3.1 An economic strategy as part of wider foreign policy
Contemporary perceptions by Africans of Gulf Arab aid, investment and trade into the Horn cannot be fully understood without considering the role Gulf societies and states have played for decades and centuries in Africa. The long record of exchanges and proximity set out in the previous section have a decisive bearing on the external policy Gulf states are currently pursuing vis-à-vis the Horn of Africa. This section makes two core points. First, it posits that the vast majority of economic initiatives by Gulf actors in the Horn are still directly inspired by and mediated through political factors- politics and economics are not discrete realms, but two sides of the same coin.[37] It thus illustrates how the current mixture of political and economic drivers is translated in concrete policy instruments. Second, the section highlights not only the related opportunities but also the risks, both to elites and to wider populations. Sudan’s experience offers a concise historical example. Although Sudan’s ties with Gulf states are uniquely close relative to those of other Horn states, the failure of the Breadbasket gamble illustrates the opportunities and hazards the Gulf’s mixture of political and economic aims and instruments in the Horn still carries.
On 25 May 1969, leftist officers led by Colonel Ja’afar Nimeiri overthrew the democratically elected Sudanese government amidst growing doubts that the promises of peace and prosperity that the political class had made at independence in 1956 would be kept.[39] Nimeiri held the upper hand militarily but lacked the organization in the form of a national political party and requisite patronage networks to durably establish control over Sudan. Moreover, once in power Nimeiri soon realised that promising development was easier than actually delivering it in a poor African country. Seeking a way out, the new president gambled that the solution lay in a partnership with the Gulf states whose revenues were skyrocketing as oil prices shot up in the early 1970s. Nimeiri knew that Kuwait, the Emirates and Saudi Arabia worried about rising water and food scarcity as consumption and population levels soared.[40] Sudanese officials trumpeted that 200 million acres of arable land were available in the country’s interior. Sudan could become the “Breadbasket” of Africa and the Middle East but, for it to fulfil this historical destiny, Western technology and Gulf Arab petrodollars would be needed on a massive scale, or so Nimeiri and his aides said.[41] This strategically calibrated message coincided with mounting global fears about desertification, drought and famine; 1974 had been a devastating year, hundreds of thousands dying of hunger in the Sahel and Bangladesh. Khartoum’s offer to put its land, labour and water resources at the disposal of the Gulf thus simultaneously suggested that a failure to put such unique potential to good use would spell a Malthusian disaster.[42]
Funded bilaterally by the dominant states on the Arabian Peninsula, and multilaterally through multiple Gulf Arab development funds, the Breadbasket was hailed by the World Bank, IMF and Western governments as a visionary policy. Yet what presented itself as an economic and environmental proposition was in fact a deeply political gambit. Nimeiri needed the petrodollars to pay for his state-building project, the crafting of new coalitions and the penetration of his rivals’ rural political strongholds. Under the guise of technocratic advice, only those crops, regions and networks that Nimeiri favoured would benefit from the Breadbasket largesse as billions of dollars in Gulf money poured into Sudan — a mechanism that acted as a punishment for recalcitrant local politicians and businessmen and as an incentive for these groups to switch to the president’s side. The expansion of mechanised farming in Sudan obeyed an iron political logic but continued to explain itself in terms of agricultural objectives and instruments.
Although Riyadh, Kuwait City and other Gulf governments did indeed see an opportunity to address the rapidly growing “food gap” between lagging domestic production and soaring consumption (particularly following the post-1970 economic boom),[43] they too had, from the start, political motives too for partaking in the Breadbasket.[44] The Breadbasket was as much about Gulf foreign and domestic policies as it was internal and external objectives for Sudan. Nimeiri had initially modelled himself on Egypt’s revolutionary leader Gamal Abdel Nasser (1952–1970) and had entered into an alliance with the Sudanese Communist Party, which preoccupied King Faisal of Saudi Arabia greatly. When the Sudanese ruler fell out with the communists in 1971, Faisal was keen to put Khartoum on a more conservative trajectory; committing petrodollars to Sudanese agriculture anchored Nimeiri in a pro-Saudi orbit and kept it safely away from any socialist allegiances that Riyadh abhorred. Sudan became a loyal friend of the Gulf Arabs and the West; Washington provided it with military assistance, turning it into a major client state. Expanding mechanised agriculture in the Sudanese peripheries thus served greater geopolitical purposes.
