Seeds of Conflict, Seeds of Opportunity: How the GCC Can Secure Its Food Future Amid Global Trade Turmoil

Executive Summary

Global trade in agricultural commodities has entered a new era of turmoil, amplified by a second Trump administration’s hard-line stance on China, resurgent tariff wars, and renewed pushback from emerging economies in the Global South. This turbulence comes against a historical backdrop of heavily subsidized U.S. and European agriculture that has distorted “free trade” for decades.

Within this fractured landscape, the Gulf Cooperation Council (GCC) finds itself at a critical juncture. Pressed by water scarcity, limited arable land, and a rising population, GCC states must secure consistent and sustainable food supplies. Meanwhile, African nations—led by powerhouses like South Africa—are asserting that the era of raw commodity extraction without local value addition must end. Emerging markets across Asia, Africa, and Latin America are forging new inter-regional partnerships, promising to reshape global agricultural supply chains.

Amid these changes lies a wealth of opportunity. This report delves deeper than ever before into the dynamics of the renewed U.S.-China trade war, the historical context of Western agricultural subsidies, and the push for self-sufficiency and self-determination across the Global South. More importantly, it highlights how the GCC can capitalize on these shifts for food security, sustainable returns, and long-term geopolitical advantage. With compelling case studies of private equity successes and a closer look at the investment returns in African agribusiness, it paints a vivid picture of a future where GCC-led agricultural projects could deliver both profit and prosperity.

1. The Resurgence of Trade Wars and Their Agricultural Battlefront

1.1 A Second Trump Term: Reinforced Tariffs and Global Ripples

With Donald Trump returning to the White House, the United States has intensified tariffs on Chinese imports, citing unresolved issues of intellectual property theft and global supply-chain security. China, in turn, has retaliated by targeting U.S. agriculture—a sector deeply embedded in the American political psyche.

• Soybeans and Beyond: China’s imposition of additional duties on soybeans, corn, and pork hits the U.S. Midwest, a politically influential region.
• Import Diversification: China has swiftly realigned its supply routes toward Brazil, Argentina, and other nations, reducing dependence on American grain and livestock.
• Next Steps: Washington has hinted at broadening its tariffs to advanced tech goods, while Beijing is exploring additional trade partnerships across Africa, Southeast Asia, and Latin America. This cycle of escalation threatens to reshape the global flow of commodities.

1.2 The Economic Fallout

While the heightened U.S.-China trade hostility carries economic consequences for major producers, it also creates opportunities for other nations to fill the void. For example, South American countries are ramping up soybean production to meet China’s demand. African nations eye expanded market share in various niche commodities such as coffee, cocoa, and specialized fruits. But these opportunities come with risks: reliance on a single large buyer (like China) can lead to future vulnerabilities if political dynamics shift.

2. The Mirage of Free Trade: Agricultural Subsidies and Dumping

2.1 A History of Subsidies: U.S. and EU Context

From the U.S. Farm Bill to the European Common Agricultural Policy (CAP), high-income countries have historically deployed vast subsidies to support their domestic farmers. This ensures local production remains competitive, stabilizes farmer incomes, and appeases rural constituencies. However, these subsidies distort global prices and export surpluses into markets that cannot compete on the same footing.

• U.S. Farm Subsidies: Estimated at around USD 20–30 billion annually, these are channeled through direct payments, crop insurance schemes, and export credits (OECD, 2021).
• EU Common Agricultural Policy (CAP): Allocates over EUR 55 billion yearly to ensure minimum price levels, direct income support, and rural development programs, making the EU a heavyweight in the global agricultural export market.

2.2 Dumping and Its Impact on the Global South

Subsidized surplus commodities from the U.S. and EU have historically been sold at prices below production costs (“dumping”), debilitating local agricultural sectors in developing countries.

• Poultry in West Africa: Subsidized poultry exports from the EU to markets such as Ghana and Togo have undercut local farmers. Many smallholder producers struggle to compete with cheap imports, stunting the growth of the domestic poultry industry (IFPRI, 2020).
• Powdered Milk in Central Africa: European dairy cooperatives often channel surplus milk powder into African countries, offering products cheaper than fresh local milk. The result is a weakening of local dairy farms and an increased reliance on imported milk.

