China Scales Back: Africa Seeks New Investment Partners in Saudi Arabia and UAE

Historically, China has been a dominant force, funnelling over $170 billion in loans to African nations between 2000 and 2022. However, recent data indicates a sharp decline, with Chinese lending dropping to $4.61 billion in 2023, the first increase since 2016 but still far below peak levels. This retreat, driven by China’s domestic economic challenges and a strategic pivot towards sustainable investments, has prompted African leaders to court Gulf states like Saudi Arabia and the United Arab Emirates (UAE). These nations, with their deep sovereign wealth funds and strategic ambitions, are stepping into the breach, offering a new paradigm for Africa’s economic development.

The shift is not merely financial but geopolitical. African economies, burdened by a $1.8 trillion public debt in 2022, face mounting pressure to diversify funding sources. Saudi Arabia and the UAE, with their focus on energy, infrastructure, and critical minerals, present compelling opportunities. Yet, this transition raises questions about sustainability, transparency, and the long-term implications for African sovereignty.

China’s role as Africa’s largest bilateral creditor has waned. From a peak in 2016, lending has contracted due to domestic economic slowdown and global scrutiny over “debt-trap diplomacy.” For instance, Angola, once a top oil exporter to China, saw its ranking slip to eighth by 2023, with exports declining significantly. This reduction in China reduced financing Africa reflects a strategic shift towards smaller, greener projects, with $50.7 billion pledged in 2024 for infrastructure and clean energy. However, African nations, accustomed to large-scale Chinese loans for roads and railways, now face a funding gap.

Countries like Kenya and Ethiopia, previously beneficiaries of Chinese-funded projects such as the Addis Ababa Light Rail, are grappling with stalled initiatives. For example, Kenya’s Nairobi Expressway, a rare success under a public-private partnership model, contrasts with stalled road projects due to withdrawn Chinese funds. African leaders, aware of the $150 billion infrastructure funding gap, are thus turning to Gulf states to bridge this divide.

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Saudi Arabia is positioning itself as a key player in Africa’s economic landscape. In 2023, the kingdom pledged $40 billion at the Saudi-Africa Summit, targeting energy and mining sectors. Saudi Aramco and ACWA Power have invested $15 billion in oil refining and renewable energy projects, including solar plants in South Africa and Morocco. These investments align with Saudi Arabia’s Vision 2030, which seeks to diversify its economy beyond oil. Moreover, Riyadh’s diplomatic efforts, such as mediating Sudan’s conflict, enhance its soft power, making it an attractive partner.

However, Saudi Arabia trails the UAE in direct investment, with $25 billion compared to the UAE’s $30 billion. The kingdom faces competition not only from regional players but also from Western institutions like the IMF, which exerts pressure on African partners. Despite these challenges, Saudi Arabia’s systematic approach, blending economic injections with military and cultural influence, positions it as a formidable contender in Africa’s economic future.

The UAE has emerged as Africa’s largest foreign direct investor, committing $110 billion between 2019 and 2023, surpassing China, the EU, and the US. Companies like DP World and Abu Dhabi Ports are expanding in African ports, from Guinea to Angola, while investments in renewable energy, such as a $34 billion green hydrogen project in Mauritania, underscore the UAE’s focus on sustainability. This surge in China reduced financing Africa has created opportunities for the UAE to fill the void, particularly in green energy and infrastructure.

Yet, concerns linger. The UAE’s investments, while substantial, often prioritise strategic interests like energy and food security. Critics highlight risks such as smuggling, with $115.3 billion in unaccounted gold exports to Dubai between 2012 and 2022. African leaders must navigate these dynamics to ensure investments translate into broad-based economic growth rather than benefiting only elites or external powers.

The pivot to Gulf states offers African nations a chance to diversify their economic partnerships. The African Continental Free Trade Area (AfCFTA) enhances the appeal of Gulf investments by fostering intra-African trade. For instance, Saudi Arabia’s $41 billion commitment over ten years in Sub-Saharan Africa could bolster regional integration. Similarly, the UAE’s tripartite investment approaches with the UK and India signal a collaborative model that could amplify economic benefits.

However, risks abound. High debt-to-GDP ratios, projected to exceed 60% in many African nations, constrain fiscal space. Gulf investments, while substantial, often lack the transparency associated with Western institutions. Furthermore, the UAE’s involvement in conflict zones like Sudan raises concerns about stability. African policymakers must prioritise sustainable projects and negotiate terms that protect economic sovereignty to avoid replicating the dependency once associated with China reduced financing Africa.

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African nations stand at a crossroads. The decline in China reduced financing Africa has spurred a strategic realignment towards Gulf states, offering both opportunities and challenges. To capitalise on Saudi and UAE investments, African governments must strengthen domestic business environments, ensuring reliable electricity, robust transport networks, and skilled labour. Joint ventures with local firms could facilitate technology transfer, enhancing long-term growth.

Moreover, African leaders should leverage the G7’s Partnership for Global Infrastructure and Investment, such as the Lobito Corridor, to complement Gulf funding. By fostering transparency and sustainable lending practices, Africa can mitigate risks of debt distress and ensure investments drive inclusive growth. The continent’s economic future hinges on balancing these new partnerships with prudent fiscal management.

As China reduced financing Africa, the rise of Saudi Arabia and the UAE as key investors marks a transformative shift. These Gulf states bring substantial capital and strategic vision, yet African nations must navigate this transition carefully. By prioritising sustainable investments and regional integration, Africa can harness these partnerships to drive economic resilience and prosperity. The challenge lies in ensuring that these new alliances foster equitable growth, avoiding the pitfalls of past dependencies.