The curious timing of Saudi Arabia’s interest in South Africa’s farmland

The Kingdom of Saudi Arabia has maintained a keen interest in deepening economic and trade relations with South Africa over the recent past. The latest expression of intent was a Memorandum of Understanding (MoU) between the two countries on technical cooperation in the field of agriculture, fisheries and aquaculture, where they would identify potential opportunities in trade, investment, capacity building, research and development.

The most interesting part of the Saudi delegation’s visit was their desire to acquire land in South Africa on 99-year leases to produce various agricultural commodities to export to the Kingdom. The timing and content of this visit is curious. The Saudi’s intent to acquire land in South Africa comes against the backdrop of a raging and on-going debate on land reform, and concerns around foreign ownership of large tracts of land.

The Kingdom of Saudi Arabia is among the largest foreign investors globally, particularly in agriculture, where they have acquired about 1.9 million hectares of land for food, forestry, and timber, as well as biofuels production. Of that hectarage, roughly 1.4 million hectares (or 74% of all their acquired farmland) is in African countries such as Morocco, Egypt, Sudan, South Sudan, Ethiopia, Senegal, Mauritania, and Kenya. Two of the largest farmland acquisitions that the Kingdom of Saudi Arabia has made are in Morocco and South Sudan, where they concluded and signed off on 700 000 ha and 105 000 ha land deals, respectively. Overall, 25 of the 31 large scale farmland acquisitions that Saudi Arabia has signed are in Africa. This shows that the Kingdom’s investment appetite for agriculture is biased mainly towards the African continent.

It is therefore not surprising that the Saudi’s are looking at South Africa as the next potential investment destination to add to their considerable global farmland interests. Like most, if not all Gulf States, off-shoring agricultural production has been a key strategy to ensure food security, particularly after the 2008 global food price crisis. Export bans from traditional global surplus producers, as well as volatile and high world food prices, meant that countries like Saudi Arabia have to acquire land overseas and produce agricultural commodities for export into the Kingdom in order to allay prospects of food insecurity.

Thus far, it appears that the Saudi’s have not had any interest in South African agriculture beyond that which they import. South Africa’s agricultural exports to Saudi Arabia are in excess of R5 billion, which only accounts for 2% of South Africa’s overall agricultural exports.  These agricultural exports mainly consist of citrus and subtropical fruits, such as oranges, lemons, pears, grapes, mandarins, apples, plums, grapes, and avocados, amongst other products.

However, much of the Saudi’s trade and investment interest in South Africa has been in the (renewable) energy sector. In its charm offensive, the Kingdom pledged to invest R133-billion in South Africa’s energy sector in 2018, a proposition that boosted President Cyril Ramaphosa’s ambitious plan to attract $100-billion in investment in the country.

Meanwhile, Saudi Arabia is the leading supplier of South Africa’s oil imports, accounting for about 42% in 2018. Bilateral trade between the two countries amounted to R76 billion in the same year. This makes Saudi Arabia one of South Africa’s key strategic trade and investment partners not just in the Gulf Region, but in the world.

To proponents, Saudi Arabia’s investment appetite in the agricultural sector will not only lead to significant capital inflows in a sector that has suffered from years of under-investment, but it will also likely improve South Africa’s trade balance with Saudi Arabia considerably. South Africa has a negative trade balance of R65 billion against Saudi Arabia. Agricultural exports to Saudi Arabia from acquired farmland would definitely go some way in re-balancing the trade deficit.

To the skeptics, however, the model of rich Gulf States off-shoring agriculture in the African continent has been viewed with a healthy amount of negative sentiment. First, over and above the sensitivities around the land issue, the job-creating potential of the investments will be called into question. Issues around the creation of decent jobs and minimum wage requirements will obviously become a major talking point.

Secondly, there will be intense scrutiny regarding who benefits from exports from the acquired land, with many questioning the extent to which export revenues would benefit the South African economy. This important question would be prefaced by criticism of land being secured for the exclusive benefit of the Saudis, at the expense of South African citizens. The likelihood of negative consequences would, however, boil down to the terms and conditions of the contract itself. The problem is that in most, if not all cases, the terms and conditions of land deals are never disclosed to the public.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s