Times have changed: while some business representatives were still happy about supposed records in German Africa business in recent years, no cheers are to be expected this year.
Quite the opposite: According to the Federal Statistical Office, German imports from Africa fell to around 10.4 billion euros from January to July – almost 3.6 billion less than in the same period in 2019. No better picture for exports: They were in the first seven months of 2020 at just under 11.6 billion euros – around 2.6 billion below the previous year’s figure. So it is a decrease of around 26 and 18 percent respectively.
Worse numbers than in the world financial crisis
The negative trend is likely to continue. “On the basis of company surveys, we assume that German imports and exports will decline by up to 25 percent,” says Heiko Schwiderowski, head of sub-Saharan Africa at the German Chamber of Commerce and Industry (DIHK), to DW. “These are numbers that we didn’t have during the financial crisis a good 10 years ago. These are severe setbacks for many German companies’ business in Africa,” said Schwiderowski. “The African exporters who sell products to Germany are also facing major challenges.”
Many DIHK member companies are similarly skeptical of business in Africa. 82 percent of all German companies in Africa and the Middle East fear a drop in sales, according to an association survey from the spring. More than every second German company surveyed in the two important markets of South Africa and Nigeria is planning to cut staff. And they are investing less: According to the Bundesbank, net direct investments by German companies in sub-Saharan Africa in the first six months of 2020 were 605 million euros – 144 million euros less than in 2019.
A severe setback for a continent that actually needs 20 million new jobs per year for all young people who are also entering the labor markets. “The development in recent years has actually been positive: more and more foreign companies came to Africa,” says Kenyan development expert James Shikwati of DW. “Now there is stagnation. The positive forecasts for economic developments will not materialize.” On the contrary: According to the International Monetary Fund, Africa’s economy is likely to shrink by 3.2 percent this year.
German politicians are alarmed
Which should not only alarm African governments, but also German politics. For years she has been urging German companies to invest more on the neighboring continent. Not only in order not to completely lose the important markets to the competition from China, but also in order to fight hunger and poverty. Because the fear of waves of refugees from Africa is widespread, even if no increased migration towards Europe can be identified. Business leaders and heads of state have already met twice in recent years with Chancellor Angela Merkel at business summits in Berlin, and in December there should actually be a third meeting.
Politicians are trying to buck the trend: support programs such as “AfricaConnect” have been expanded. It offers loans for German companies in Africa that have got into trouble due to the Corona crisis. In response to a request from DW, the German Investment and Development Company (DEG) announced that over 3,000 jobs were secured in Africa through support from the “AfricaConnect” program. Accordingly, ten projects have been supported so far.
In another program, “develoPPP”, the Federal Ministry for Economic Cooperation is providing special loans for companies whose initiatives want to mitigate the consequences of the pandemic in developing and emerging countries. More than 200 projects have already been selected.
Impetus for the global economy?
There is great interest in the programs among companies, says DIHK expert Schwiderowski. “From the point of view of German companies, this is more than the famous drop in the ocean, but in the long run it will not be enough to keep business going.”
Optimists hope for a cautious easing of the situation. Some African countries have started to relax the strict corona measures. Borders will be reopened, airlines could resume international routes soon. According to the Kenyan economist James Shikwati, Africa could even provide important impetus for the global economy: “I believe that Africa offers other countries the chance to get their economies going again.” After all, the continent has a huge need for investments in areas such as energy, logistics and the construction industry. They would also exist after the crisis.