OPINION | SA should look to the East to bolster economic diversification

The first G20 Summit hosted on African soil delivered significant dividends for the continent, with the United Arab Emirates (UAE) pledging $1bn (about R18.85bn) for “AI for development” to complement its growing investment footprint. Economic relations between SA and the UAE are already reaching new heights, strengthening SA’s diversification efforts.

With SA facing continued strained relations with the US and an impending EU carbon tax, it would be prudent for the country to seek trade partners in Asia.

While China has been expanding its influence, already accounting for 12% of trade, the Middle East holds immense growth potential.

UAE government data shows SA is the UAE’s second-largest trading partner in Africa, accounting for nearly 8% of the UAE’s non-oil trade. Within the Gulf Cooperation Council, the UAE is one of SA’s key import partners, holding a 38% share of the region’s trade.

While Dubai has been a growing tourist destination for many South Africans, the country has also opened up many job opportunities for those seeking employment overseas.

Bilateral trade between SA and the UAE exceeds $6.5bn, with renewable energy, agriculture and fintech driving mutually beneficial growth.

These figures reflect a broader trend of deepening trade relations and SA’s new venture to the East. Bilateral trade grew by 45% between 2020 and 2023, which signals a mutual commitment to strengthening economic ties amid a volatile geopolitical environment.

The UAE has recently positioned itself beyond just being a tourist destination — a trade shift SA can learn from as it develops its economy.

While growth started in the oil sector, the UAE has advanced beyond a commodity-dependent economy, which is a pathway SA is seeking as it makes efforts to beneficiate minerals at the point of extraction.

As SA faces 30% unilateral tariffs and strained relations with the US, access to an open and expanding UAE market is expected to support job creation and infrastructure development. In 2023, SA imported goods worth $4bn from the UAE, while exports to the UAE totalled $2.53bn.

Investment flows are also accelerating. UAE investments in SA exceeded $1.3bn in 2024, while South African foreign direct investment into the UAE surpassed $600m over the same period. This points to deeper integration between the two countries’ business environments.

The growing momentum has spurred new initiatives to promote collaboration. The SA Business Group in the UAE was established to link companies and boost trade. Concurrently, the Dubai Chamber opened an office in SA, and memorandums of understanding were signed between the UAE Federation of Chambers of Commerce and key South African business councils.

Although these ongoing trends have been overshadowed by geopolitical tensions with the US and China’s behemoth, the trade shift is towards the continent. However, the SA-UAE trade relations provide a blueprint on how SA can manage bilateral ties to improve and diversify its economy.

The UAE’s infrastructure, tax-free environment, strategic location and financial system continue to attract South African firms seeking regional expansion.

At the same time, several UAE companies — including Adnoc, DP World, Amea Power, Infinity Energy and AWS Distribution — have launched major operations in SA. The relationship is reciprocal and complementary.

Key sectors driving bilateral interest include agriculture, fintech, artificial intelligence, manufacturing, renewable energy, the digital economy, healthcare and education.

These industries are attracting investment and creating opportunities on both sides, supporting SA’s goal of achieving 3% economic growth.

Recent years have seen several landmark agreements. These include Amea Power’s 2023 power purchase deal for an 85MW solar photovoltaic plant, the opening of the Dubai Chamber’s Johannesburg office and Infinity Power’s acquisition of Lekela Power, Africa’s largest renewable energy transaction to date.

These developments support SA’s ambition to diversify its energy mix and increase solar power to 15% of the grid.

SA must deepen these types of trade relations for sustainable growth and long-term prosperity.

• Mabasa is a journalist and researcher