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Berlin: We need to invest in Africa to create jobs

It's time to shift our thinking about Africa away from the donor mentality and towards creating strong economic partnerships, according to two German policy experts. Stefan Liebing and Christoph Kannengiesser

Handelsblatt Global vom 30.10.2018 um 08:18:49 Uhr

Africa is young, but it is growing rapidly and its young population is capable, dynamic and eager for work. It’s time Germany did more to help.

The number of people living on the continent will double to two billion by 2050. Those people will want to work: In a couple of decades, a quarter of the world’s working population will live in Africa. That means a million young people will need jobs each year, in the countries where they live. For that to happen, Africa’s economies are going to have to connect to the global economy – and that’s in everyone’s interest.

Together with Africa, we need to move towards sustainable economic development, rather than the outdated donor model we think of now, in our relationship with the continent.

For that to happen, foreign direct investment is crucial, as are efforts by African governments to improve conditions for business. Although investments into Africa have risen continuously since 2000, they’re still relatively low: EURO 36 billion ($40.1 billion) in 2017, mainly in Egypt, Ethiopia, Nigeria, Ghana and Morocco. That’s only 2.9 percent of global foreign investment. In the same period, EURO 434 billion flowed into Asia’s emerging and developing countries.

We must now find ways to incentivize foreign companies to invest in African countries, particularly states which are willing to make reforms, in order to boost local economic growth.

Germany’s SMEs should invest in Africa

That’s also the view of the German government. Berlin has launched the Compact with Africa (CwA) to promote private investment and infrastructural expansion. To date, Berlin is working with 11 African countries: Benin, CCÂŽte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia. The leaders of those states have been invited to Germany to talk about investment projects that worked well and to promote new ideas.

So far, 1,000 German companies are active in Africa and projects worth EURO 1 billion are in the pipeline. But Germany is not one of the most important investors, and Berlin is only active in a few countries. So much more is needed if we’re to see the progress that’s urgently needed in terms of development and trade. But when German companies think about Africa, they tend to focus on the risks rather than the opportunities. Berlin should encourage small and mid-sized companies, in particular, to do business in Africa and overcome their fears that it is risky and dangerous.

Focus on opportunity, not risk

The public sector can hedge some of that risk and we’re seeing gradual progress. Better conditions for Hermes credit guarantees in several African countries are helping, but more is needed. Yes, Berlin has launched programs, from CwA to Pro-Africa and the Marshall Plan for Africa, but now they need implementing.

Plus, we need a development investment fund, to promote foreign trade where the market or traditional stimulus don’t help. We also recommend a regular Germany-Africa summit, as China, Japan, France and the US have shown how well such events work. Otherwise, we’ll face more and more bilateral competition.

And lastly, we must change our perceptions, so we no longer associate Africa with only poverty, but see it as a neighbor and economic partner. Young Africans are highly motivated and have innovative business ideas. German companies should seize their opportunities in Africa – now, before everyone else does first. But help from politicians is needed. Now we should fulfill our promises in the Compact with Africa, boost investment and create jobs with our African partners.

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