The shift in the balance of economic weight to Africa and the Arabian Gulf

Date: 08 - 08 - 2023

Abu Dhabi

Source: Mufakiru Alemarat

Dr. Ali Mohamed Al Khouri

At a time when European economies are grappling with the effects of climate change, energy crises, and the repercussions of escalating international tensions, Africa and the Arabian Gulf regions are witnessing major shifts that point to the possibility of a shift in the economic, cultural and technological balances in their favour. The abundant reserves of natural resources, in addition to the remarkable economic growth rates in the countries of the two regions, make them potential centers for global economic activities in the near future. This requires the attention of policy makers to look at its repercussions, and then develop enhanced plans for a smooth transition and ensure a sustainable economic future. Let’s see this picture in more detail.

Climate change and the trillion budgets to face the energy crisis in Europe

Economists’ forecasts point to many factors that may contribute to this potential transition. Among the most important of these are the large climatic changes that Europe witnessed, represented by a rise in temperatures to 48 degrees Celsius, which led to severe droughts that had not occurred in a thousand years, in addition to lower rainfall levels than in previous years, the outbreak of widespread forest fires, and the shrinkage of rivers. diminishing groundwater supplies; Forcing some European governments to take drastic measures, such as closing tourist sites, banning car washes and watering public parks, along with plans to ration natural gas and restart coal plants.

The European Space Agency had warned soon that the heat wave would reach most parts of Europe, such as Italy, Spain, France, Germany and Poland, all the way to Britain. European statistics indicate that the death rate associated with the impact of high summer temperatures has increased, reaching nearly 62,000 deaths across Europe in 2022. Climate impact is not limited to the direct effect of heat, as global warming will lead to more diseases and epidemics. Such as malaria and dengue fever, shrinking resources, and represents a direct threat to European human life.

On the other hand, the energy crisis in Europe is another important issue that threatens to stagnate its economy, and even to the emergence of security challenges that the old continent has not known for decades. The war in Ukraine caused the suspension of clean, low-cost energy projects, and the end of the era of dependence on cheap Russian oil and gas, which was one of the most important sources of wealth for Europe during the past twenty years. With the rising prices of global energy sources, and the inability of European Union governments to provide cheap energy sources, governments have resorted to setting huge budgets to protect households and businesses from the repercussions of large increases in energy prices. The total amount allocated by governments, such as Britain, Germany and France, amounted to more than half a trillion euros to secure the country’s energy needs after dozens of factories stopped, and unemployment rates rose to unprecedented levels.

Despite the economic packages put in place by European governments to provide high energy sources, especially natural gas; The energy crisis, according to the opinions of specialists, may drain between 6% and 9% of the annual gross domestic product. This represents a very heavy burden on these economies, in light of the low growth rates resulting from global conflicts and crises. Accordingly, these financial burdens, coupled with the effects of climate change in the agricultural sector, could weaken the European economy, increasing the need for borrowing, raising taxes, or even printing money.

The course of events as a whole indicates that these complex crises may undermine the pillars of stability in Europe, with rising prices, inflation rates, and deteriorating living conditions, in the midst of the outbreak of popular protests and demonstrations against government policies, and voices calling for the lifting of sanctions imposed on Russia. In short, the picture is not rosy in Europe, one of the most important castles of the global economy today.

The other scene is in the Gulf and Africa

If we head south, we will find that the Arab Gulf and Africa regions are witnessing a comprehensive, albeit uneven, renaissance, with their countries adopting coherent and sustainable development policies with strategic directions and future aspirations, as a major player in the global economy.

We start with the Gulf countries that are undergoing a comprehensive renaissance process, and are characterized by the growth of their economic, educational, real estate, agricultural and industrial sectors. This progress, which is complemented by the transfer of technology in various economic and service fields, will contribute to the transfer of the Gulf countries from developing countries rich in resources to diversified economies, and thus reduce their dependence on energy investments alone.

The Gulf countries have also witnessed an unprecedented increase in the level of winter rains in recent years, in addition to the formation of lush green valleys, lakes and rivers from fresh groundwater in the sands of the Empty Quarter, deserts and dry areas. These climatic phenomena illustrate the remarkable environmental transformations taking place in the Arabian Peninsula, amid expectations of a continuation of the rainy situation, the rate of greening, and wildlife. This climate shift may mean a reverse population migration to stability in the Gulf countries, which will enjoy a wider green area, vegetation in desert areas, more groundwater fields, and lower levels of air pollution. This will be an important turning point in the global economic landscape.