The Breadbasket dream and the internal and external alliances it had helped to build came crashing down in 1985 when protests toppled Ja’afar Nimeiri. Shortages and rampant inflation were the proximate cause of regime change but underlying was the failure of the extraversion gambit to which the president had tied his political fate. Although the Breadbasket had promised to transform Sudan into an agricultural superpower, by the early 1980s the country faced the return of famine to its western, central and southern regions.[45] Soils were being exhausted, land was being degraded and productivity was sinking rather than soaring. Agricultural projects failed to live up to expectations as political and patronage considerations precluded sound agricultural management and development practices, leading to various problems such as soil erosion. Tens of thousands — maybe hundreds of thousands — of people had been displaced to feed the Middle East and Africa. However, Nimeiri had neither managed to vanquish the old political elites nor to counter the rising new forces in Sudanese politics, whether the Islamists of Hassan Al-Turabi or the rebels of the Sudan People’s Liberation Army/Movement. The latter in particular attracted recruits and support from those dispossessed by the Breadbasket.[46]
Nimeiri’s erstwhile foreign friends had left disappointed too. The oil price had fallen back from its peak of more than USD 100 in 1979–1980, meaning that petrodollars were no longer just spare cash at the disposal of the foreign policy of Gulf states but were actually needed at home to sustain the ballooning cost of the huge patronage systems the Gulf royals had built to sustain domestic stability. Moreover, many Gulf investors felt tricked by the Nimeiri regime, losing their way in Sudan maze’s of crony politics and bureaucracy. As the questionable hydro-agricultural assumptions underpinning the Breadbasket were exposed by disappointing production figures, Gulf capital pulled out, seeking easier returns and more transparent projects to invest in.[47]
Although Horn states differ significantly in their domestic political and economic situations as well as in the relationships they maintain with Gulf states, Sudan’s bid in the 1970s and 1980s to become the Breadbasket of Africa and the Middle East provides several lessons which apply to some degree to many of the relationships between the elites of the Arabian Peninsula and those of the Horn. It is a cautionary tale for those (over)enthusiastically seeking regional integration between both shores of the Red Sea today. The Breadbasket story underlines the fundamentally political motivations that often determine aid, investment and trade flows, rather than discrete economic variables or sound ecological arguments, whether on the side of the donor (the Gulf) or the recipient (the states of the Horn).[48] It also highlights the ways in which extraversion is not only a lucrative but also a risky strategy for African states to pursue, not least because of the dependence on factors they do not control (e.g., oil prices). Finally, it underscores the crucial point that the stakes of political-economic ventures are quite different for both partners: whereas the sums of money are comparatively small for Gulf states (and therefore an irritant in case of losses but inconsequential for their macroeconomic balance sheets), for the countries of the Horn they can be positively transformative or catastrophically destabilising. Three decades after the collapse of the Breadbasket, these insights remain highly pertinent.
These lessons are also particularly important in light of the dramatic scaling-up of the political, military and economic presence of Gulf Arab actors in the Horn of Africa over the last ten to fifteen years. After a near-total withdrawal in the late 1980s and 1990s, Emirati, Kuwaiti, Qatari and Saudi actors have returned to the Horn — hesitantly at first, but with increased vigour since 2008. This comeback began in Sudan: Gulf governments and multilateral funds provided the lion share of the funding for Khartoum’s multibillion dollar Dam Programme from 2001 and 2002 onwards.[49] Given the close connections between dam building and the rejuvenation of large-scale, capital-intensive irrigated agriculture in Sudan, a flurry of Gulf enterprises followed in the wake of visiting monarchs and scouted out possibilities for an updated version of the Breadbasket: once again, the Sudanese government was offering its land, water and labour to outside investors and hoping to capitalise politically and financially on the inflow of FDI and aid. Some Gulf partners sceptically remembered the debacle of twenty years earlier and withheld their cash. Those who did invest did so in part because the political imperative was clear. Just as their support of the Breadbasket had been intended by Riyadh to keep Nimeiri out of the socialist camp, so the funding of the dams and of Sudan’s Agricultural Revival Programme sought to bolster the military and business wing of the regime that came to power in Khartoum in 1989, marginalising the radical Islamists associated with Hassan Al-Turabi who had been dominant in the 1990s. In more recent years, Saudi support to Sudan, such as billions in concessional loans and bank deposits, for the Sudanese regime has been instrumental to securing the continued engagement of Sudanese troops in Yemen and Sudan’s breaking off ties with Iran in the wake of the Saudi execution of Shia cleric Sheikh Nimr al-Nimr.[50]
3.2 (Mostly) economic determinants
Bringing Sudan back into the Saudi-led fold of GCC states has proven a major driver for Gulf aid, investment and trade. From 2007 onwards, it has been complemented as a determinant of economic ventures by a dramatic spike in commodity prices. When Asian states banned rice exports and grain prices spiralled out of control a decade ago, food riots broke out in several African countries and fears of a Malthusian crunch returned to the Arabian Peninsula: a repeat of the 1970s seemed to be in the making.[51] The prospect of running out of food and water, and the associated risk of political instability,[52] compelled sovereign wealth funds and holding companies from Saudi Arabia, Qatar and the UAE to aggressively move on international markets with a view to buying up or leasing productive land and concluding long-term agreements to secure regular supplies.[53] Soaring prices made the cultivation of previously marginal land attractive again. The geographic proximity of the Horn, coupled with cultural similarities and people-to-people familiarity in a number of cases, is an obvious pull factor for Gulf investment in agricultural projects, especially in Sudan and Ethiopia.[54] Saudi investments are further facilitated by the returning Sudanese and Ethiopian diaspora, who frequently start businesses on their return, drawing on their Saudi connections to find business partners or investors.
