Wealthy Gulf Investors Pour Into Africa

Another major focus of investment for Gulf firms is African agriculture; oil-rich, water-poor Gulf states such as Saudi Arabia and Qatar have been buying large areas of farmland overseas to ensure access to food supplies.

Qatar’s Hassad Food, an arm of the country’s sovereign wealth fund, agreed in 2009 on a $1 billion farmland development joint venture with the government of Sudan.

Some other agricultural ventures, however, may risk involving Gulf States in the socio-political and water scarcity problems of African countries, if they displace local people from their land or disrupt local farming patterns.

“We are very concerned that the land deals will lead to increased violence at the local level, as we have seen already in several parts of Africa,” Henk Hobbelink, coordinator of GRAIN, an international, non-profit organisation which supports small farmers, said last year.

In a research report published in late 2011, Standard Chartered said Gulf countries had tended to focus their agricultural investment on seven countries: Sudan, Mozambique, Ethiopia, Tanzania, Kenya, Mali and Senegal.

But it added that debate in those countries over the role of foreign investors was growing. “Transparency, sustainability, and a meaningful return for local communities will be fundamental elements,” it said.

As long as African economies continue to grow considerably faster than much of the rest of the world, however, the trend of increasing Gulf investment in them looks set to persist.

“Investing in Africa is like diving into dark waters. There’s an equal chance of finding pearls or getting stuck with empty shells,” said an executive at one of the Gulf’s biggest family-owned conglomerates, declining to be named because of the political sensitivity of his remarks.

“But there’s also high risk investing in the top European markets these days – so why not go to Africa where the return is higher?”