For decades, Foreign Direct Investment (FDI) was understood through the North–South axis: capital flowing from developed economies into emerging markets, bringing with it technology, know-how, and often political influence. Yet the 21st century is increasingly defined by a different dynamic: South–South FDIs, where emerging economies invest in one another, reshaping regional alliances and global value chains.
South–South FDIs a shift in global power dynamics
South–South FDI refers to cross-border investments between developing economies. The so-called Global South. Unlike the traditional pattern of capital flowing from industrialized nations in the North to developing markets in the South, South–South FDIs represent a diversification of capital sources.
Key characteristics include:
- Diversification of capital: Developing economies are no longer dependent only on Western or Northern investors but have become investors themselves.
- Regional integration: These flows are often driven by geographic proximity, trade agreements, or historical/cultural ties.
- Sectoral focus: Infrastructure, agriculture, manufacturing, and increasingly digital services dominate South–South investment portfolios.
- Knowledge and technology transfer: Unlike North–South capital, South–South FDIs often involve technologies and business models adapted to similar development contexts, making them more accessible and scalable.
As UNCTAD notes, these flows are now a structural feature of globalization, with developing countries accounting for almost 40% of global outward FDI in recent years. In 2022 alone, developing economies generated more than US$500 billion in outward FDI flows, led by Asia and the Middle East.¹
With its increasing gravity, South-South FDIs, decrease North-South dependency and here through represent a shift in global power dynamics.
Comparative Dynamics of FDIs
| Dimension | North–South FDI | South–South FDI |
| Capital Source | Developed economies (OECD, G7) | Emerging economies (GCC, BRICS, ASEAN, etc.) |
| Motivation | Market expansion, technology transfer, profit maximization | Resource security, food security, political influence |
| Sectoral Focus | Industrial, finance, services | Infrastructure, agriculture, energy, digital leapfrogging |
| Conditionalities | Often tied to governance, reforms, or political alignment | Pragmatic, context-sensitive, fewer political conditions |
| Technology Transfer | Advanced but often mismatched to local context | Adapted, scalable to similar development challenges |
| Power Relations | Reflects asymmetry (North dominant, South dependent) | More reciprocal, though asymmetries still exist |
Motivations for GCC–Africa South–South FDIs
The GCC’s growing role as an outward investor in Africa is not accidental. It reflects three interconnected motivations:
- Political Influence
Gulf states deploy FDI to strengthen diplomatic ties and project soft power, particularly in regions where Western or Chinese influence is contested. This reflects the broader trend of South–South FDIs serving as instruments of geopolitical positioning.¹² - Filling a Power Vacuum
As Western investors reduce exposure to perceived “frontier markets” and China recalibrates its Belt and Road financing, Gulf investors are stepping into critical sectors such as ports, logistics, and urban infrastructure. The African Development Bank estimates that Africa faces an annual infrastructure financing gap of US$68–108 billion,³ much of which GCC sovereign wealth funds are now targeting. - Food and Resource Security
Agricultural investments in Sudan, Ethiopia, and other African countries are linked to Gulf states’ food security strategies, securing farmland and supply chains to mitigate dependence on volatile global markets. The FAO notes that over 85% of food in GCC countries is imported,⁴ while World Bank data shows that Gulf economies spent over US$53 billion on food imports in 2022, making African farmland a strategic hedge.⁶ - Energy Transition and Green Growth
GCC economies are investing heavily in African renewables, solar, wind, and hydro, to secure green energy supply chains and establish leadership in green hydrogen.- Example: Masdar’s investments in Egypt’s 10 GW wind farm and in Mauritania’s hydrogen projects.
- Motivation: Aligns with Saudi Vision 2030 and UAE Net Zero 2050 strategies, while supporting Africa’s growing demand for clean power.
- Market Access and Diversification
Africa’s 1.4 billion people, with a projected consumer market of US$2.1 trillion by 2030 (AfDB, 2023), provide scale for Gulf companies beyond their saturated domestic markets.- Motivation: Open new markets for Gulf champions in telecom, aviation, and logistics, such as Emirates Airlines, DP World, and Etisalat, expanding across Africa.
- Security and Stability Buffer
Investments in Africa also serve as a regional stability strategy, reducing risks of instability in proximate regions, notably the Horn of Africa and the Red Sea corridor that could disrupt GCC maritime and trade security.- Example: The UAE’s stake in Berbera Port, Somaliland, linking maritime security with economic development.
From Hydrocarbons to Diversification
The GCC’s FDI strategies are no longer confined to hydrocarbons. Saudi Arabia, the UAE, and Qatar are deploying sovereign wealth and private capital into infrastructure, logistics, fintech, and renewable energy across African markets.