Deradicalising Sudan and concerns about food and water security have therefore been flanked as determinants of increased Gulf economic activity in the Horn by more apparently commercial motives as well. Middle Eastern companies have taken up important positions in the telecoms, banking and hospitality sector as well as opening for-profit schools, launching mining operations and acquiring valuable real estate. Gulf-owned enterprises have been central to this move. This presence is in part related to improved macroeconomic management in many African states and reduced exchange rate volatility and inflation.[55] The much discussed 2010 report by McKinsey & Company, Lions on the Move: The Progress and Potential of African Economies, has embodied this recent period of newfound gusto about African markets (often referred to as Africa Rising). Reports of an emerging middle class with greater than hitherto appreciated purchasing power have underpinned this bullishness about economies such as Ethiopia’s and Kenya’s and increased the buzz about investment in them. The claim is twofold. First, the return on FDI in Africa is higher than anywhere else in the developing world. Second, the gradual urbanisation of the continent will produce a permanent consumer bloc that could revolutionise demand for foreign and African-made goods.[56]
Consumer-facing industries, infrastructure and agriculture across the continent could generate more than USD 2 trillion in revenue annually, which would turn the likes of Ethiopia, Kenya and Sudan into African equivalents of Asian Tigers.[57] Interestingly, McKinsey’s public and private work has not just been important in altering some perceptions regarding (East) Africa’s investment climate, but also in drafting extensive reforms to do so in the Gulf as well, notably in close partnership with the office of Saudi Crown Prince Mohammad bin Salman. It is widely understood that Riyadh’s much vaunted (and criticised) Saudi Vision 2030, which aims to reduce the Kingdom’s oil dependence and diversify its economic base by entering into new international partnerships (including with Africa), was strongly inspired by consultants of McKinsey.[58] Even if the main thrust of these reforms has little to do with the Horn and investments into Africa rank below those envisaged in Asia and Europe, capturing even a fraction of Saudi Arabia’s USD 2 trillion capital funds available to implement Vision 2030 would result in a huge bonanza for any East African state.[59]
This trend of looking towards Africa to recycle some of the Peninsula’s petrodollars in the form of investment has been further strengthened by the hundreds of thousands of Ethiopian, Sudanese, Somali, and Eritrean professionals working in the Gulf. Many of these — especially the Sudanese in Abu Dhabi, Eastern Saudi Arabia and Qatar and the Somalis in Dubai — have been key conduits for advice and channelling capital inflows from Gulf economies into their countries of origin. Moreover, diaspora returnees to the Horn in the last decade have brought substantial savings with them from North America, Europe and the Gulf, which has boosted domestic demand and led to the expansion of the banking and services sector. Combined with years of sustained economic growth, itself driven mostly by high commodity prices and expanding cities, this inflow has bolstered the disposable income of a small but meaningful middle class in Addis Ababa, Hargeisa, Khartoum, Mogadishu and Nairobi. For the first time since independence, a group of people — perhaps 20 to 25 million across the Horn (if Kenya is included) — has enough purchasing power to acquire some of the consumer goods that multinational corporations, including Gulf based players in the aforementioned sectors, provide. Whereas 30 years ago the number of potential customers, say, a profit-driven Emirati investor would have counted was too limited to warrant the complex procedures of setting up risky operations on the continent, today’s growing market size is changing the cost-benefit ratio and bringing Kuwaiti telecom operators, Qatari property developers and Saudi banks to the Horn. Many investments are further de-risked through the political backing from their home governments they can potentially call upon.
