Africa - Dynamics from Cape Town to Cairo

Africa's economy holds opportunities and challenges in store
– Text: Philipp Andree und Andreas Wenzel (DIHK)

The African continent has been experiencing an economic upswing for almost fifteen years. According to the International Monetary Fund, Africa’s economic output will continue to grow faster than the global economy in 2019 and 2020 at around 4 percent. At the same time, however, the population on the African continent will double to around 2.5 billion by 2050. Every year, 20 million young people flock to the continent’s labour markets. The young, digitally affine population is both an opportunity and a challenge for Europe’s neighbouring continent. If it is possible to offer young people employment prospects, Africa will also be able to overcome its social challenges and find economic access.

German economy must set course now

German-African trade, with a volume of around 45 billion euros in 2018, is roughly on a par with the exchange of goods with Sweden. Only two percent of German foreign trade is generated with the countries of our neighbouring continent. However, the trend is positive: German exports to Africa have grown by 116 percent since 2000. The German investment stock on the African continent amounted to approx. 11 billion euros in 2016. Since 2010 this has risen by 13 percent. Both trade and investment are heavily concentrated on the more developed economies of the North African states and the Republic of South Africa.

The African continent will play a major role in the future development of the global economy, as it has a rapidly growing labour force, large untapped energy and raw material reserves and outstanding agricultural potential. Africa is therefore already becoming an increasingly important trading partner for many international competitors, not least from Asia. Individual African markets will continue to develop into investment locations. The first steps in this direction are impressively demonstrated by the economic heavyweights Nigeria as the hub for West Africa and Kenya as the economic centre of East Africa. Less developed economies such as Ethiopia and smaller countries such as Ghana are also making great strides. This also offers Germany, as an internationally active economy, additional opportunities for cooperation. It is therefore important that German companies set the right course now.

Federal Government: Less development aid, more economy

Since the German G20 presidency in 2017, the German government has set a new course for cooperation in order to create economic prospects for Africa’s young population. The coalition agreement emphatically calls for greater entrepreneurial commitment instead of traditional development cooperation, and also relies on the German economy.

A new element of this policy is the Compact-with-Africa (CwA) initiative. The G20 countries have launched so-called reform partnerships with twelve African states. The African governments undertake to implement improvements in the framework conditions for economic engagement in their countries. This applies, for example, to issues of legal security, administrative reforms and the improvement of the education situation. In return, the G20 governments are supporting greater involvement by their companies in Africa.

At an investment summit of the Sub-Saharan Africa Initiative of German Business (SAFRI) in October last year, the Chancellor also presented further instruments of the German government to support entrepreneurial commitment in Africa. A development investment fund endowed with a billion euros is intended to create additional incentives, particularly for German companies. In addition to specific funds to finance investments, the Federal Ministry of Economics and Energy (BMWi) is planning to establish an economic network in Africa.Such measures are central to a greater commitment on the part of German companies. After all, it is precisely risk protection and the financing of projects in Africa that often pose high hurdles. The instruments should therefore be implemented and further developed quickly and consistently. In the political dialogue, the DIHK is committed to making the entrepreneurial logic of German small and medium-sized enterprises (SMEs) the centre of action and also to considering the perspective of African partner companies. In dialogue with business, the new instruments should be geared to the needs and realistic possibilities of German and African SMEs.

The Chambers of Commerce Abroad (AHKs): Partners of Business in Africa

The DIHK sees opportunities for German companies as technology partners to deepen value creation in agriculture and mining. Population growth and increasing urbanization also call for solutions to expand infrastructure, especially in transport, water and electricity. Increasingly, companies in the consumer goods industry are also producing locally – the growing middle class has a great demand for the globally known brands. The Foreign Chambers of Commerce (AHKs) provide support in identifying promising markets and locations as well as in successfully implementing projects. The worldwide network of AHKs now offers a comprehensive and competent advisory service for German companies at fifteen locations in twelve countries on the African continent, which is currently being expanded.

“Siemens has been a partner in Africa’s development for more than 160 years.

We cover all African countries and support the development of the continent’s energy, transportation and medical infrastructure. We pursue our business goals in the comprehensive network of bilateral German Chambers of Commerce Abroad and German Business Delegations (AHKs). The AHKs are the first port of call, especially for small and medium-sized enterprises interested in developing business in Africa.” – Sabine Dall’Omo, CEO Siemens (Pty) Ltd, and president AHK South Africa

“The young, knowledge-thirsty population of Africa offers German companies outstanding opportunities.”

– Emad Ghaly, CEO Siemens Egypt, President AHK Egypt

“Nigeria is the “Power House of Africa”.

As largest economy and most populous Country of the continent as well as through the access to the West African Economic area ECOWAS Nigeria offers huge market potential. This applies in particular for the key industries Oil & Gas, Infrastructure, Energy Supply and environmental technology, chemical industry, Agriculture and food processing mining and digital economy. The network of 90 German companies, which are represented in many Cases successfully active on site for decades and the extremely positively occupied brand “Made in Germany” make us ideal business partners for the Nigerian side.” – Dr. Marc Lucassen, Delegate of the Germans Economy in Nigeria

Free trade agreements with the EU and African Union countries underline Egypt’s excellent positioning as a gateway to North Africa.

– Jan Nöther, Managing Director of the German-Arab Chamber of Industry and Commerce, Egypt

Meet us at HANNOVER MESSE!

■ Afrika: Dynamische Märkte von Kapstadt bis Kairo
3 April 2019, 10:00 am – 12:30 pm
Global Business & Markets, Business Forum 1

■ Eine gemeinsame Veranstaltung der
Auslandshandelskammern in Afrika:
– Ägypten
– Algerien
– Ghana
– Kenia
– Marokko
– Nigeria
– Südliches Afrika
– Tunesien