The Scramble for Africa

BERLIN(Own report) – German businesses are demanding that the government intensify its support for tapping the “continent of opportunity, Africa” in competition with China and other BRICS countries. Parallel to the West’s waning global influence, German businesses are loosing ground on the African continent. This is why German enterprises are pushing for increasing Hermes trade credit insurances, double taxation treaties, and generally “stronger political support for the German industry in Africa.” A building industry federation is explicitly demanding that future allocations of development funds be tied to orders for German/European firms. The German government has indicated its readiness to implement these policies. The KfW Development Bank and other public-sector banks are already seeking ways to support the German industry’s expansion efforts by expanding credit transactions.

Stronger Political Support

Interest groups are therefore demanding that the German government get more involved. “Stronger political support for German industry in Africa would have a positive effect on bi-lateral economic relations,” according to the Federation of German Industries (BDI).[3] Criticism has been raised particularly of the habit of not granting Hermes trade credit insurances for direct business deals with countries such as Nigeria, because of a high risk of default – countries, which in the past could only be saved from state bankruptcy through debt-cuts. Without these insurances, German companies will hesitate before participating in bids for large infrastructure projects, for example road construction. Since companies have to establish local subsidiaries to obtain orders, they are also demanding to include “local costs” in the calculation of payment default. “Therefore, the federal government’s future Hermes guarantee grants should be subject to ‘German interests’, which extend beyond the criteria of ‘supplied from Germany’ and ‘German share in the supply,'” according to the “BDI Demands for the 18th Legislature.”[4] The “Federation of the German Construction Industry” (HDB) is also demanding that obligatory environmental standards not be upgraded on companies taking credit default insurances. The HDB warns that such a step – due to restrictions – would aggravate the already existing disadvantaged in competition with China and other BRICS countries.[5]

Tap the Potentials of African Markets

The Grand Coalition has indicated its willingness to act. The new “German Government Africa Policy Guidelines” recognize that the Hermes credit insurances need to be reformed. In the “Tap the Potentials of African Markets for German Business” subchapter, it also recommends providing guarantees for businesses dealing with “Heavily Indebted Poor Countries” (HIPC). Since some time, the German ministries of foreign affairs, economy, finance and development aid have been discussing a revision of “country cover policies.” The guidelines also admit that development aid policy should have a stronger focus toward the interests of the exporting companies. “Through better mutual networking, we seek to increase the effects of development cooperation measures and foreign trade promotion in Africa.”[7]

Innovative Forms of Financing

Efforts are being made for expanding the possibilities for financing business with Africa. The KfW Development Bank has significantly increased its credit volume for such transactions through the International Project and Export Finance Bank (IPEX) and the German Investment and Development Association (DEG). “Until now, the DEG has been granting only ten percent of its credits to German companies. We would like to triple or quadruple this proportion,” explained Ulrich Schröder, KfW CEO.[8] DEG spokesperson Bruno Wenn sees a certain urgency, “if German businesses continue to wait, these markets will be taken over by emerging countries.”[9]

Other reports and background information on Germany’s Africa policy can be found here: Risk in Africa and African Interventions.

Full article: The Scramble for Africa (German Foreign Policy)

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