By way of conclusion, it is worth highlighting that as important as these economic motivations for augmented Gulf interest in the Horn are, they remain heavily dependent on political backing by state governments. Few investors would dare to wade into markets they still struggle to understand and navigate autonomously. Economic considerations may be cited as a legitimating factor by Gulf entrepreneurs venturing into the Horn, especially in the case of agricultural projects, but the underlying business case is often questionable. For agricultural (excluding livestock) projects, it should be noted that 1) Gulf states are located on a major shipping route, and could reliably source from other areas while hedging prices; 2) Horn states are food insecure, indicating difficulties with food production in the region; 3) developing and operating large-scale farms in a developing context takes significant expertise, which is not in abundant supply in most Gulf states; and 4) returns on investment from such projects are rarely evaluated by investing Gulf parties, making economic motives as a driving factor unlikely.[60]
3.3 Geopolitical determinants
A third, and currently the most crucial element, that brings Gulf capital to the shores of northeast Africa is geopolitical. Developments like the Emirati and Saudi investments in the ports of Berbera (Somaliland), Doraleh (Djibouti), Bosaso (Somalia) and Assab (Eritrea), the ongoing Saudi support for Sudan’s ambitious Dam Programme and promises of billions of Qatari riyals for agriculture, and light manufacturing and social services in Darfur[61] are all to be understood in the context of escalating rivalries between Middle Eastern states and clashing identity paradigms.[62] Two fault lines are vital. First, the proxy war between Iran and Saudi Arabia (and to a lesser extent the Emirates) is the main factor shaping the violence and diplomatic jockeying in the contemporary Middle East.[63] Riyadh is convinced that Iran seeks to undermine the stability of the Gulf and encircle Saudi Arabia with Shia (or at least pro-Iranian) regimes in Bahrain, Iraq, Lebanon, Syria and Yemen.[64] King Salman and Crown Prince Mohammad bin Salman are supported in this conclusion by de facto ruler Emirati Crown Prince Mohammad bin Zayed who, like his Saudi peers, is convinced that Tehran is still pursuing the revolutionary foreign policy it launched in 1979 when the Islamic Revolution led by Ayatollah Khomeini toppled the shah. Africa’s eastern flank is an extension of the battlefield of the Saudi-Iranian rivalry — Tehran and Riyadh each accusing the other of seeking to use African allies to commit aggression against the other. Because the Saudi ruling family sees Iran as an existential threat, no efforts are spared to counter it. This has not only meant rallying Gulf Cooperation Council states (including Kuwait, Qatar and UAE) to support the Saudi-led war in Yemen but also persuading Eritrea, Sudan and Somalia through investments, loans and central bank to central bank transfers to sign up to the pro-Saudi camp and keep Iranian ships out of the Red Sea. Sudan’s cutting of ties with Tehran in 2016, despite a previously close politico-military relationship, should be seen in light of this as well as an attempt to enlist Saudi support to delist Sudan from the state sponsors of terrorism list and (partial) lifting of the US sanctions regime.[65] In a similar vein, in previous years the port of Assab (Eritrea) saw frequent Iranian traffic, but is now hosting Saudi and Emirati military presences and Eritrean fighters are supporting the Saudi-led coalition in Yemen.[66] The establishment of Emirati and Saudi military bases across the Horn coastline could be seen in a similar light, though the military significance of these bases, when completed, remains rather limited.
The second defining geopolitical fault line is the enmity amongst the Gulf Arabs themselves. Saudi Arabia continues to see itself as the unassailable regional hegemon (and the voice of Sunni Islam globally) whose policies cannot be be challenged by other actors in the region. Qatar and the UAE feel both capable of and entitled to an independent foreign policy in which they pursue their own interests in and ideological vision of the Middle East, North Africa and the Horn of Africa.[67] Doha and Abu Dhabi cannot match the sheer size and firepower of the Saudi armed forces, but by virtue of their oil and gas wealth and nimble financial management have material resources that put them in the same league as Riyadh, even if they are not quite equals. Emirati and Qatari aid and investment into the Horn is thus driven by the same geopolitical objectives as that of their Saudi friends-cum-rivals: commercial projects are meant to consolidate political relations and gain greater influence in regional politics; any profit they might yield is a welcome bonus but not an expected outcome.
This rivalry was mostly hidden from outsiders, but dramatically came to the fore when Saudi Arabia, the UAE, Bahrain and Egypt imposed a sweeping embargo on Qatar in June 2017, seeking to force Emir Tamim bin Hamad Al-Thani to either altogether ditch Qatar’s independent foreign policy in Africa and the Middle East or to be ousted by an internal coup. The embargo has so far failed to bring about either of these objectives, but it has led to severe economic stress in Qatar and is likely to have a negative impact on Qatar’s financial and diplomatic ability to project influence and power across the Red Sea. The Eritrean government has already decided to side with the Saudi coalition, breaking off ties with its former main economic partner and financial supporter.[68] Muhammad bin Salman’s aggressive posturing — complemented by an internal centralisation of power as evidenced by the dramatic developments of November 2017 — sends a clear warning to potential other contenders for regional hegemony. Although the Saudi-Emirati alliance appears solid for the time being, the core interests of Saudi Arabia and the UAE are not always aligned, including in Yemen[69] and in the Horn of Africa, as demonstrated when Somalia President Mohamed Abdullahi Mohamed Farmaajo lobbied its backer Saudi Arabia to prevent a UAE military base from being established in Somaliland.[70] The two countries thus may risk clashing in the near future as well. Such structural geopolitical tensions should temper the buoyant investment bulletins sent into the world by McKinsey and others.
