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Dr. Stefan Liebing & Christoph Kannengießer (Chairman of the Board & CEO, German-African Business Association)

An interview on Africas economic prospects, German investors, and new waves of refugees.

By Hermann Olbermann, published in Rotary Magazin 1 October 2016


Dr Liebing, you’ve predicted that the next large wave of refugees from Africa to Europe lies ahead. How did you arrive at this conclusion?


Liebing: Two factors play a role. Firstly, the massive growth in population. We expect that Africa’s population will double by 2050, to 2 billion people. In 30 years’ time, the population of Nigeria alone will be greater than that of the U.S. and Russia combined. Even if we assume the same percentage of Africans will head to Europe as previously, this would result in a higher absolute number.


The second factor: at a certain average per capita income, the number of migrants starts to increase. This sounds surprising, but when prosperity increases more families can afford to send a family member to Europe where he or she can pursue opportunities and receive an education and training. This means that, despite Africa’s positive economic development, we will have to expect at least a transitional phase with significantly more people attempting to come to Europe.




Mr Kannengießer, what should be done?


Kannengießer: Migration from Sub-Saharan Africa is currently not a major issue in Germany. At the moment, Germany is not one of the top ten countries African refugees are heading to. However, pressure to migrate to Europe will increase if Africa doesn’t gain access to global economic development more quickly. The more strongly we support the process of catching up economically, and are successful in doing so, the greater the opportunity to manage migration processes sensibly. 


With the exception of East Asia, economies are growing more strongly in Africa than any other region in the world. Why then, are there so few jobs?


Liebing: Although growth rates are indeed some of the highest in the world, this is from a very low starting point. Current economic growth is often insufficient to increase prosperity because it is partly consumed by population growth. If the economy grows by 4%, but the population by 5%, there is not much left for individuals. Africa needs economic growth approaching the double-digit range. This is the case in some countries, but certainly not all.



Which African countries can serve as positive examples?


Liebing: In the individual countries there are areas that are going well, and areas that are going badly. For example, in Ethiopia, foreign investment has increased dramatically, and the economy has been growing in the double digit range for three years. However, the political system is in many cases difficult and very sluggish. With respect to economic policy reform, Rwanda is probably the most interesting country.


Kannengießer: When we speak of Africa, we’re talking about 54 countries. Every single one of them has to be assessed individually. There is no perfect market for all investments.







" The next countries to become emerging markets lie in Africa!" - Dr. Stefan Liebing



Only 2% of German exports go to Africa, and only 2% of imports to Germany come from Africa. Why is this figure so low?


Liebing: Many don’t know Africa well enough, and associate it with war, disease, corruption and a lack of infrastructure. All of that is present on the continent, but the reverse is also true. Africa is only just starting to strongly develop into a destination for German companies. Although the continent is still very far behind with respect to trade figures, it is in the very same position China was around ten years ago regarding German foreign investment. It was clear to everyone at the time that China was going to be the next important growth market, and this is exactly the case with Africa as regards investment there.


Is Africa the new Asia?


Liebing: Asia didn’t consistently develop in a uniform manner, and neither will Africa. However, the next countries to become emerging markets lie in Africa. One can’t say with absolute certainty today whether it will be three, five or seven countries, whether it will take place in three or five years or which countries they will be. This is highly dependent on how the respective governments are organised and what conditions they establish for investors.


France and Great Britain already have greater involvement in Africa.


Kannengießer: There are historical reasons for this. And it’s also because of the prevalence of SMEs in the German economy – also with respect to international business. These SMEs are already reaching capacity due to their successful involvement in other growing regions of the world. There are limited capacities to take on an additional challenge now with the complexity of Africa. The relatively weak presence in Africa can thus be seen at least partly as a result of Germany’s success in other regions. However, the attitude to Africa is changing now, even if this change is still taking place too slowly.


Does Africa still need development aid?

Liebing: Here one has to make some distinctions. Education plays a very central role. Without qualified workers, there are no investors, and without investors there are no jobs, and without jobs there is no prosperity.


But that’s hardly a new finding.

Kannengießer: I’m not entirely sure if supporting private investments and founders in recent years has really been the major focus German development aid. Trade instead of aid – we need this paradigm shift.


Liebing: Another point is that German SMEs are certainly more cautious, as they have less capacities and instruments than the Chinese groups that they are in competition with in Africa. This is why it’s important that the German Federal Government support SMEs – with development policy instruments, with guarantees, with insurance and with the financing of up-front project costs. Economic development has to be advanced at such a rate that it can keep pace with population growth. This is the medium-term perspective. Nevertheless, there are people in Africa today who have no access to clean water and no medical care – obviously, we need to help these people immediately. There are many Rotary projects with this objective.


Kannengießer: Development cooperation shouldn’t be called into question in generally speaking, but it needs to be reconceptualised. This includes removing the artificial borders between foreign trade promotion and development cooperation, and understanding international and German entrepreneurial involvement for what it actually is: an effective contribution to creating work and prosperity in Africa.




"Trade instead of aid - we need this paradigm shift." - Christoph Kannengießer

Do you demand subsidies?


Liebing: For us, it’s not about demanding subsidies for German SMEs. Some 800 German companies have already invested in Africa, and I want to increase this number by a factor of ten. At an international level, ten times as much private money goes to Africa as does development aid. Maybe it would make more sense to apply every euro of development funds so that ten euros of private funds then flow. We need support where German SMEs cannot bear the risks by themselves. Africans value the involvement of German companies, their fair dealings with people, their high standards of quality and work safety – the same cannot be said of many other investors on the continent.


The Chinese are increasing their investment in Africa, but are often the focus of criticism.


Liebing: Many standards are lower with Chinese companies – especially social standards. A lot of Africans have already recognised this. However, almost every week, African government representatives come to Germany and tell us that, with many tenders, they can only choose between Chinese companies. No German companies applied because they just don’t have the capacities for major projects or taking on the role of general contractor. This is why it might be worth considering whether we should work more closely with the Chinese - combining German technology and standards with Chinese labour-intensive production. This would make more sense than simply withdrawing from the market and complaining that the Chinese have taken over Africa.


We should help develop Africa’s economy. You also assert that, with increasing prosperity, the number of Africans heading to Europe will increase. How can this dilemma be resolved?


Liebing: We have only one option: we have to work through this, and doing so faster will result in falling numbers of migrants. In addition, when people are prosperous, they tend to have less children. The alternative would be to keep people so poor that they can’t afford to head to Europe – an alternative that no one could seriously wish.