prioritizing the dedollarization of debt is crucial for these countries to avoid potential debt distress every few years if not addressed in a timely manner.”

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