- The UAE alone announced US$97 billion in outward FDI in 2022, a record high, with Africa among the key destinations.¹
- Saudi Arabia aims to triple outward FDI to US$100 billion annually by 2030, much of it targeted at emerging markets.⁵
This reflects not only diversification away from oil but also alignment with national visions such as Saudi Vision 2030 and UAE 2031, which explicitly seek global south partnerships to secure food, energy, and logistics resilience.
Africa, with its 1.4 billion people (median age 19), untapped resources, and fast-growing consumer base, provides a natural partner. Structural drivers like urbanization (projected 60% urban by 2050), digital adoption (500 million internet users), and demand for sustainable infrastructure, intersect directly with Gulf capabilities in finance, construction, and energy.³
Strategic Logic of GCC–Africa FDIs
Source triangulation: UNCTAD (2023), AfDB (2023), EY GCC Attractiveness Survey (2024).
Based on UNCTAD and AfDB tracking, GCC-Africa greenfield FDI projects numbered 85 in 2023, worth ~US$11.5b. In 2024, WEF and other sources highlight 73 announced projects with commitments exceeding US$53b, reflecting a shift toward fewer but larger-scale deals in energy and infrastructure.
That amount represents 6% of global FDI in 2024, up from ~4% in 2023.7
Three strategic logics stand out:
- Resource Security: Gulf countries are investing in African agriculture and mining not only for returns but also to hedge against food insecurity and supply disruptions.
- Infrastructure and Connectivity: Mega-port projects in East Africa, Gulf-backed rail networks, and aviation hubs illustrate how the GCC seeks to build corridors that lock Africa into Gulf-centred trade routes.
- Technology and Digital Leapfrogging: With the rise of digital FDIs, Gulf investors are channelling capital into fintech ecosystems in Kenya, Nigeria, and Egypt. In 2023, African fintech attracted over US$1.2 billion in funding, with Gulf investors participating in several rounds.³
The South–South Advantage
Unlike traditional North–South FDI, South–South flows are often more context-sensitive. GCC investors operate with an awareness of shared challenges of economic diversification, resource nationalism, and governance gaps. They are also less constrained by the political conditionalities often attached to Western capital.
This alignment fosters not just financial returns but mutual resilience: African states gain capital and know-how, while the Gulf secures new growth frontiers beyond hydrocarbons.
Risks and Volatility
Yet, the GCC–Africa investment corridor is not without challenges. Both sides face financial volatility, driven by exchange rate fluctuations, regulatory unpredictability, and political risk. Sovereign wealth flows are resilient, but private GCC firms still demand assurances around repatriation of profits and contract enforcement.
Moreover, resource nationalism, African governments asserting greater control over their mineral wealth, may create friction with Gulf investors, echoing earlier tensions with Western multinationals.
Conclusion: A Redefinition of South–South Capital
The story of GCC investments into Africa is more than a tactical deployment of surplus capital. It is part of a long-term repositioning of the Global South, a reframing of FDI as a mutual exchange of resilience rather than a one-way dependency.
As EY’s 2024 GCC Attractiveness Survey highlights, Gulf economies are no longer just recipients of Western capital but are emerging as FDI powerhouses, capable of shaping economic destinies beyond their borders.⁵
In this, the GCC–Africa corridor may come to symbolize the next chapter of globalization: a South–South axis of growth, resilience, and strategic interdependence.
Take aways
- South–South FDIs are reshaping globalization: They reflect capital flows between emerging economies, with the GCC now a major outward investor into Africa.
- GCC motivations are strategic: Building political influence, filling the gap left by Western and Chinese retrenchment, and securing food and resource supply chains.
- The GCC–Africa corridor is high-potential but volatile: Investments drive diversification and resilience, yet face risks from financial volatility, governance gaps, and resource nationalism.
References
- UNCTAD. World Investment Report 2023: Investing in Sustainable Energy for All. Geneva: United Nations; 2023.
- Brautigam D, Rithmire M. The new banks in town: Chinese finance in Africa. Foreign Affairs. 2021;100(1):129-140.
- African Development Bank. African Economic Outlook 2023: Mobilizing Private Sector Financing for Climate and Green Growth in Africa. Abidjan: AfDB; 2023.
- FAO. Near East and North Africa Regional Overview of Food Security and Nutrition 2022. Rome: Food and Agriculture Organization; 2022.
- EY. GCC Attractiveness Survey 2024. November 2024.
- World Bank. Gulf Economic Update: Navigating Food Security Challenges. Washington, DC: World Bank; 2023.
- UNCTAD, Africa: Foreign investment hit record high in 2024, 19 June 2025
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