UAE will not be alone at the in a new wave of Gulf investments in the North African nation.
During the Cairo visit of Saudi Crown Prince Mohammed bin Salman (MBS) some 14 deals worth $7.7bn were signed in vital sectors in Egypt, including energy, food, and fintech. A joint statement later said Saudi Arabia is determined to lead $30bn investments in the most populous Arab country, without disclosing further details.
The fresh Saudi-Egyptian agreements followed hard on the heels of a spike in the UAE’s investments in Egypt. With a multitude of acquisitions and expansions either planned or already executed, the Emiratis are looking to increase their investments in the third largest Arab economy by 75% in the coming five years, which will take their overall value to $35bn in 2027.
“Of course, Egypt as a matter of principle is one of the Middle East’s largest markets … given the population size, the location of the country and so on,” says James Dorsey, a senior fellow at the University of Singapore’s Middle East Institute.
“But what I also think is that a lot of this has to do maybe less with [the] economy as much as it has to do with geopolitical strategy,” he tells The Africa Report.
Dorsey points to an ongoing competition between them for more influence in Egypt. Even though the two most significant states in the Gulf Cooperation Council (GCC) are close allies, still vie for influence.
“You see that, for example, in forcing corporates to move to Riyadh rather than Dubai,” Dorsey says. “You saw that in … eliminating the advantage the UAE had with its free zones” by excluding goods made in GCC free zones from Saudi tariff concessions last year. “In a sense it is friendly competition”.
Saudi investments in Egypt, through more than 6,800 firms, are estimated at over $32bn, 60% higher in value than those of the UAE.
However, the UAE has more clout in Egypt, Dorsey argues. “The Emiratis are more influential and I think that’s something the Saudis would like to change,” he says.
For instance, the Emiratis have gained significant influence in Al Azhar, the prestigious Cairo-based thousand-year-old seat of Sunni Muslim teaching, at the cost of the Saudis. “Look at [Al Azhar Grand Imam] Ahmed Al-Tayeb’s relationships and positions in the Emirates as opposed to Saudi Arabia”.
Al-Tayeb, who always receives a warm welcome by Emirati leaders whenever he lands in Abu Dhabi, is entitled to issue fatwas, or Islamic rulings. He also represents the Muslim world on some occasions.
In 2019, Al-Tayeb put his signature to a document entitled ‘Human Fraternity for World Peace and Living Together’, along with Pope Francis in Abu Dhabi. The document is the basis for the multi-faith Abrahamic Family House, which is poised to be inaugurated this year in the UAE capital, comprising a mosque, a church, and synagogue.
Normalisation with Israel
Proclaiming that its purpose is promoting peace and harmony among religions, the Abrahamic Family House has raised doubts that its underlying target is to further normalise relations with Israel in the region.
Stoking the speculation, the UAE and the Jewish state penned a peace agreement in 2020, part of the so-called Abraham Accords, and both countries have dramatically and openly strengthened their bilateral ties ever since.
Home to the holiest Islamic sites, which millions of Muslims visit every year for the Haj pilgrimage, Saudi Arabia cannot follow in the UAE’s footsteps when it comes to normalisation, at least not without a resolution to the perennial conflict between the Israelis and Palestinians.
“Saudi Arabia [is] wanting relations with Israel, but not able to establish diplomatic relations with Israel with the same ease as the Emiratis have been able to,” Dorsey says.
Instead, Saudi Arabia is seeking nowadays to “forge region-wide security relationships” through MBS’s recent Middle East tour, which next to Egypt included Jordan and Turkey. “All of that is reason for the Saudis to … find a way into Egypt in terms of influence,” Dorsey adds.
Saudi Arabia and UAE have been among the strongest financial backers of Egypt since the 2013 toppling of late president Mohamed Morsi, who hailed from the Muslim Brotherhood, the Islamist group both oil-rich nations are at loggerheads with.
The Gulf duo have been robustly supporting incumbent Egyptian president Abdel-Fattah El-Sisi, who, as an army chief at the time, led Morsi’s ousting. Right after, Saudi Arabia and UAE pumped billions of dollars worth of deposits into Egypt, a lifeline to its economy that was badly battered through years of political turmoil.
History repeats: Egypt has been in a trouble as a result of the Ukraine war and ensuing rise in commodity prices; and once again Saudi Arabia and the UAE have come to its rescue. Only this time their support came more in the form of business transactions rather than financial aid, although Saudi Arabia deposited $5bn in the Egyptian central bank last March.
Karen Young, a senior fellow at the Middle East Institute in Washington, believes Saudi Arabia and UAE are not vying for political influence in Egypt this time around as much as they are after sound investment.
“… keep in mind this is a very different political environment than in 2013 or 2016 when Gulf states openly fought over influence in Egypt,” she tells The Africa Report. “This is a value for money investment proposition, and a time of political de-escalation in the region where Gulf leadership is secured. There is no imminent threat from political Islam, and larger battles are ahead.
“There is an investment opportunity in Egypt as the government faces a real fiscal problem and will need to sell some assets” worth $40bn over the course of four years”, she says. “The [Egyptian] currency is under pressure and inflation will make for some bargains if paid for in a stronger currency like the dollar,” she adds.
Key to diversification
Investing in Egypt, what’s more, can help Saudi Arabia decrease reliance on oil and diversify its economy pursuant to its 2030 Vision, a long haul that entails regional backing.
“The main objective here is strategic – to support Egypt’s economy and external finances – although financial viability is undoubtedly a factor,” Krisjanis Krustins, director of sovereigns at Fitch Ratings, tells The Africa Report, commenting on the latest Saudi-Egyptian deals.
“Saudi Arabia’s economic diversification will hinge on a degree of stability in the region, and the investment agreements support the diversification goal in that sense.
“Some of the projects involve desalination and clean power generation, and Saudi Arabia will benefit from its companies gaining more experience and building a better position in those fields, as they will also be important for the Kingdom’s own water and energy security.”
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