Saudi Arabia’s Vision 2030 calls for the country to become a “global investment powerhouse” in the next decade, and Africa appears to be the testing ground for Riyadh’s new financial strategy.
In the past, Saudi Arabia’s investment in Africa has often been motivated by political gains and short-term economic goals. As states transition into a post-Covid world marked by food shortages and energy hikes caused by Russia’s invasion of Ukraine and a looming need to embrace green energy sources, Saudi Arabia has sought to flex its financial muscles to bolster its soft power appeal across sub-Saharan Africa.
Aside from the potential soft power benefit of investment abroad, Saudi Arabia’s financial inroads satisfy its goal of becoming a “global investment powerhouse,” as described in its Vision 2030 policy framework. Developing business relationships within Africa also helps to thwart Riyadh’s primary rival Iran, with whom tensions have escalated in recent years. Because Iran has carefully curated its own economic ties to African states and views Africa as an important theater of geopolitical competition, Saudi Arabia’s inroads on the continent also serve its objective of diminishing Tehran’s influence.
In 2021, analysts speculated that the enduring Saudi-Iranian rivalry could finally ease amid peace negotiations in Baghdad. However, recent escalations between the two geopolitical rivals have cast doubt on these predictions. Iran has blamed Saudi Arabia, among other external actors, for stoking its ongoing domestic protests, while Tehran and Riyadh oppose each other on many regional issues, such as the renewed war in Yemen.
As shown by China’s growing footprint in Africa, the countries of the continent are looking eastward in search of new investment partners. The Gulf Cooperation Council (GCC) states are a natural option for many African states, given their preexisting relations with the continent, their lack of insistence on political reform, and their financial heft.
Growing Saudi Clout on the Continent
In recent months, Saudi Arabia has taken several steps to promote its influence in the continent, particularly in West Africa. On November 15, the Guinean president Mamady Doumbouya met the CEO of the Saudi Fund for Development (SFD) Sultan Abdulrahman al-Marshad. The meeting produced a memorandum of understanding (MoU) in which the Saudi Fund agreed to provide $8 million for a water project in the country. The fund will build 140 wells (many of which will be solar-powered) and will provide other water delivery projects, such as water tanks, to alleviate drought in rural areas of Guinea.
As Africa’s third largest economy, South Africa has long been considered a gateway for doing business with the continent and has attracted investment from China and wealthy Middle Eastern powers. Saudi Arabia has attempted to enhance its ties with Pretoria accordingly. On October 17, Saudi Arabia signed several major deals with South Africa intended to develop the country’s fledgling hydrogen industry, as well as other renewable energies and oils. In total, the agreements totaled around $15 billion in Saudi financing. These developments built on Saudi energy company ACWA Power’s pledge to invest in South Africa’s green hydrogen industry and collaborate over the construction of a renewable energy plant in South Africa. Only a week before the October meeting with South Africa’s president, the SFD also agreed to provide $5 million for solar-powered street lights in the Central African Republic (CAR).
Last year, Crown Prince Mohammad bin Salman signaled Riyadh’s intent to allocate around $1 billion in investments and loans to help developing countries recover from the economic impact of the COVID-19 pandemic. Since then, Saudi Arabia has also pledged greater support for countries like Kenya for socio-economic development, as well as advancing cooperation in areas of existing ties, such as IT and transport.
Saudi Arabia is also looking to match the overwhelming clout of its close partner and fellow GCC member state, the United Arab Emirates (UAE), which stated in a UN Security Council meeting in August 2022 that sustained investment in Africa’s development was the key to generating sustained peace on the continent. Having pursued a policy of proactive engagement across Africa in the last decade, Abu Dhabi is already a leader in port development and maritime cooperation; its state-owned giant Dubai Ports World (DP World) currently runs projects in Djibouti, Rwanda, Somaliland, Mozambique, Nigeria, and Senegal. These initiatives have made the UAE the world’s fourth largest investor in Africa after the United States, China and the European Union (EU). Indeed, a recent Dubai Chamber of Commerce and Industry study showed that Emirati investment in Africa accounted for 88 percent of total GCC investment on the continent between January 2016 and July 2021, at around $1.5 billion. It will take an immense effort from Riyadh to displace Abu Dhabi as the primary Gulf investor in African development projects.
Targeted Iranian Influence
Iran has tried to make inroads into sub-Saharan Africa over the past decade. In 2014, President Hassan Rouhani considered Tehran’s ties with the continent a “top priority.” Rouhani’s successor in office, incumbent President Ibrahim Raisi, has reiterated these sentiments, stating in a meeting with Guinea-Bissau’s speaker of parliament in August 2021 that “all the capacities for cooperation with African countries will be seriously activated.”
Africa, with its emerging economies and abundant natural resources, matters a great deal to Iran’s leadership. Economic ties with African governments provide Tehran a way to alleviate the impact of U.S. and EU sanctions on Iran’s struggling economy. Forging diplomatic and security ties help Iran escape the threat of international isolation. Indeed, there is fertile ground for facilitating these types of connections with African states. Tehran has portrayed its engagement with Africa as uniting the “third world” against the neocolonialist West. In August, Nelson Mandela’s son Mandla Mandela received a human rights award when visiting Iran for his role in the anti-apartheid struggle.
Although Iran had pursued many economic projects in states like Senegal, Gambia, Mali, Sierra Leone, Benin, Nigeria, and Ghana, both Raisi and his predecessor Rouhani have kept Iranian investment targeted in states where Iran tried to expand the Islamic Revolution’s objectives through cultural and media initiatives. These developments look set to continue as Iran’s Trade Promotion Organization (TPO) said it will open seven trade centers in Africa by the end of March 2023. This comes after Iran’s Foreign Minister Hossein Amir-Abdollahian toured several African countries in August, including Mali, which has sought new diplomatic partners after a falling-out with France and has served as a key focal point for Tehran’s ongoing engagement in the Sahel.
Saudi Arabia’s economic and diplomatic overtures to African states give it good reason to believe Tehran’s influence will wane as its own grows. African states are diversifying their economic relationships beyond their traditional ties to Western countries or Russia. Indeed, China’s displacement of the United States as the primary investor in Africa has already created significant space for other players to forge their own economic ties there. Without the financial weight of the GCC states or economic superpowers like the U.S. and China, Iran may struggle to keep up with the competition.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.