Citi’s Gulf Investments in Africa Keeping Bankers Busy, Reports Show
Wealthy investors from the Middle East are actively seeking opportunities in Africa focused on agricultural ventures, essential minerals, and renewable energy, as reported by Citigroup.
They are targeting nations like Kenya for boosting food security in the Gulf region, and exploring industrial deals and renewable energy projects in South Africa to diversify their economies beyond oil, according to George Asante, Citigroup’s head of African markets.
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“Deals are emerging,” Asante mentioned in an interview, though he did not provide specifics. Citigroup has a presence in 15 African nations, employing over 70 sales and trading specialists who are engaged in facilitating new financial flows from various global regions into Africa, he noted.
Middle Eastern investors are joining forces with companies from the US and China in their quest for ventures in the world’s second-largest continent, which is rich in minerals crucial for transitioning to cleaner energy sources and has extensive arable land capable of producing grains and other foodstuffs. According to the World Economic Forum, companies from the Gulf Cooperation Council committed $53 billion in investments last year, compared to $100 billion over the last decade.
In South Africa, the Zahid Group from Saudi Arabia along with other investors are in negotiations to acquire Barloworld Ltd., the African distributor of Caterpillar Inc. machinery, while Abu Dhabi’s Adnoc and Saudi Arabia’s Aramco are competing to purchase Shell Plc’s downstream assets in the continent’s most developed nation, as previously reported by Bloomberg.
A significant decrease in asset values in countries like Egypt, Nigeria, and Angola presents a favorable entry point for investors, Asante stated.
Investment from the US is also increasing, particularly in the critical minerals sector. In the first half of 2024, the US government facilitated over 400 deals worth $32.5 billion, according to recent figures from Prosper Africa.
Political risks—such as unrest in gas-rich Mozambique—may discourage some investors. The detention of foreign executives in Nigeria and Mali raise additional concerns for businesses. Recently, four employees of Barrick Gold Corp. were arrested by Mali’s military government amidst escalating disputes concerning its local mining operations, while Binance Holdings executives were detained in Nigeria.
The continent confronts an annual financing gap of approximately $402 billion until 2030, required to “accelerate its structural transformation and catch up with high-performing developing nations in other regions,” as stated by the African Development Bank.
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Direct foreign investment flows are helping African sovereigns diversify financing sources away from eurobonds and concessional funds, offering an opportunity for nations to decrease their reliance on dollar-denominated funding.
“The eurobond market is reopening for several African nations like Cameroon, Kenya, Benin, and Ivory Coast, though many countries are exercising caution with their debt management following recent defaults,” Asante commented.
He emphasized that accumulating debt in foreign currencies poses significant risks for countries. An increasing number of nations are opting to convert their debt exposures into currencies they can better manage.
Governments, alongside the banking sector and major entities like the International Monetary Fund and the World Bank, need to work towards decreasing Africa’s reliance on foreign currencies, Asante remarked.
“It is crucial for African nations to establish frameworks and tools to manage their foreign currency debt exposure and the volatility it introduces to their balance sheets,” Asante stated. “Prioritizing the dedollarization of debt is essential for these countries to avoid potential debt distress every few years if not addressed promptly.”
© 2024 Bloomberg
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