UAE in position to plug South Africa’s energy crisis

Wam

• Masdar and Adnoc part of UAE business delegation to the country
• State of disaster declared in South Africa after electricity shortage
• With Cop28 in Dubai renewable energy is focus of expansion

Energy is likely to drive a new era in trade relations between the UAE and South Africa as the latter’s power supply crisis will dominate debate at next year’s general election.

Experts say UAE energy powerhouses Masdar and Abu Dhabi National Oil Company (Adnoc) could be attracted to South Africa in light of the crippling electricity shortage that forced the government to declare a state of disaster earlier this year.

The upcoming Cop28 helps focus the UAE on moving the dial, according to Claire Matheson Kirton, a partner with legal firm White & Case in Dubai.

“The renewable energy space is a hot topic and I can see a push towards making something happen in South Africa,” she said.

• Adnoc taking on the world in renewable energy push
• Masdar could look East for investment opportunities
• UAE must deliver tangible results at Cop28 to quiet the critics

Both Masdar and Adnoc, as well as Amea Power and Infinity Power, were part of a UAE business delegation to South Africa last month, led by Dr Thani bin Ahmed Al Zeyoudi, the UAE’s minister of state for foreign trade.

“Some commentators say if the South African government doesn’t solve the energy crisis, there’s a risk they lose the election next year,” said Lionel Shawe, a Johannesburg-based partner with White & Case.

“The government wants to align with players who can help.”

Masdar has already invested in Africa after agreements with Angola, Uganda and Zambia to develop renewable energy projects with a combined capacity of up to 5 gigawatts.

Energy collaboration was high on the agenda for UAE officials during the visit to South Africa, alongside logistics, food production and tourism as both countries look to build on bilateral trade which rose to $6.5 billion in 2022.

Shawe told AGBI there are opportunities for UAE companies to invest “on the cheap” in sectors such as agriculture, logistics and mining.

“There are a lot of well run companies who, given the deterioration in the rand versus the dollar, are relatively cheap targets for acquisition,” he said.

The South African government is on a push to drive foreign investment, he said, adding: “It’s trumpeting every foreign investment it manages to bring in and this recent UAE delegation is only going to accelerate investments.”

Dr Bhaskar Dasgupta, non-executive director for the GCC, Israel and India boards at Apex Group, said that despite big challenges, South Africa is an attractive destination for UAE capital.

He said it is “perhaps the only African economy” that can easily absorb the size of investment that UAE sovereign wealth funds and family offices are seeking to deploy. 

Seth Ochieng, director of client engagements at Healy Consultants Group, added that the UAE and South Africa offer a “myriad of business set-up opportunities”.

According to White & Case’s Matheson Kirton said the demand from South African companies to set up in the UAE has “grown exponentially” over the last couple of years.

“’When you walk around the DIFC [Dubai International Financial Centre] and other business areas there’s a huge number of people here doing business from and into Africa,” she said.

“You hear the South African accent all the time. The business demographic is changing rapidly. And there is so much focus on Africa now both ways.”

Last month the UAE refused an extradition request for two brothers from the wealthy Gupta family who deny accusations in South Africa of profiting from their close links with former President Jacob Zuma.

White & Case’s Shawe described this as a “storm in a tea cup” that wouldn’t impact trade relations. 

UAE President Sheikh Mohamed bin Zayed Al Nahyan seemed to back this view when he chose the country’s Eastern Cape for a holiday to mark the end of Ramadan. Local media reported he flew into Bulembu Airport in Bisho with his family and government officials.

Shawe said: “It was an indicator of the UAE’s interest in the country. The relationship appears friendly.”