This system, which pays lip service to “free trade,” traps many developing countries in a cycle of dependency. As the Global South grows more outspoken about these inequities, calls to reform the global agricultural trading system are getting louder.

3. Africa’s Call: Toward Self-Reliance and Value Addition

3.1 South Africa at the Forefront

A leading voice in the African continent, South Africa has consistently argued against the relentless outflow of raw commodities. Instead, the country stresses the importance of value addition, local processing, and regional integration.

• Export Restrictions: South African policymakers have debated imposing higher duties or restrictions on raw mineral and agricultural exports, compelling multinational corporations to process commodities domestically.
• Collaboration with Neighbors: South Africa is working with the Southern African Development Community (SADC) to develop shared industrial parks and transport infrastructure, aiming for cost-effective processing, job creation, and higher export revenues.

3.2 AfCFTA: A Game-Changer

The African Continental Free Trade Area (AfCFTA), which came into force in 2021, aims to create a single market encompassing 1.3 billion people. It seeks to eliminate tariffs on 90% of goods traded across member states, facilitating intra-African commerce.

• Enhanced Regional Supply Chains: By integrating agricultural supply chains, AfCFTA reduces reliance on outside markets like the EU or the U.S.
• Investor Magnet: Infrastructure upgrades such as roads, rail links, and ports—coupled with policy harmonization—present ample opportunities for GCC investors wanting to tap into a rising consumer base.
• Case in Point: Kenyan horticulture, once primarily focused on exports to the EU, is now exploring new routes within Africa and Asia to diversify risk and reduce reliance on any single market.

4. The Global South’s Pivot: India, Africa, and the GCC

4.1 India’s Role in GCC Food Security

India has historically been a major food supplier to the GCC states, exporting basmati rice, spices, sugar, and wheat. The cultural ties, geographic proximity, and robust diaspora networks simplify bilateral trade channels.

• Stable Supply Chains: Despite global disruptions, India has shown relative reliability in providing essential commodities.
• Expanding the Corridor: With new ports coming online (e.g., Jebel Ali in the UAE, Mundra and Kandla in India), there is room to streamline and expand trade flows.
• Potential Pitfalls: Climate change, monsoon unpredictability, and domestic food security concerns in India mean the GCC cannot rely solely on this corridor.

4.2 Africa-GCC Partnerships

Given Africa’s vast arable land and the GCC’s investment capital, the synergy is evident:

1. Land Leases and Direct Ownership: Over the past decade, GCC investors have acquired or leased farmland in Sudan, Ethiopia, Tanzania, and other African nations. This “outward agricultural investment” strategy aims to secure staple crops at favorable rates.
2. Joint Ventures in Agribusiness: Beyond farming, GCC firms are exploring partnerships in food processing, logistics, and cold-chain storage to capture higher margins and ensure quality control.
3. Win-Win Possibility: African countries benefit from inflows of capital, technology transfer, and potential infrastructure development—provided deals are structured with local community interests and ESG (Environmental, Social, Governance) principles in mind.

5. Why Food Security and Agriculture Are Prime Investment Fields

5.1 The Macro Investment Case

Population Growth: The world population is projected to reach 9.7 billion by 2050 (United Nations, 2019). Feeding these billions will require up to a 50–70% increase in global food production. Arable land is finite, so more efficient and large-scale agricultural investment is inevitable.

Inflation Hedge: Farmland and agricultural commodities often serve as an inflation hedge. When consumer prices rise, food prices tend to follow, protecting investor capital in real terms.

ESG and Social Impact: Ethical and responsible investors increasingly see agriculture as an avenue to achieve both returns and social good, by supporting local communities, reducing food insecurity, and fostering sustainable practices.

5.2 Harvesting Financial Returns

Historically, private equity investments in emerging-market agribusiness have delivered attractive Internal Rates of Return (IRRs), sometimes exceeding 15–20%. Though not without risks—such as political unrest, currency volatility, and environmental challenges—the robust demand for food, combined with improving infrastructure, often offsets these threats.

