Germany will use G20 presidency ‘to boost Africa infrastructure investments’

Out-Law News | 06 Dec 2016 | 3:44 pm | 2 min. read

Germany will use its presidency of the G20 group of leading industrialised and emerging economies to “encourage private investment and investment in infrastructure” in Africa, the country’s finance minister has said.

Wolfgang Schaeuble told the Business 20 (B20) forum in Berlin, which generates private-sector policy recommendations for G20 leaders: “Together with our African partners, we want to encourage private investment and investment in infrastructure.”

“This should help make private investment in Africa more attractive by making it more secure, and reducing the barriers to investment,” Schaeuble said. “We call this a ‘compact with Africa’. The objective is to boost growth and jobs, promote inclusion and give people economic perspectives at home so that they do not have to leave their home country to seek subsistence elsewhere.”

Germany, which took over the G20 presidency on 1 December for one year, wants to “improve the information on existing initiatives with Africa and make the environment more conducive to private and infrastructure investment”, Schaeuble said. “The focus on Africa is intended to improve the framework conditions. This should encourage investors because the risks involved will become clearer and smaller.”

Schaeuble told an earlier event to launch the German G20 presidency: “We want to make investments safer and reduce investment constraints. An objective is also to conclude concrete investment arrangements between individual African countries, international organisations and partner countries.”

Schaeuble also called for the international community to “improve the conditions for remittances to Africa”. Money sent by migrant workers to their home countries across Africa is equal to three times the level of official development aid to the region, Schaeuble said.

Germany aims to make remittances “cheaper and safer... ensuring that the standards against money laundering or terrorist financing will not be compromised”, Schaeuble said. “The focus on investment in Africa is to contribute to the reduction of financial risks through better framework conditions. If we succeed, we will have achieved a lot.”

According to Germany’s federal foreign office, “South Africa remains a market offering substantial opportunities for German companies, particularly in the renewable energy, water and infrastructure sectors”.

Many German companies “value South Africa as a gateway to other African markets in the region”, the foreign office said. “In 2014, bilateral trade was worth EUR 13.2 billion. South Africa exported to Germany goods worth €4.9bn and imported goods worth €8.3bn, making Germany South Africa’s second biggest trading partner again in 2014”.

Around 600 German companies are operating in South Africa and have invested more than €6bn there, employing a total workforce of nearly 100,000, the foreign office said. “German companies, which are invariably held in high regard in South Africa, are concentrated in the following sectors: the automotive and chemical industries, mechanical and electrical engineering.”

Last year, the chairman of the sub-Saharan Africa Initiative of German Business Heinz-Walter Grosse told the first ‘German-African Business Summit, supported by Deutsche Bank, that it was "time to focus more clearly on Africa as a highly promising economic partner and future market”.

Grosse said: "The interest of the German business community in Africa is growing. Over the last 10 years exports have risen by 64% to around €23bn. Even more impressively, German direct invest-ment in the continent rose by almost 25% in the years 2009 to 2012.”

Also last year, Germany’s KfW Development Bank finalised a loan for €200 million to help fund a record-breaking locomotive purchase programme in South Africa by the state-owned freight logistics group, Transnet. KfW said the promotional loan, backed by a partial guarantee from Germany’s federal government, would contribute 20% to financing Transnet’s procurement of 240 out of a total 1,064 electric locomotives.

KfW has also renewed its support to the African Export-Import Bank (Afreximbank) for trade finance business in Africa. KfW agreed to put in place a ‎line of credit to fund renewable and energy efficient projects, including solar and wind projects, being considered by Afreximbank. The two banks pledged to work together in an environmentally sustainable manner by targeting an initial pipeline of $1bn dollars starting this year.