Germany and Africa’s Economic Potential: A Missed Opportunity?
Africa’s economic growth surges with tech hubs, mobile payments, and sustainable markets. Germany lags in seizing these opportunities despite historical ties and potential partnerships.
Dear Readers,
Africa’s economic dynamism has accelerated significantly in recent years. Lagos, Nigeria’s most populous city, has become an important technology centre in recent years. The city is home to many start-ups and companies that focus on technology and innovation. Some of the most well-known companies are Andela, Flutterwave, Paystack and Paga.
Kenya is the country where M-Pesa, a mobile payment system, was invented. M-Pesa was launched in 2007 by Safaricom, a telecommunications company in Kenya, and has since transformed the lives of millions of people in Kenya. The system allows users to make money transfers and payments through their mobile phones. In addition, there are other African countries that are showing impressive growth rates and increasing integration into the global economy. In view of this development, the question arises: is Germany missing the economic boat in Africa?
Africa’s upswing
Africa has developed from a continent predominantly exporting raw materials into a dynamic market. Ethiopia has developed into a centre of garment production in recent years. The Ethiopian government has set the goal of making Ethiopia the centre of textile and garment production in Africa by 2025, with annual exports of 30 billion US dollars. As part of the “Bottom Up!” project, the international network organisation Solidaridad is trying to build a sustainable, inclusive and transparent value chain in Ethiopia from cotton cultivation to the textile end product.
Rwanda has invested in the technology sector, with a focus on drone technology. In 2016, Zipline International Inc. launched a drone programme to deliver medical supplies in Rwanda. The programme was launched in response to the country’s lack of infrastructure and poor road quality. The drones fly to the most remote corners and drop blood supplies. The programme has helped improve medical care in Rwanda and save lives. Zipline is now also active in other African countries.
Germany’s role in Africa so far
Although Germany is historically linked to Africa through its colonial history and development aid, it falls behind other countries in economic terms. One example: While German car manufacturers such as Volkswagen are trying to set up production facilities in Rwanda. and Ghana, China already has an extensive network of infrastructure projects, from railways in Kenya to ports in Tanzania.
Challenges and opportunities
Germany’s hesitant approach to Africa can be explained by several factors:
Risk perception: German companies are often reluctant to invest in countries like South Africa, even though there is huge potential for solar energy there. The reason for this is that many German companies consider the risk to be too high. The political instability, the high crime rate and the inadequate infrastructure are some of the factors that contribute to German companies’ reluctance to invest in South Africa.
Lack of market knowledge: Ghana is an important cocoa exporter and offers opportunities for German chocolate manufacturers. However, there is often a lack of knowledge about local business practices.
An example of a German company producing chocolate in Ghana is Fairafric. Fairafric is currently the only German chocolate company that exports not only (semi-processed) cocoa beans, but finished chocolate from a growth country.
Competition: Indian pharmaceutical companies already have a firm foothold in supplying generic drugs to African countries. India is one of the largest generic drug manufacturers in the world and has been expanding its presence in the African continent in recent years. Some of the Indian pharmaceutical companies operating in Africa are Cipla, Ranbaxy, Dr Reddy’s Laboratories and Sun Pharmaceutical Industries. These companies have helped improve healthcare in Africa by providing low-cost medicines.
Still, there are huge opportunities:
Huge market: Egypt is a potential market for German luxury goods. With more than 90 million consumers, Egypt is the largest market in North Africa and one of the most important sales markets in the MENA region. The ongoing consolidation of the political framework has helped the economy to recover. The following sectors offer above-average sales opportunities: construction, water management, infrastructure, renewable energies, health care, mechanical and plant engineering, and chemicals.
Economic growth: Côte d’Ivoire, also known as Ivory Coast, has experienced impressive economic growth in recent years. The country’s economy grew by 5.5% in 2022 and is expected to grow by a further 6.5% in 2023. Côte d’Ivoire is the world’s largest cocoa producer with a global market share of around 40 %. The country is also an important exporter of coffee, cotton and palm oil. The ongoing consolidation of the political framework has helped the economy to recover.
Innovation potential: In Nairobi, Kenya, start-ups are developing innovative agricultural technologies that could also be interesting for German agricultural companies. One example is the start-up Apollo Agriculture, which has developed a platform for smallholder farmers to order seeds, fertiliser and other agricultural inputs and obtain financing. Another example is the start-up SunCulture, which has developed a solar pump that smallholders can use to irrigate their fields more efficiently. These technologies could also be of interest to German agribusinesses looking for innovative solutions to increase their productivity and reduce their environmental impact.
Conclusion
Even though Germany has certainly missed opportunities in Africa, as the example of electric mobility in Morocco shows, it is not too late. I believe that Germany needs to rethink its strategy in order to make the most of the many opportunities Africa offers. From my point of view, it’s not only about investment, but also about real partnerships and knowledge exchange. This is the only way Germany can ensure that it does not lose out in the growing and thriving African economy.
Yours sincerely
Thomas Hellmuth-Sander