3.4 Religion as a determinant of aid, investment and trade?
A frequent question in the context of Gulf foreign policies broadly and economic engagement with the Horn specifically is that of the perceived influence of (religious) ideology in shaping partners, motives and instruments. As discussed earlier, both the Arabian Peninsula and the Horn of Africa have deeply religious populations; that monotheistic traditions originated in this region remains important today as a source of pride and self-identification. Many ordinary people reject any in their eyes arbitrary separation between religion and politics and believe strongly that power must be religiously sanctioned, or, at the very least, that public officeholders must respect the core tenets of society’s dominant faith. This is most evident in the central position occupied by the Al Ash Shaykh — the leading family in the Wahhabi clergy — in Mecca and Medina: the monarchy and the ulema depend on each other for the political, economic and societal power, a pact at the heart of state formation and consolidation in Saudi Arabia.[71] Yet elsewhere too religion and politics continue to entwine. The rulers of Qatar and the UAE reject Western interpretations of liberal electoral democracy by arguing that their form of governance is derived from the Islamic concept of shura (consultation), which holds far greater legitimacy in the eyes of their subjects.[72] This is also true in the Horn of Africa. Generations of Ethiopian leaders have sought symbiotic relations with the Ethiopian Orthodox Tewahedo Church and continue to don themselves in the Orthodox symbolism of power and legitimacy. Even though the current EPRDF government is officially secular, its interpretation of Ethiopian nationalism is infused with Orthodox narratives and the Tewahedo Church remains primus inter pares in Ethiopia’s religious landscape.[73] Sudan has been ruled since 1989 by a military-Islamist regime which saw the Islamization of society — specifically, the functioning of the market, the education system, the public propagation of Islam and the state’s foreign relations — as its top priority. Virtually the entire new political establishment in Somalia describes itself, in some shape or form, as Islamist: many of these individuals studied in Sudan (including the two last presidents, Sheikh Sharif Sheikh Ahmed and Hassan Sheikh Mohamud) and returned home with a belief that a more conservative societal orientation and a more public role for religion would be key ingredients of state reconstruction.
This said, as important as religion is in both public discourse and ideas of political legitimacy in the Gulf and the Horn of Africa, its importance for foreign policy and in dynamics of aid, investment and trade should not be overstated either. Saudi Arabia does indeed seek to aggressively promote its particular interpretation of Islam across the Red Sea, but has never made its foreign political or economic relations conditional on embracing Wahhabism. Quite the contrary, it sometimes seems. As outlined earlier, Riyadh had particularly difficult relations with Sudan when the regime there was at its most religiously zealous and has quite comfortably dealt with secular military dictatorships in Egypt. Qatar too, often accused by its detractors of promoting the Muslim Brotherhood and its Islamist ideology,[74] is in practice rather pragmatic when it comes to business deals and developing diplomatic relations. For two decades, perhaps its most consistently good relationship in the Horn was with Eritrea, the most aggressively secular of the Horn of Africa states and which boasts a track record of cracking down ferociously on the likes of the Brotherhood. Thus, leaders from the Horn of Africa, such as Omar Al-Bashir, often engage in public performances from performing the pilgrimages of hajj or umrah whenever in Saudi Arabia to lauding King Salman as the custodian of the Two Holy Mosques of Mecca and Medina (rather than as an ordinary head of state). But the substance of international relations remains predominantly dictated by political interests and framed in identity politics, which are much more multilayered than religious binaries suggest. Religion matters, in other words, but only up to a point.[75]
The engagement of the leading Gulf states with Somalia differs, to some extent, from that with other partners in the Horn The weakness of the Somali state, the continuing insecurity in large swathes of the territory and the dominance of Al-Shabaab in the countryside and in key coastal areas all hinder large-scale and long-term investments by Gulf actors. Ever since 1991, Somalia has remained simply too risky for deep economic commitments, especially in immovable assets. This does not imply that Somalia is of no importance to the states of the Arabian Peninsula: Omani, Yemeni and Iranian fishermen are active in Somali waters; Somali charcoal has for years been smuggled (illegally) to the Gulf for consumption in shisha (hookah) bars and grilled meat & seafood restaurants; and Somali livestock remains an important source of fresh camel, goat and (to a lesser extent) cow meat for Gulf customers.[76] Economic engagement has been conducted instead mainly through direct financial transfers and trade incentives, avoiding the requirements of high risk on the investor’s side of long-term investments in assets or institutions. Especially the UAE and Saudi Arabia have been able to claim considerable influence (see figure 5).
