Follow the New Silk Road: Malaysia’s Strategic Pivot to Africa

Article by Ms Aparupa Chakravarti, Director, Botho Emerging Markets Group

Malaysia has undergone substantial economic transformation, evolving from a commodity-dependent economy to a diversified middle power. This progress has been largely driven by South-South cooperation and ASEAN’s regional growth. With aspirations to achieve high-income status by 2050, Malaysia’s trajectory now demands an expanded scope of international partnerships. Strengthening ties with Africa, particularly through the emerging halal economy, strategically aligns with Malaysia’s long-term growth prospects.

Africa’s role in the global economy is rapidly shifting. The UN projects that by 2050, one in four people worldwide will reside in Africa, underscoring the continent’s demographic significance. Africa’s working-age population, already the youngest globally, is growing by over 12 million individuals annually, contrasting with aging populations in other regions that threaten to constrain economic dynamism. Sub-Saharan Africa’s economic growth, forecast to reach 4% by 2025-26 against the global growth average of 2.7%, positions the continent as an increasingly vital component of global economic activity. These demographic and economic trends present an opportunity for Malaysia to broaden its markets beyond traditional ASEAN partnerships.

Recognition of Africa’s strategic importance is also evident in global diplomacy. The African Union’s recent inclusion in the G20 reinforces the continent’s influence in global governance, reflecting the region’s shift from a passive participant to an active contributor in international decision-making. At the latest BRICS summit, African countries led by South Africa advocated for global policy reforms, securing a formal role among higher-income nations like Russia and China. These developments indicate a geopolitical recalibration, with global powers seeking to deepen relations with Africa as they recognize its potential for growth and influence.

Economic engagement in Africa by non-Western nations has accelerated. Brazil, the world’s largest halal exporter, recorded over $8 billion in halal exports to Africa in 2022—a 35% increase from the previous year—and has announced plans to scale this further. The UAE has also intensified its investments, committing over $60 billion to Africa between 2012 and 2022, making it the continent’s fourth-largest investor after China, Europe, and the US. Trade between the UAE and Sub-Saharan Africa has expanded by more than 30%, with trade volume now twelve times greater than a decade ago. Notable investments include DP World’s $80 million logistics hub in Egypt’s Suez Canal Economic Zone and Turkish e-commerce firm Hepsiburada’s partnership with African retailer Jumia. These examples underscore the growing recognition of Africa as an emerging economic frontier.

In this context, Malaysia has a distinct opportunity to deepen its economic engagement with Africa. While China remains Africa’s dominant trading partner, other Asian nations are increasingly active in the region. South Korea, for instance, has integrated Africa into its “global pivotal state” strategy, leading to a 29% annual increase in bilateral trade as it seeks to diversify supply chains. Unlike other Southeast Asian countries, with the notable exception of Indonesia, Malaysia has established relationships across Africa, largely rooted in its South-South cooperation narrative.

From a Marine Insights article on Djibouti Ports

Malaysia’s established agreements with African countries provide a strong foundation for expanding its presence. The Kenya National Chamber of Commerce and Industry’s MoU with the Kuala Lumpur & Selangor Indian Chamber of Commerce & Industry, along with various partnerships between Malaysia, Ethiopia, and South Africa, facilitate cooperation across sectors like trade, industry, and agriculture. Malaysian firms such as Petronas, Golden Africa Kenya Ltd., SMH Railways, Probase Manufacturing, Serba Dinamik, and BSMART Technology are already operational in Kenya, South Africa, Uganda, and Tanzania, demonstrating Malaysia’s foothold on the continent. Malaysia exports $6.9 billion in goods to Africa, and its imports have grown to $3.6 billion, signaling a solid trade foundation for further expansion.

Malaysia’s leadership in the halal economy further strengthens its position as an ideal partner for Africa. Consistently ranked first in the Global Islamic Economy Index, Malaysia’s expertise in Islamic finance, halal food, and Muslim-friendly tourism can support Africa’s growing halal sector. By 2030, 17.6% of the global Muslim population is projected to reside in Africa, and the halal cosmetics market alone represents an $8 billion opportunity. Islamic finance initiatives are also expanding: Kenya has amended its capital market policies to allow sukuk issuances, while Tanzania and Uganda are progressing toward similar offerings. Ethiopia has recently established full-scale Islamic financial institutions. Djibouti, which boasts one of Africa’s most developed Islamic finance sectors after Sudan, exemplifies this growth through its funding of major projects like the $65 million Djibouti Africa Regional Express fiber cable. The $590 million Dolareh Multipurpose Port further solidifies its potential as a significant regional trade and financing hub. With its strategic location at a global crossroads and deep-sea ports, Djibouti’s financial infrastructure positions it as an ideal partner for Malaysia’s African expansion, particularly in the halal trade and Islamic finance sectors. Given that Malaysia’s halal industry is projected to reach $113.2 billion by 2030, the country is well-positioned to tap into this potential and forge mutually beneficial partnerships across African markets.

From Pew Research Center

Malaysia’s primary economic focus has been on ASEAN markets, which have been instrumental in driving the country to middle-income status. However, diversifying into African markets could accelerate Malaysia’s medium- and long-term growth objectives while hedging against risks associated with overreliance on its immediate region. A targeted Africa-Malaysia strategy could provide Malaysia with a competitive advantage within ASEAN, positioning it as a leader in South-South trade while meeting its aspirations for global economic integration.

A broad, monolithic approach to engaging Africa would be inefficient for Malaysia, given the number and diversity of individual countries combined with the complex web of regional blocs. Instead, Malaysia would benefit from a more nuanced and targeted strategy to navigate the continent, one that goes beyond conventional value chain mappings and geographic groupings. Departing from the typical delineation separating the East and Horn of Africa, for example, the Djibouti, Uganda, Kenya, Ethiopia, and Somalia (DUKES) region presents a compelling frontier for Malaysia’s strategic entry. This collective, with its mix of dynamic emerging markets and asymmetrical opportunities, offers a pathway to gradually expand Malaysia’s influence. Djibouti, in particular, stands out as a potential financial and trading powerhouse with developed Islamic finance infrastructure and strategic deep-sea ports. Leveraging Djibouti’s position as a gateway economy, Malaysia can establish a foothold in the DUKES region, facilitating deeper economic integration and partnerships that can eventually extend across the wider African continent.

Malaysia’s prospects for high-income status depend on strategic engagements that diversify supply chains and tap into growing markets. Africa’s economic landscape, demographic trends, and Malaysia’s existing relationships create an opportune environment for a proactive, structured approach to bilateral and multilateral cooperation. Establishing a clear Africa-Malaysia partnership strategy could be a critical step in realizing Malaysia’s economic potential on the global stage.

Botho Emerging Markets Group is a strategy consulting and investment advisory firm that facilitates the exchange of partnerships, opportunities, investments and knowledge between African countries and emerging economies around the world. For close to 20 years, we have guided Fortune 500 companies, governments, development institutions, SMEs, start ups, and nonprofits in entering into and navigating the world’s fastest growing markets. Botho is keen to build on this foundation and build similarly strong relationships between the Malaysian private sector and its African counterparts, through targeted market research and intelligence; strategy development; partnerships and government relations; and curated convenings. For further information, please contact Aparupa Chakravarti at aparupa@botholtd.com or Naam Chakravorty at naam@botholtd.com