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Africa and the Middle East: Proxy wars or economic partnerships

Kurt Davis Jr.
By Kurt Davis Jr.
Investment banker

Kurt Davis Jr. is an investment banker with private equity experience focused on Africa, the Middle East, and Turkey. He earned an MBA in finance, entrepreneurship and operations from the University of Chicago and a J.D. in tax and commercial law at the University of Virginia’s School of Law. He can be reached at kurt.davis.jr@gmail.com.

Posted on Wednesday, 22 January 2020 14:59

A fighter loyal to Libya's UN-backed government (GNA) gestures during a clash with forces loyal to Khalifa Haftar at the outskirts of Tripoli, Libya 21 May 2019. REUTERS/Goran Tomasevic

Libya has two governments, two legislatures, two central banks, and several militias battling for control of the country.

Earlier this month, the rebel army of General Khalifa Haftar attacked and took control of the coastal town of Sirte. General Haftar’s Libyan National Army is now claiming the city is “completely liberated” and is being “cleaned up” by militia forces.

From a distance, as the civil war endures, Libya has the look of a country that will be mired in a war for some years and destroy itself from within. But the reality is different and more complex than how the story plays out publicly in the media. Libya sits on strategic real estate, in particular significant oil reserves, which is accordingly attracting international attention and participation.

On the east of the country, the militia forces have the military and financial backing of the United Arab Emirates (UAE), Saudi Arabia and Egypt. The Government of National Accord, which is the interim government for Libya formed under the United Nations-led Libyan Political Agreement, is receiving reinforcements from Turkey and Qatar.

The Libyan map

A quick look at the map of Libya clearly indicates that the battle for the country will involve General Haftar’s forces pushing towards Misrata (a little more than 242km from Sirte) with their ultimate focus on taking Tripoli. A deeper survey of the forces on the ground and the flow of cash into the country suggests that intensity will also rise as a by-product of competing regional powers in the country.

As the battle in Libya intensifies, it is also important to acknowledge that Libya is not the end-all-be-all for competing Arab states—UAE, Saudi Arabia, Egypt, Qatar and Turkey. Libya is rather becoming a greater manifestation of the spill-over effect of an escalating rivalry between Arab states into the continent of Africa. Arab states are conspicuously spending time and money to intervene in African politics and economies with both benevolent and strategic intentions. Libya is simply the most visible situation in a sizeable group of examples.

Ethiopia-Eritrea “Jeddah Peace Agreement”

Although several leaders have attempted to stake a claim on the successful easing of tension (and broader relationship building) between Ethiopia and Eritrea, the highest amount of credit obviously goes to the leaders of the two neighbouring countries, Ethiopia’s Prime Minister Abiy Ahmed and Eritrea’s President Isaias Afwerki.

That said, the deal to open the borders between the countries, however, would not have succeeded without the political support and financial backing of Saudi Arabia. The peace agreement, also known as the “Jeddah Peace Agreement”, was negotiated at the Peace Palace in Jeddah with the mediation of King Salman bin Abdulaziz, Crown Prince Muhammad bin Salman and the secretary general of the United Nations Antonio Guterres.

Qatari exit

More important is the backdrop to Saudi Arabia’s participation in the peace agreement, which was the exit of Qatari peacekeepers in 2017 and the various storylines associated with their departure. First, the exit came shortly after Djibouti and Eritrea sided with Saudi Arabia in the diplomatic rift with Qatar. Secondly, Saudi Arabia and Eritrea had a security cooperation agreement (signed in April 2015) and the UAE was then constructing a military base north of the port of Assab. Third, the exit of Qatari forces officially removed the status quo of an incessant peaceful border underwritten at the expense of another country…in other words, Qatar was keeping a 500-man plus presence in the country which was costly.

At the end of the day, Qatar essentially funded the initial peace process through its border presence with Saudi Arabia financing the ‘last mile’ by hosting and participating in discussions between the two countries. Sadly this figuratively seamless see-sawing of power and presence is the not the norm…again see Libya today.

Somalia: An election in 2020/2021?

The head of Somalia’s electoral commission told the UN Security Council late last year that 2020 was a “pivotal year” as the country looks to have its first fully participatory election in nearly 50 years. President Mohamed Abdullahi Mohamed (also known as ‘Farmajo’), who was previously prime minister of Somalia from November 2010 until June 2011, won the 2017 Somali presidential election with 195 of the total 330 votes cast by the members of the Somali Parliament (as it was too dangerous in the country to have citizens go to polling stations). Now, as Farmajo approaches 2020, there are rumours that he is opening conversations about financing again with Qatar, which helped finance his previous election.