Based on a Clingendael survey in October 2016. Share of survey respondents from Mogadishu/Hargeisa/Garowe indicating actor as influential.
Somalia has also been the arena in which Gulf jockeying for influence through proxies has been going on for years, though with limited success by most accounts. Ethiopia and the US accused Qatar of supporting Al-Shabaab via Eritrea between 2008 and 2012. The UAE has provided extensive security assistance, especially to the Puntland Maritime Police Forces, at different times to different levels of the nascent Somali government, often pitting them against each other (e.g., Puntland and the federal government). Nonetheless, the Arab Emirates have also been implicated in Al-Shabaab’s charcoal and sugar trade. A number of Al-Shabaab–affiliated charcoal traders benefited from tax breaks in Kismayo port for their charcoal exports to the Emirates, from where it is transported on by road to Saudi Arabia. One trader allegedly also served as a conduit for laundering contributions from Saudi individuals to Al-Shabaab.[77]
The Emirates also sought to support former head of state Sheikh Sharif in the presidential elections of February 2017 against the incumbent, a politician widely seen as the candidate of Qatar and Turkey, Hassan Sheikh Mohamud.[78] However, neither managed to rally a majority of delegates. The eventual winner, Mohamed Abdullahi Mohamed ‘Farmaajo’, allegedly also received small sums of cash from Abu Dhabi, Doha and Riyadh but his surprise victory over Sheikh Sharif and Hassan Sheikh was widely seen by Somalis as a nationalist rebuke to Gulf interference. Farmaajo has tried to maintain his nationalist credentials after taking office while balancing relations with creditors of his cash-strapped government. Thus he refused to endorse the Saudi-Emirati embargo imposed on Qatar in June 2017, allegedly turning down an initial USD 80 million in Saudi funds,[79] despite facing substantial criticism from the Somali regions, parliamentarians and the business community.[80] He also visited Riyadh and Abu Dhabi, reassuring them of his continued participation in the Saudi-led Islamic military counterterrorism coalition. The tiny budget of the Somali federal state condemns it to a structural dependence on outside funders, perpetuating patron-client relations with external powers and undermining both the legitimacy and the effectiveness of the fight of any government in Mogadishu against Al-Shabaab. A comparable situation exists in Somaliland, where 75 percent of the state budget is reliant on the livestock exports through Berbera port (mainly to Saudi Arabia, Egypt and Yemen).[81]
The influence of the Emirates extends beyond its direct monetary incentives. The UAE also functions as an important hub for the Somali business community, as many Somali entrepreneurs operate their Somali businesses out of Dubai. Gaining residency in this emirate is relatively easy for many in the Somali diaspora, and operating out of the UAE (sometimes through intermediary companies) offers these entrepreneurs access to financial services and suppliers that will not service or deliver to companies incorporated or located within Somalia itself. Re-exporting supplies received in the UAE to businesses in Somalia is relatively easy and quick as well. The Somali business diaspora in the Emirates is thus estimated to approximate 100.000 individuals, many of whom maintain close ties with (and at times fund) political actors in Somalia.[82]
3.5 Policy instruments and actors
As discussed earlier, any assessment of Gulf aid, investment or trade into Africa must take into account the political economy of that activity. That so much of this economic activity is politically determined in terms of its motivations and expected outcomes is, unsurprisingly, also reflected in who drives these policies forward and how they are pursued.
