Saudi Push Into South Africa Yields Billions of Dollars in Deals

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Meanwhile, the kingdom is also facing a fresh fiscal squeeze due to subdued oil prices that could complicate efforts to invest abroad. Saudi Arabia’s sovereign wealth fund — a key driver of investment in the local economy — is already allocating more money at home than abroad and may consider selling international assets to come up with more cash, analysts have said.

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Renewables, Ports

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Saudi companies including ACWA Power and ports operator Red Sea Gateway Terminal International, both backed by the kingdom’s $925 billion sovereign wealth fund, have invested in South Africa or are bidding for assets in the country. Thanks to the Public Investment Fund’s 44% stake in ACWA, the kingdom is now the largest investor in South Africa’s renewable-power sector, according to Standard Bank Group.

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South Africa’s current coalition government “brings economic and policy certainty and renewed confidence,” while “high local banking capacity” makes it easier for companies to expand, said ACWA South Africa country manager Nandu Bhula. The company has invested $1.9 billion in its three plants so far, with the stabilization of power supplies also helping attract foreign investment, he said.

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ACWA plans to invest as much as 7 billion rand ($378 million) in South Africa’s water and energy sectors over the next five years, according to people familiar with the matter.

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Red Sea Gateway Terminal International is prepared to make a bid that may exceed $600 million for sub-Saharan Africa’s biggest port in Durban, according to people familiar with the matter. That deal is pending a legal challenge against a tender award two years ago.

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“South African container terminals represent some of the most attractive investment opportunities in the sector globally,” said RSGTI director of global investments Gagan Seksaria. The group would also be interested in bidding for Cape Town’s port, should a tender come up, he said.

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Logistics, Gas Stations

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Last month, the Jeddah-based Zahid Group reopened talks with Barloworld Ltd. shareholders to increase its stake in the sole distributor of Caterpillar Inc. equipment on the continent, valuing the firm at $1.25 billion. The Saudi Arabian Oil Co. is also competing to buy Shell Plc’s downstream gas stations in South Africa for about $1 billion, as previously reported by Bloomberg. 

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Saudi billionaire Ajlan Bin Abdulaziz Al-Ajlan has plans to invest $500 million in a platinum smelter and refinery in South Africa’s Limpopo province. Saudi Telecom last year completed the acquisition 49% of CMC Networks South Africa for an undisclosed amount.

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This month, the South Africa-Saudi Business Forum met the kingdom’s deputy minister of economic planning Al-Baraa Al-Iskandarani in Riyadh. That followed an earlier meeting in February, where a half dozen Saudi officials including Al-Iskandarani visited South Africa’s Johannesburg Stock Exchange, the Industrial Development Corporation and other businesses.

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The group agreed to compile a new list of potential deals in South Africa, according to people familiar with the matter who asked not to be identified as the information is private.

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The deals dovetail with the crown prince’s Vision 2030 plan to diversify his country’s economy away from oil.

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Earlier this year, the kingdom announced $41 billion in investments across various sectors — focusing on natural resources, food security and renewable energy — in Africa until 2030, as it positions itself on the continent to compete with Middle East rivals.