Some critics argue that Somalia’s opposition to port deals by UAE-based DP World with Somaliland and Puntland was underwritten by Qatari election support. Somali authorities also seized $10m in cash from an arriving UAE flight to Mogadishu in 2018 that was reportedly intended to support a UAE-run military training mission.

The UAE subsequently withdrew its presence from Mogadishu and now supports Somalia’s semi-autonomous federal states—Somaliland and Puntland. Turkey is reportedly discussing potential support to Farmajo for his re-election with many observers speculating whether Qatari and Turkish support will come as a package deal (as seen in Libya).

Sudan: Life After Omar al-Bashir

All the Arab states have sent dignitaries to Khartoum in the past six months to assess the situation. Saudi Arabia and the UAE pledged $3bn to the country following the ousting of President Omar al-Bashir in April 2019, which is being used to prop up the economy and bridge the interim leadership to its next election. The Saudi government is also spending on a propaganda campaign in Saudi Arabia and Sudan to promote a more formal and acceptable image (and history) of the current transitional military council and its chief Abdul Fattah Al Burhan. Al Burhan and Prime Minister Abdalla Hamdok, to no one’s surprise, also visited Saudi Arabia late last year.

Qatar, on the other hand, maintains strong links to the security apparatus in the county. Ousted president Bashir reportedly asked Qatari officials for help in January 2011 before being removed in April that year. Al-Bashir only received an offer of political asylum, which must have surprised the former president, considering Qatar had recently signed a $4bn deal in March 2018 to develop Sudan’ Suakin Island, home to a strategic Red Sea port, and had previously provided other financial support to the Bashir regime. A relinquishing of power and influence in Sudan by either Saudi Arabia or Qatar would ultimately tilt the balance of power in the Horn of Africa.

It’s not simply politics….it is also economics

The Gulf States and Turkey have a long history of trade with Africa. The global financial crisis from 2007 to 2009 deepened economic ties as these counties turned to Africa’s fast-growing economies and growing middle classes as Western economies faced downtrodden times. Other factors, such as food security and a desire to demonstrate economic influence, has also further opened the pockets of Arab states.

Turkey’s trade minister Ruhsar Pekcan, for example, is not secretive about the country’s ambitions to strengthen trade relations with the African continent. Earlier this month, the minister told a crowd at the Morocco-Turkey Business Forum that Turkey’s trade with Africa was up 12% in 2019. Pekcan also discussed Turkey’s deals for reciprocal protection of investment with 30 countries as well as agreements with 13 countries to prevent double taxation.

Turkey trade

Turkey also has free trade agreements with Egypt, Morocco, and Tunisia with agreements with Ghana and Sudan in the process of approval. Officials will also be spending time in Kenya, Mozambique, Morocco, Nigeria, Rwanda and Tanzania over the coming months. These expanding relationships have boosted bilateral trade between Turkey and Africa to nearly $24bn in 2018 from $5.5bn in 2003 (official statistics for 2019 have not been released).

The UAE continues to leverage its shipping and port infrastructure—for example led by DP World projects in the region—to build long-term economic relations with Africa. Most observers will remember DP World’s history in Djibouti, which reportedly includes losses of $1bn-plus since the Djiboutian government took over the terminal in February 2018. That aside, DP World is active in other African countries, including Mozambique, Senegal and Rwanda, with great success. DP World and other Emirati investors thus remain optimistic and interested as UAE officials push for greater political and economic ties on the continent.

Qatar is currently building a hub with Qatar Airways now having agreed to construct Rwanda’s biggest airport—Bugesera Airport—after Rwanda officials lost faith in troubled Portuguese investor Mota Engil. Qatar Airways will have a 60% stake in the airport, which is expected to cost $1.4bn. Rwanda’s infrastructure minister Claver Gatete said the government bought back shares from Engil, for an undisclosed amount, in order to facilitate the deal with Qatari officials. Qatar Airways will finish the project and, as part of the deal, receive the rights to operate the airport for 25 years in order to recoup its investment with an option to extend the agreement for 15 years.

The long-term outcome for Africa

The presence of Arab states in Africa may not match China’s presence in Africa in the near term. But their accelerating competition should mean more investment for the continent. That said, the regional rivalry in the Gulf and power vacuums in some African countries continues to underpin the chess game played by Arab states in Africa.

Many observers go as far criticising many Arab states for building asymmetrical relationships, where African states are acting on behalf of Arab states simply for large sums of cash. There is some truth in that thinking. But the reality is that policy-makers in African countries have to make their own policy decisions and govern their own borders. Absent that ownership of the future, many Arab states and non-Arab states (i.e., USA, Russia, China) will continue play a political game of chess and proxy (economic) wars. This chess game, however, is more dangerous than normal because there are way more queens and kings on the board than pawns.

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