Precious little capital in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE is genuinely private, that is, has been generated and is reproduced through strictly competitive economic activity, separate from state patronage networks (for the example of Ethiopia’s Sheikh Al-Amoudi’s rise to wealth, see box 4). The Gulf states are famous for being textbook rentier states: in the classic definitions of Hussein Mahdavy, Hazem Beblawi and Giacomo Luciani, they derive the vast majority of their national revenues from the rent of extractive economic activities in which external clients play a crucial role. Rentier states do not require — and probably even preclude — a vibrant internal productive sector, because the state is able to forgo the taxation of productive activity in the real economy and can instead fund its operations and the control of its population through (in this case hydrocarbon) rents. This has important implications for the type of capitalism that dominates in such systems.[83]
Capital itself and commercial activity more broadly in economies like those of Abu Dhabi, Qatar or Saudi Arabia — and even that of Dubai, often assumed to be the economically most liberal of the Gulf — are mostly concentrated in the hands of different wings of the royal families and their main supporters. Statistically this is often categorised as ‘private’ and distinct from state-owned enterprises and state-led initiatives, but in reality it is the centralisation of rents around the monarch and then their parcelling out — in the form of contracts, market shares, niche monopolies, etc. — to loyal clients that is the order of the day.[84] This supposedly private activity hence fully depends on public authority and cannot exist without it. At the same time, what passes for public expenditure in Gulf economies is mostly spent in function of the needs and preferences of a small number of private individuals — the monarchs in power and their close kin. It is true that the strongly tribal basis of all Gulf societies forces the ruler to both consult and to effectively distribute to societal actors a significant chunk of the rents that accrue to him, but there can be no denying of the quasi-complete dominance of the royal elite of both the public and private realms of the economy.[85]
Foreign policy is more often than not an extension of these domestic political and financial dynamics.[86] In the same way that, for example, the construction sector is carved up by the diwan (ruler’s office) between four or five major enterprises, each owned by a lesser royal or head of a prominent family, so are contracts for operating abroad and associated lobbying by Gulf embassies and state visits shared out amongst constituencies. Letting one firm or family or constituency monopolise all foreign or domestic activity would be politically foolish from the diwan’s point of view. Balancing is the order of the day unless a particular sector or investment is deemed of such capital importance that either a fully state-owned enterprise or a company directly owned by the ruler must assume leadership. Classic examples of the latter scenario are the roles played by the UAE’s Mubadala Development Company and its Abu Dhabi Investment Authority, internally in the Emirates and abroad.[87] What further strengthens these dynamics is the absence of strong expeditionary armies and experienced diplomatic services on the part of Gulf states. Having neither much willingness nor the requisite ability to militarily coerce Horn of Africa states to align with their international positions, pursuing an activist foreign policy necessitates the mobilisation of significant amounts of private and public capital as the external relations tool par excellence of Gulf states. One Omani observer wittily dubbed this ‘Riyal Politik’.[88]
Given this extremely skewed political economy of the Arabian Peninsula and its dominant states’ particular approach to foreign policy, a number of key instruments can be drawn upon to pursue these goals. The first instrument are the Gulf sovereign wealth funds (SWF), state-owned investment vehicles that seek to acquire stakes in just about every type of asset (stocks, bonds, real estate, agricultural land, strategic mineral reserves, etc.) the market can make available. Every Gulf state has at least one, but some, like the UAE, have several at their disposal (both at the federal level and the level of individual emirates), allowing them to either specialise in specific niches or to strategically corner pivotal markets. Management of these SWFs is a highly politically sensitive affair. For instance, although the Abu Dhabi Investment Authority claims considerable independence from political decision makers, six out of 10 board members are members of the ruling Al-Nahyan family with limited technical qualifications contradicts such statements.[89] Gulf family feuds therefore have a direct bearing on regional and global economic and political developments. The Abu Dhabi Investment Authority, Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, the Investment Corporation of Dubai and the Kuwaiti Investment Authority feature in the ranking of the 10 biggest SWFs in the world, their combined assets totalling more than USD 2 trillion.[90]
Closely related to these SWFs, but analytically somewhat distinct from them, are the state-owned holding companies that often function in ways similar than SWFs but do much more than acquire stakes or claim ownership. Often times, they seek to exert a more direct managerial role. The Emirates provide the best example of how these operate. Mubadala Development Company, Abu Dhabi’s crown jewel chaired by Crown Prince Muhammad bin Zayed himself, not only makes capital available for investments but also provides strategic guidance to join up particular asset acquisition with broader UAE objectives. Mubadala also directs, through its countless subsidiaries, on-the-ground operations in overseas markets where it operates, from production or extraction to product assemblage to marketing and research. Large procurement orders from Mubadala-controlled companies to foreign companies have been noted in connection with informal return favours in the form of arms transfers.[91] The operations of these holding companies are often closely associated and coordinated with those of enterprises with a more apparently straight-forward commercial outlook and global reach, such as DP World (shipping/infrastructure) and Nakheel (real estate and hospitality) or even public joint-stock companies such as Emaar (real estate). DP World, for instance, will do its best to purchase a share or operate ports in the region such as in Berbera (Somaliland) and Doraleh (Djibouti), but such acquisitions first and foremost serve Emirati foreign policy and the projection of power in the Red Sea and Indian Ocean. Similarly, Emaar’s property development in Khartoum and Cairo is not merely meant to offer Dubai-style luxury accommodation to Sudanese and Egyptian wealthy families: it is an integral part of the strategy of bringing these elites into the Emirati political orbit.[92]