Case Study:

• Phatisa’s African Agriculture Fund Strategy: Invested USD 246 million in Sub-Saharan agribusiness value chains (2011–2017). Outcome: Portfolio companies reported double-digit growth. Some deals achieved IRRs of 12–15%, demonstrating the viability of patient capital in African agriculture (Phatisa, 2019).

6. Real-World Success Stories and Emerging Opportunities

6.1 Farmland Acquisitions

• Middle Eastern Sovereign Funds in Sudan: As early as 2014, Saudi Arabia’s Al Rajhi Group embarked on a major farmland project in Sudan, focusing on wheat and animal feed production. Despite political turbulence, the investment continues, showcasing that long-term contracts and government-to-government agreements can mitigate risks.
• Brazil and Argentina: Though not in Africa, these Latin American countries remain hotspots for farmland investments by GCC-based private equity due to their established export infrastructure and fertile land.

6.2 Agritech and Modern Farming

As the planet grapples with resource constraints, technology-driven solutions are set to revolutionize agriculture:

• Precision Farming: Using drones, satellite imagery, and AI-driven analytics to optimize inputs like water, fertilizers, and pesticides.
• Vertical and Desert Farming: GCC countries, especially the UAE, have made strides in hydroponics and vertical farms that can reduce water usage up to 90% compared to traditional methods.
• FoodTech Startups: Companies like Twiga Foods in Kenya, which connect smallholders directly with retailers, are drawing international investments, reducing waste, and boosting farmer incomes.

Case Study:

• KKR’s Investment in Afriflora Asset: A large-scale Ethiopian rose farm that exports to Europe. Key Takeaway: While flowers are not a food crop, Afriflora’s success demonstrated that well-managed agribusinesses in Africa can handle complex logistics and still yield returns. KKR’s partial exit in 2018 reportedly fetched over 2x its original investment (KKR, 2018).

6.3 Infrastructure and Logistics: The Backbone of Food Security

Moving food efficiently from farm to consumer is crucial. Storage facilities, cold chains, ports, and rail systems are all prime investment areas:

1. Warehouse and Silos: Minimizing post-harvest losses can dramatically improve yields that actually reach markets.
2. Port Upgrades: Ports like Mombasa (Kenya), Dar es Salaam (Tanzania), and Djibouti (Djibouti) benefit from foreign direct investment to handle larger cargo volumes.
3. Roads and Rail: The Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor exemplifies how coordinated infrastructure projects can unlock isolated regions.

Case Study:

• CDC Group (British International Investment) in African Logistics Investment: Development of warehousing and transport hubs in Nigeria and East Africa. Returns: Provided stable revenue streams from storage fees while simultaneously reducing food waste and uplifting local agricultural income (CDC Annual Reports, 2020–2021).

7. GCC’s Grand Strategy: Sowing the Seeds of Food Security

7.1 A Three-Pronged Approach

1. Diversify Import Sources
2. Invest in Localizing Production
3. Pursue Win-Win Outward Investments

7.2 Moving Beyond Traditional FDI

To build goodwill and secure deals, GCC states can strengthen relationships with African governments through:

• Public-Private Partnerships (PPPs): Collaborations that share risks between the public sector (host government) and private GCC investors, ensuring that projects align with local development goals.
• Technical Assistance Programs: Offering agricultural extension services, technology upgrades, and vocational training to local farmers fosters community support and sustainable farming practices.
• Regional Financing Facilities: GCC-based banks and funds can establish dedicated lines of credit or grants to promote agribusiness entrepreneurship, enhancing the investment climate in host countries.

8. Quantifying Potential Returns and Exit Strategies

8.1 Return Profiles

• Private Equity IRRs: In successful Sub-Saharan investments, private equity deals have posted IRRs ranging from 15% to 25% (EMPEA, 2021). This significantly outperforms many developed-market investments, reflecting both higher risk and the region’s growth potential.
• Farmland Appreciation: Historically, farmland in emerging markets has appreciated at a faster rate than farmland in mature markets due to improvements in infrastructure, yield enhancements, and rising global commodity prices.

