German industry has long considered Africa a promising future market. The paradigm shift in German development cooperation could further enhance the framework for entrepreneurial commitment on the continent. However, Africa must also lead the way and help shape its development.
Five years ago the company Herrenknecht AG decided to take a risk, giving many German companies food for thought. Member of the Board Ulrich Schaffhauser recalls, “After 36 years of engagement in Egypt it was time for us to take a closer look at the rest of the continent in greater detail – and we were in fact able to identify individual hotspots, enabling us to play an active role.“
We are talking about Africa. German businesses have long been providing the stimulus to perceive the continent as a promising future market and business partner. Within the framework of the German government´s current G20 Presidency, business ties with Africa are to play an important role. In the past few months three federal ministries – the Ministry of Finance (BMF), the Ministry for Economic Cooperation and Development (BMZ) and the Ministry of Economics and Energy (BMWi) – submitted position papers which are both to enhance the framework conditions for German investment in Africa and boost trade, viz. “Compact with Africa“ (BMF), “Marshall Plan with Africa“ (BMZ) and “Pro! Africa“ (BMWi).
Paradigm Shift for Africa
Africa must have the opportunity to rid itself of being regarded as merely a supplier of raw materials and recipient of development aid and become a trading partner of equal standing, the German Federal Government declared. It is also clear to German business that Germany, particularly in times of increasing criticism of globalisation, should continue to commit to global economic engagement, as BDI President Dieter Kempf underlined at the Day of German Industry 2017 (TDI'17).
However, what does this mean for businesses willing to invest? Has the starting signal been sounded? Is the “sleeping giant“ of Africa now awake? These were the questions at the TDI'17 panel on “Globalisation / Africa“, which Ulrich Schaffhauser of Herrenknecht AG also attended. Despite his fundamental commitment to the future market of Africa he sees a need for action. “In the meantime enough political initiatives have been set up. However, when it comes to concrete investment decisions, we need a concrete schedule, for instance, to ascertain what amounts of money will be invested in which areas. I have yet to see this.“
Eva Schulz-Kamm, Head of Global Government Affairs at Siemens AG, is more optimistic. As an employee of a company which has been playing an active role on the continent for more than 100 years, she welcomes the initiatives – and in particular the paradigm shift on which they are based. „It has been recognised that something has to change for Africa – it has to move away from aid and towards Public Private Partnerships. To make investments and to have political flanking will help us deal with Africa as equals.“
Siemens currently employs 3,600 people in ten of Africa´s countries “with an upward trend“, says Schulz-Kamm. In her opinion there is only one mistake which should not be made and that is to fall into a rhetoric of “one-size-fits-all“. “Over the years we have learnt that such an approach is not helpful. A differentiated view should be taken of Africa´s countries.“ Anyone who wants to be successful in Africa should proceed step-by-step, i.e. infrastructure, electricity supplies, innovation, education, Schulz-Kamm sums up.
Tanja Gönner, spokesman for the Executive Board of the Society for International Cooperation (GIZ) also welcomes a slow, considered approach. The argument repeatedly put forward that one should not allow oneself to be flattened by the contrary positions of other countries strategies, in particular that of China, i.e. one based on speed and aggression, Gönner does not find particularly constructive. China – contrary to the perception of many people – is not top of the list in regards to direct investments in Africa. In addition, the approach has nothing to do with German economic strategy, “with our values, with the fact that we support a social and ecological market economy“, says Gönner.
Time for Action
The GIZ has for many years been playing a key role in helping German companies make contact with local institutions and business partners. Gönner sums up the lessons learnt from these experiences this way, “We have above all to bear in mind which framework conditions should first be created on the government side of African countries so that meaningful investments can be made – e.g. in terms of legal certainty.“
James Asare-Adjei, President of the Association of Ghana Industries (AGI), admitted that “Africa has still got a lot of work to do to build up a good image for itself“. However key conditions for investment are in place, viz. “a young population, high employment potential and an abundance of mineral wealth“.
Industrial value creation and a wise opening up for the world market are the basis for Africa´s economic development. “Our focus in Ghana was to strengthen local production. This is why we were keen to achieve the trade agreement with Europe, the Economic Partnership Agreement (EPA)“, Asare-Adjei reports. “EPAs help us in the transition to becoming an export-oriented economy, giving us access to the European market and resulting in what we need most at the moment, i.e. economic stability.“
“What are we waiting for?“ is Asare-Adjei´s rhetorical question to German companies. “Many African countries are ready for investment by Germany and Europe.“ Eva Schulz-Kamm also warned against taking action too late, turning into some kind of “toothless tiger“ in the end. “We cannot allow other actors to create facts which would prove painful not only for us as Siemens but also for the entire global economy – and in particular for the African countries at whose expense everything is being played out.“