A third important economic instrument are the central banks of the region. The Saudi Arabian Monetary Authority (SAMA), the Qatar Central Bank and the Central Bank of the Emirates do not just provide monetary stability at home, but also engage, when deemed necessary by the ruler, in central bank to central bank support with partners on the other side of the Red Sea. Sudan in particular, when it teetered on the edge of economic collapse in July 2011 after the secession of South Sudan, which broke away with three-quarters of (united) Sudan’s proven oil reserves, has been a major recipient of Saudi and Qatari monetary transfers that have helped arrest (or at least slow down) the depreciation of the Sudanese pound and to manage public unrest following food price hikes.[93] Such assistance proved essential in helping Omar Al-Bashir stay in power. Similar loans have likely been made to Ethiopia.[94] Eritrea too is believed to have benefited from such help from SAMA and the Central Bank of the Emirates after it gave the green-light in 2015 for its southern port of Assab to be used as the spearhead of the Saudi and Emirati bombing campaign against the Houthis in Yemen.[95]
A fourth conduit that serves to both promote economic interdependence and to provide political leverage over Horn of Africa states are the development funds operated or hosted by the Gulf.[96] If the Jeddah-based Organisation of Islamic Cooperation mostly offers Saudi Arabia some diplomatic clout, its financial arm, the Islamic Development Bank (IDB) with its capital base of more than USD 150 billion allows for more direct (and hence costly) developmental initiatives, driving development for the recipient government and supporting wider geopolitical aims of the major donors (especially Riyadh). Another important player is the Arab Fund for Economic and Social Development (Kuwait based), which holds close to USD 10 billion in assets and has been especially active in Sudan, including during the Breadbasket strategy of the 1970s and 1980s and, more recently, as a prime funder of Sudan’s ambitious but controversial Dam Programme.[97] The OPEC fund plays a more limited and discrete role: in theory all member states of the Organisation of Petroleum Exporting Countries contribute; its activities, however, are usually closely aligned with the objectives of the dominant Gulf states. Of note is that its Director-General has for many years been a Saudi national.
The multilateral funds are complemented by a number of national institutions, including the national ministries of finance, the Abu Dhabi Development Fund, the Saudi Fund and the Kuwait Fund for Arab Economic Development.[98] The Kuwait Fund is part of the multiple channels Kuwait uses to garner influence and promote economic prosperity in Asia and Africa. Kuwait not only has long proven one of the main backers of the World Bank, it is also the only nation in the world to spend consistently more than 1 percent of national income on foreign aid.[99] Last year more than 2 percent of Kuwaiti GDP went to overseas development assistance. A mention should be made here to of the activities of the Qatar Foundation (taking place in Qatar). This organisation is not strictly speaking either a development fund or even primarily oriented towards projects outside of Qatar.[100] However, as perhaps the biggest not-for-profit organization in the world (its annual budget is likely to exceed USD 2 billion), its deep involvement in the education of children in the world’s least developed countries, its leadership in technological innovation and its dazzling investments in cultural heritage make it a key foreign policy tool — soft power. The Qatar Foundation is chaired by Sheikha Moza bint Nasser, mother of the current emir and a global icon for women’s empowerment and cultural activism; her daughter (and full sister of the emir) Sheikha Hind is its CEO.
A sixth channel involves charity organisations and private foundations. Although officially totally committed to strictly humanitarian objectives under the umbrella terms of zakat (the mandatory Islamic tax) and sadaqa (voluntary alms), many such organisations act as an extension of the objectives of the royal family and its closest allies. Cases in point are the Sultan bin Abdulaziz Al Saud Foundation (Saudi Arabia), the Khalifa Foundation (UAE/Abu Dhabi), the Muhammad bin Rashid Al-Maktoum Foundation (UAE/Dubai), the Muslim World League and the Islamic Relief Fund and, above all, the various activities organised or sponsored by the various Wuzara Al-Awqaf (ministries of religious endowment). These ministries often seek to harness the soft power of their national states by projecting an image of compassionate conservatism and, especially in the cases of Saudi Arabia and Qatar, they often promote a specific (mostly literalist) understanding of Islam. Mosque building and the development of social infrastructure is often a priority, as are scholarships to undertake Islamic Studies in Medina, Doha or other centres of learning.[101] These are for the most part not targeted solely at the elites in African states, but instead reach a much wider population, often leading Djibouti, Eritrea and Ethiopia leaders to worry greatly about the potentially destabilising effects of such bottom-up promotion of Wahhabism, support for which frequently bypasses central governments.
Figure 6 summarises the main interests, instruments and actors linked to Gulf states in the Horn of Africa.[102]
