South Africa should take Saudi Arabia seriously as a commercial partner. South Africa’s evolving South-South strategy, centred on Brazil, Russia, India and China, should include countries in the Persian Gulf region and the broader Middle East.

Saudi Arabia, in particular, is a country with which South Africa should deepen trade and investment ties.

Not only is Saudi Arabia a pivotal Gulf state, it is a country with boundless potential. Since the late 1990s, there has been a concerted effort by Saudi policymakers, under the leadership of King Abdullah, to reform the country’s economy and position it as an investment destination and an important player in the global economy.

The stereotypical image of a backward desert economy and a breeding ground for Islamic extremism is one that the Saudi authorities are determined to erase. By joining the World Trade Organisation, Saudi Arabia committed to opening up its economy through reform of its trade and investment policies as well as of its regulatory structure – with the private sector as a key driver of economic development.

Economic reforms have created many opportunities for outsiders seeking new trade and investment avenues. Many countries have rushed to conclude trade and investment treaties with the Arab kingdom.

Saudi Arabia has proposed the construction of 6 megacities as the lynchpins of its development strategy. This is to expand economic activities, attract foreign investment, managerial expertise and technology, address a high demand for housing and increase the absorptive capacity of the labour market.

Construction has already begun on four of these economic cities, namely King Abdullah Economic City, Prince Abdul Aziz bin Mousaed Economic City, Jazan Economic City and Knowledge Economic City. Costing in excess of $60 billion (R422bn), this ambitious development project is expected to promote diversification, create more than a million jobs, build homes for 5 million residents and contribute $150bn to national economic output.

The project offers investment opportunities in transport and logistics, construction, petrochemicals, pharmaceuticals, tourism, finance, telecoms, information technology (IT) and agro-processing.

Surprisingly, bilateral relations between South Africa and Saudi Arabia are not as strong as they should be. This is not for want of trying on Pretoria’s part. In 2007, before he was ousted from office, former president Thabo Mbeki undertook a state visit to Saudi Arabia, which was aimed at strengthening economic ties.

A key instrument for bilateral engagement, in the shape of a Joint Economic Commission (JEC), was created to facilitate ongoing dialogue between the two countries.

However, despite its enormous potential in terms of identifying mutual areas of economic co-operation between the two countries, the JEC has been dormant. Similarly, the Joint Business Council between South Africa and Saudi Arabia remains inactive, with South Africa’s private sector activity in Saudi Arabia being minimal.

That South Africa has not positioned itself strategically enough to exploit the abundant growth opportunities in Saudi Arabia (and the wider Gulf region) points to a weakness in South Africa’s economic diplomacy. Already, local firms lag Western ones, mainly from the UK and the US, with an existing presence in the kingdom.

Significantly, they also trail behind companies from other emerging economies, such as India and China, which have established footprints in the country.

These emerging powers have pushed to strengthen trade and investment links with Saudi Arabia, and Indian and Chinese firms have infrastructure projects through joint ventures with major Saudi groups. China’s commercial links are reflected in the country’s growing importance as a leading consumer of Saudi’s oil, having overtaken the US as the main importer in 2009.

Moreover, there are 70 Chinese construction firms (employing about 20 000 people) operating in Saudi Arabia. The endless stream of Chinese business delegations to the kingdom almost every week underlines the growing commercial relations between Saudi Arabia and China.

India’s involvement is evident in the Knowledge Economic City, where India’s world-class IT firms have a strong presence. More than 190 Indian firms have applied for or received licences to invest in Saudi Arabia, including Air India, New India Assurance, Wipro, Tata, Progressive Construction and HDFC Bank. Both India and China are exploring the possibility of concluding free trade agreements with Saudi Arabia, a clear sign of the economic importance they attach to the kingdom.

The Saudi kingdom has set its sights on sub-Saharan Africa, where it seeks to strengthen strategic and diplomatic relations while also engaging in commercial exchanges with the continent.

In recent years, Saudi Arabia and other Gulf states have become key sources of inward investment across Africa, straddling sectors such as energy, telecoms, banking, hotels, infrastructure development and manufacturing businesses.

What’s more, Saudi Arabia has shown a keen interest in agriculture and has earmarked several African countries where it seeks to purchase farmland; this is aimed at controlling supply at source with a view to tackling the desert country’s growing food security concerns.

South Africa should harness for its benefit the desire of Saudi Arabia to foster closer economic ties with Africa. Apart from seeking economic opportunities within the growing and modernising Saudi economy, South Africa should actively promote itself as a natural and attractive destination for Saudi investment.

South Africa’s external strategies, both through the government’s diplomatic efforts and through commercial strategies, ought to give priority to Saudi Arabia as a growing market in the Gulf region and as a vital global actor. Policymakers should restore momentum to the country’s relationship with Saudi Arabia and should set in motion processes that will elevate two-way relations to a higher level.

To this end, existing co-operation mechanisms between South Africa and the Saudis, through which the two countries can pursue structured and purposeful economic dialogue, should be strengthened.

Mzukisi Qobo is the head of emerging powers and global challenges at the SA Institute of International Affairs. Mills Soko is an associate professor at the University of Cape Town’s Graduate School of Business.