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Once you have a solid hold on Gibraltar and the Suez Canal, THEN you can start expanding out a bit. Even then, only expand until you've linked up Allied territory across North Africa. Don't bother going down into the Sahara, and for the love of all the gods, don't bother with South Africa aside from the territory South Africa itself controls at the start of the game. There's literally no benefit to holding onto most of the colonial territory that the Brits start the game with. It's not worth victory points for either you or the enemy, because it's colonial territory, and garrisoning it is just going to cost you divisions that could be fighting elsewhere, and equipment that you'll lose to desert attrition. Let the Germans, Italians, and Japanese starve themselves in the completely useless Sahara.
Likewise, ignore the western and eastern coasts of Africa. You don't need the ports there to be able to move ships/troops between the Pacific and Mediterranean theaters, and it's just more territory that your enemies will make you waste men defending from naval invasions if you take them.
Oh, and if you need any more reason to avoid all but the northern coast of Africa, consider that most of the continent has almost no infrastructure. Troops take forever to move across the territory, and they'll take a ton of attrition in the process, which will absolutely savage your supplies. Marching across most of Africa involves a few weeks to a month between each province, with your troops taking really nasty desert attrition the entire time.
Once you control the canal and straits, you're going to want to immediately start striking Italy. The Royal Navy and Royal Airforce should outclass the Italians by a mile at that point in the game, so just focus everything you can afford to on crushing Italy. Leave some men behind at Suez and Gibraltar,(If the Axis retakes the northern coast between those places that's fine. You can kick them back out once Italy is gone.) and cut off the Axis's access to the Mediterranean. You'll still have submarines go through and harass you sometimes, but the vast majority of the Axis forces will now be cut off from each other, which should give you plenty of space to finish off first Germany, and then Japan.
TL;DR, the only area you're going to want to hold onto is the stretch of land from Gibraltar along the northern coast up to the two sides of the Suez Canal. Everything else is completely worthless. No resources, and so little manpower that you'll actually lose more holding it than if you just let the Axis waste their men and equipment marching across it.
You should use a land theorist. It´s more doctrines faster AND army XP for templates.
On that note, how do you use the divisions other countries send? All the Dominion countries (not to mention all of Europe) keep sending me divisions but I can never see anything, besides some scattered inefficient divisions spread out ineffectually over Africa
Also don't go over the supply limit in Africa the ai does this and for some reason will sometimes throw their entire armys into Africa.
The best troops for Africa are motorised division also maybe some paratroopers to encircle armys
Another good tactic is to keep the Africa cut of from mainland Italy use naval bomber from Malta and convoy raid to keep him low on supplies and reinforcements
Strategic bombing campaign of Italy proper.
Letting Italy go deeper in desert and cut ports off, using your naval superiority.
In current state of AI, even light tanks are good enough until 1943 or so. Make 2-3 light tank armored divisons and destroy AI easily.
You place them in your own armies. For example if South Africa send troops, you can merge them with the colonial army you probably have near Ethiopia. You can have mixed armies from several countries under, say, Montgomery.
Italy can literally take the rest of Africa and they're still screwed when the US enter the war as long as you've kept the Suez and Gibraltar open.