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Germany seeks to invest more in Africa

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Germany seeks to invest more in Africa

Chancellor Olaf Scholz declared that Germany should become a reliable, long-term partner for African countries by stepping up investment on the continent.

Africa : A Strategic Economic Partner for Germany

The German government has pledged to invest 4 billion EUR in green energy projects in Africa by 2030. Chancellor Olaf Scholz said African countries should benefit more from their wealth of natural resources.

Scholz discussed the commitment at a press conference on the G20 Compact Summit with Africa in Berlin. He did not mention any specific projects, but said that the materials used in green energy should be processed in the African countries where they originate. « This will create jobs and wealth in these countries », Scholz said.

The Compact with Africa is based on an initiative launched by Germany during its presidency of the Group of 20 leading industrialized and developing countries. It aims to improve economic conditions in participating countries to make them more attractive to foreign private investment.

« Africa is our partner of choice when it comes to intensifying our economic relations and moving together towards a climate-neutral future », he said.

Several African countries open to various partnerships

The economic agreement with Africa includes Côte d’Ivoire, Ethiopia, Benin, Burkina Faso, Ghana, Egypt, Guinea, the Democratic Republic of Congo, Morocco, Rwanda, Senegal, Togo, and Tunisia. When asked about China’s notable presence in Africa, some African leaders assert that the continent is open to other types of partnership, like the one organized during the Canada-Africa Business Conference.

Moussa Faki, chairman of the African Union Commission, says : « China is undoubtedly bolder, it certainly has more vision and it has confidence in Africa’s potential. The African continent is open to different partnerships », he added.

Germany wants to catch up with other international partners

Germany has more than doubled its investment in Africa in the last 20 years. But internationally, Germany still has some catching up to do when it comes to investing in Africa. France has increased its capital stock sixfold over the same period, while China has increased its capital stock 90-fold.

German companies are now feeling the effects of this past reluctance to invest: 22 % of them report an increase in market share in the capital sector. At the same time, however, more than a third (38 %) see themselves as exposed to dominant international competition, particularly from France, China and Turkey.

South Africa, Kenya and Nigeria are the most important markets for German companies, followed by Ghana and Egypt. These are essentially the largest markets in Africa. However, Ghana, although modest in size, is a strong magnet for German companies due to its political stability and relative economic resilience.

Market size and growth as key location factors

A report shows that German companies are already very successful on the continent and that the vast majority of local companies are optimistic about Africa. The outlook is also positive. By 2023, more than half of respondents expect their sales to increase:

  • Either slightly (17 %)
  • Significantly (39 %)

Over the next five years, more than three-quarters of respondents expect revenues to increase. Companies cite market size and growth (69 %) and labor availability (27 %) as their top geographic advantages. When comparing Africa to China, rapid population growth (51 %) and untapped markets (52 %) are seen as key advantages. It is estimated that by the end of this century, one in two of the world’s megacities could be on the African continent.

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