In the same way as the Gulf countries, the abundant reserves of minerals, oil and huge natural resources in the continent of Africa may lead to the transformation of the brown continent into a large and leading market power. While Europe struggles with a shortage of energy sources, abundant natural resources and climatic changes give Africa and the Arabian Peninsula agricultural preference, and make them alternatives to global economic dependence.

According to a report issued by the African Development Bank for the year 2022, 53 out of 54 African countries maintained positive growth despite the repercussions of the Covid-19 epidemic; This shows the resilience of the continent’s economies. Africa, which has a population of 1.2 billion people (40% of whom are young), has 12% of the world’s oil reserves, and huge reserves of precious metals, such as gold, platinum and cobalt. It is noteworthy that 12% of the oil produced globally comes from Africa, and its production is concentrated in Nigeria, Libya, Angola, Egypt and Algeria. These countries produce 12 million barrels per day, and it is exported to Europe and America.

South Africa is the largest gold-producing country in Africa, followed by Benin, Morocco and Gambia. The countries of the continent produce nearly two-thirds of the precious metal cobalt in the world, which is concentrated in the Democratic Republic of the Congo. The continent is also the largest producer of wood in the world, and it comes from Cameroon, Gabon, Togo, Liberia, Ivory Coast, Ghana, Nigeria and the Congo. It is exported to China, England, France and the United States of America. The continent also has many precious minerals that make it one of the richest continents in the world.

The strategic location makes the continent unique. It is bordered to the north by the Mediterranean Sea, to the south by the Atlantic Ocean, to the west by the Pacific Ocean, and to the east by the Red Sea. It has an arable land area of ​​approximately 600 million hectares capable of feeding the world; What makes it the future of the world economy soon.

All in all, with the awareness of the Gulf and African countries of their geostrategic importance and economic weight, it is expected that their influence will increase at the international level, and they will take a position in the global system as new competitive forces.

Policy considerations and future directions

Given the economic transformations and climate changes, policy makers should realize the importance of strategies that can respond to possible future scenarios, anticipate challenges in the economic transformation scene, and prepare to face them. These shifts necessitate policy makers in the Arab region to study the potential impact on their economies, and to work proactively to find alternatives and possible solutions in various fields.

Among these areas are: first, strengthening the national environmental economic, political and regulatory structures, in a balanced and harmonious manner; Foreign companies and investments are looking for safe environments in which governments prioritize political stability, governance structures that promote transparency and build trust, enforce the rule of law and prevent corruption; In addition to the skilled workforce, and the environment of life that is peacefully receptive to the other; As well as infrastructure, such as roads, power, water, and the Internet.

Secondly, economic reforms that require a focus on creating business-friendly environments that encourage innovation and entrepreneurship. The focus here should include developing clear and effective regulatory frameworks, reducing bureaucracy, providing incentives to companies, helping investment in key sectors such as technology, manufacturing, and services, contributing to diversifying economies, and reducing dependence on natural resources.

The third area is related to the development of vital infrastructure for economic growth, such as transportation networks, utilities, and telecommunications, and those related to how rain and torrents are directed, stored, and exploited to be an added share of water. The paths here must be linked to investment in social infrastructure, including education and health care; To develop human capital in a way that enhances productivity, facilitates trade, and improves living standards.

As for the fourth area, it is inclusion and social justice; To ensure that policies are in line with economic growth that is inclusive and beneficial to all segments of society. Efforts here must aim at reducing income disparities and providing social safety nets, as keys to ensuring sustainable growth.

The fifth area is environmental sustainability; Given the significant impacts of climate change, policymakers must ensure that their economies develop in a sustainable manner. By intensifying investments in renewable energy resources, promoting green technologies, and adopting policies that protect the environment and biodiversity.

And while the public scene is full of complex challenges that must be faced, opportunities will continue to knock on the doors of the Gulf and African countries to better harness their wealth of natural resources, strategic geographical locations, and youth demographics that require innovative policies that support a prosperous and resilient future.