8.2 Exit Options

1. Trade Sale: Larger agricultural conglomerates (e.g., Olam International, Cargill) frequently acquire smaller-scale farming and processing operations to expand their footprints.
2. Secondary Buyouts: Another private equity or infrastructure fund might purchase the investor’s stake, especially if the business continues to grow.
3. Public Listing: While IPOs are less common in African agribusiness, several have taken place on stock exchanges in Nigeria, Kenya, and South Africa, offering potential liquidity and visibility.

Additional Case Study:

• Adenia Partners in C?te d’Ivoire Investment: A mid-sized food processing plant specializing in milling and packaging grains for domestic and West African markets. Outcome: After upgrades in equipment, marketing, and distribution, Adenia exited within five years, reportedly posting an IRR of over 20% (Adenia press release, 2021).

9. The Road Ahead: Key Considerations for GCC Investors

9.1 Risk Management

• Political Stability: African nations offer high potential but come with risks of policy changes, social unrest, and corruption. Political risk insurance (e.g., from MIGA under the World Bank) can mitigate some uncertainties.
• Currency Fluctuations: Exchange rate volatility can undermine returns. Structuring deals in stable currencies or hedging through financial instruments is paramount.
• Climate Change Impact: Droughts, floods, and shifting weather patterns can severely affect crop yields. Integrating climate-smart agriculture practices is essential to sustain yields and manage risk.

9.2 ESG and Community Engagement

Modern investors face increasing scrutiny over environmental and social responsibilities. Projects perceived to undermine local interests can face protests, legal challenges, or reputational damage.

• Sustainable Water Usage: Over-extraction of water in dry regions can lead to environmental degradation and local conflict. Efficient irrigation and water recycling are indispensable.
• Inclusive Development: Employing and training local labor not only boosts productivity but also builds trust.
• Governance and Transparency: Thorough due diligence, clear contractual terms, and compliance with anti-corruption regulations must be standard practice.

10. Conclusion: Food Security as Both Necessity and Opportunity

A hypothetical second Trump administration has reignited fierce trade wars, accelerating shifts in global agriculture. The historical inequities of “free trade”—exemplified by Western agricultural subsidies and dumping—have long been challenged by emerging nations. Now, as South Africa and other African countries demand an end to exploitative commodity extraction, the Global South is forging a path toward greater self-sufficiency and intra-regional trade.

For the GCC, which grapples with limited arable land and water scarcity, these developments present a strategic imperative to secure food supplies. By partnering with Africa and India, diversifying sourcing, and investing in agritech, the GCC can safeguard its food future. The upside for investors is substantial: farmland and agribusiness in emerging markets have historically delivered strong returns, especially under prudent governance and risk management frameworks.

While the road is not without pitfalls—political volatility, climate challenges, and infrastructure gaps remain—these obstacles are surmountable with long-term vision, effective collaboration, and responsible investment. In seizing these opportunities, the GCC not only ensures its own food security but also contributes to a more equitable, resilient global food system.

References

1. Organization for Economic Cooperation and Development (OECD). (2021). Agricultural Policy Monitoring and Evaluation. Retrieved from OECD iLibrary.
2. International Food Policy Research Institute (IFPRI). (2020). Global Food Policy Report.
3. EMPEA (Emerging Markets Private Equity Association). (2021). Industry Data & Statistics.
4. Phatisa. (2019). African Agriculture Fund Final Closing Press Release.
5. KKR. (2018). Investment in Afriflora and Partial Exit Announcement.
6. Adenia Partners. (2021). Press Release on Exit in C?te d’Ivoire Food Processing Company.
7. CDC Group (British International Investment). (2020–2021). Annual Reports.
8. United Nations. (2019). World Population Prospects.
9. African Development Bank (AfDB). (2021). African Economic Outlook.

Author’s Note: This document is designed as a high-level research report and does not constitute financial advice. Investors should conduct thorough due diligence, engage local partners, and adhere to responsible investing principles when venturing into emerging market agriculture.

Prepared by Irshad Akhtar / HilalESG, 2025. For further inquiries on customized investment strategies and detailed feasibility studies, please contact [email protected].