Africa: The Next Frontier in Saudi Arabia’s Expanding Sphere of Influence

by Ameera Tameem (Gulf Regional Lead, Botho Emerging Markets Group) and Akinyi Ochieng (Esther Ocloo Fellow, Botho Emerging Markets Group)

DOWNLOAD FULL ISSUE BRIEF

Crown Prince Mohammed bin Salman first announced Saudi Vision 2030 in 2016 to position Saudi Arabia as the leader of the Arab and Muslim world. Leveraging its strategic location near key waterways such as the Red Sea and Gulf of Aden, Vision 2030 intends to transform Saudi Arabia into a global gateway and trade hub for emerging markets. As Saudi Arabia aims to become a global investment powerhouse, the ambitious plan is likely to drive more Saudi investment towards Africa.

The Kingdom of Saudi Arabia is now the fifth largest investor in Africa, with nearly $4 billion dollars in investments across the continent. In the last three years, over 20 African heads of state have visited the nation to meet King Salman bin Abdulaziz of Saudi Arabia to enhance bilateral cooperation in key areas including the economy, security and intelligence.

Today, the Kingdom approaches African countries as viable, profitable trade partners — territories where capital may be invested for sizeable returns. Following South African President Cyril Ramaphosa’s visit to Saudi Arabia, the Kingdom and the UAE jointly pledged $20 billion towards South Africa’s infrastructure, stressing the introduction of alternative energy such as solar panels and wind turbines. This was a landmark moment for the GCC-Africa relationship.

Recent Saudi investments in Africa have focused primarily on energy, housing, agriculture and water. According to Islamic Development Bank (IDB) President Dr.Bandar Hajjar,  "these infrastructure projects will go a long way in addressing the development challenges of our member countries. They will greatly contribute in creating employment and providing an enabling environment for the growth of the public and private sector.” Headquartered in Jeddah, IDB has pledged to fund the expansion of electricity infrastructure in Gabon, and facilitated $805 million in investment in countries such as Burkina Faso, Senegal, Mali, and Tunisia.

There are already signs of progress that Saudi’s expanding interest in Africa will soon bear fruit: the Republic of Congo is poised to join the Organization of Petroleum Exporting Countries (OPEC) soon. Plans to improve healthcare standards in Nigeria in partnership with Saudi German Hospital in an initiative led by the country’s former Vice President, Atiku Abubakar, has demonstrated both Saudi Arabia’s leadership in medical research and their ability to foster successful Public-Private Partnerships (PPPs).

s_a_infographic-06.png

Preparing for a Post-Oil Future

Established in 1971, Saudi Arabia’s Public Investment Fund is one of the largest sovereign wealth funds in the world, rising to 11th place in sovereign rankings in 2017. In the past year, the Fund’s expansion plans have been the subject of considerable interest in the financial services sector. Saudi Arabian Oil Company’s (ARAMCO) now-scrapped initial public offering, Elon Musk’s statement that Saudi Arabia's sovereign wealth fund might back a deal to take Tesla private, and the backing of the landmark $100 billion Saudi-backed Vision Fund managed by SoftBank, are all tell-tale signs that the Kingdom is doubling down on its strategy for a post-oil future.

Despite the falling production of wheat, Saudi Arabia continues to supply its demand from domestic capacity. However, climate change, water scarcity, and a booming young population mean that the Kingdom will soon be unable to meet growing demand, and will need to import additional supplies. The solution has been to invest in foreign agricultural production as a “means to ensure a long-term, reliable supply of stable commodities”; Saudi Arabian investors have looked outward to secure their food security. They reportedly own over 800,000 hectares of farming land abroad, and recognising the urgent need to promote food security, the Saudi government established the King Abdullah Initiative for Saudi Agricultural Investment Abroad in 2009, which provides large Saudi agribusiness firms with access to credit, as well as strategic and logistical support to invest abroad.

Saudi Arabia’s military presence has recently expanded to nearby Djibouti. Sources report that a planned military base expansion is meant to  safeguard the strategic Bab Al Mandeb strait, as well as the Kingdom’s interests in key waterways and proximity to agricultural investments.

Saudi Arabia increasingly views Africa as a key partner in its reformation agenda to evolve, modernise and reinvigorate its economy. The Kingdom’s increasing investment in the region not only diversifies the Saudi investment portfolio, but also secures opportunities to collaborate with key countries across Africa embarking on similarly ambitious plans for economic development.