The shea tree (Vitellaria paradoxa C. F. Gaertn.) is a major parkland species occurring across Africa from East to West. Its fruits, butter, and further products from shea butter play key roles in the Sustainable Development Goals of poverty eradication, hunger elimination, and gender equity in many African regions. The inter-play of abiotic conditions (e.g. rainfall patterns, drought periods) and biotic interactions (grazing by large herbivores) shape parklands because they influence vital processes like photosynthesis, transpiration and biomass production of common plant species including shea. We measured gas exchange of shea seedlings grown under ambient and elevated atmospheric CO2 (eCO2), with and without competition of the C4 grass Cenchrus pedicellatus, and under different water availabilities in greenhouse chambers. We hypothesized that eCO2 will generally increase seedling growth in shea via increases in photosynthesis. When growing together with C4 grass at low water availability, we expect an improved competitiveness of shea under eCO2, beacuse eCO2 is reported to augment water use efficiency (WUEi) of C3 plants more than C4 plants. Increased CO2 caused a 10% (p < 0.001) increase in maximum light-saturated photosynthesis (Amax), 22% (p < 0.001) increase in WUEi and 13% (p < 0.001) increase in stem mass fraction (SMF) of shea. Grass competition significantly reduced Amax by 9% (p < 0.001), SMF (p < 0.001) by 19%, with a corresponding reduction in all biomass parameters, but also significantly increased the C/N ratio (by 3%, p < 0.001). Interactive effects of eCO2 and competition were recorded for maximum electron transport rate, dark respiration, stomatal conductance, CO2 compensation point and the leaf area ratio. The control of grasses in the early stages of shea development is therefore recommended.