German firms have had low interests in Africa. But that's about to change with a business forum in Nairobi where over 400 representatives backed by top politicians are attending the German-African Business Summit (GABS).
The German delegation is led by economic minister, Brigitte Zypries, and development minister, Gerd Mueller. Germany's Foreign Minister Sigmar Gabriel is also lined up as a speaker at the forum.
On the African side, high ranking politicians from five different countries are attending the forum along with the host nation Kenya led by President Uhuru Kenyatta, who is opening the three-day summit.
In the run up to the summit, the German side already made their intentions clear. "The German economy is missing out on this market," said Development Minister Mueller a few weeks ago on the national broadcaster ZDF.
Germany's economic engagement with Africa is important to Berlin's Africa agenda for a few reasons.
On one hand, the German government wants to control the high influx of migrants and refugees from Africa. Berlin had said in order to reduce the number of people forced to flee to Europe, living conditions in sub-Saharan Africa must be improved. "If we do not solve the problems in Africa, they will come to us sooner or later," said Mueller a few weeks ago.
On the other hand, German politics is also about jobs creation. "Many politicians see that Africa is becoming very interesting as an investment location and market," said development expert Elvira Schmieg from the German Institute for International and Security Affairs, (SWP) in Berlin. "For a long time, Europe was Africa's most important source for importing, and it's still the case, but it has lost that importance," Schmied told DW.
China ahead of Germany
Big businesses in Africa are currently doing extraordinary things, especially in host country Kenya, where Chinese companies are building a railway line costing almost 14 billion euros ($15 billion) between the main seaport of Mombasa and the capital Nairobi. Eventually, the railway will be extended to neighboring Uganda.
Countries such as China and India are becoming the most important trading partners in Africa. The common gross domestic product of the continent has quintupled since 1990, there are still huge mineral resources in the continent and the population is still growing.
But German firms have been holding back. Only around 1,000 companies are active on the African continent, according to the development ministry. Approximately two-thirds of these investments are directed towards South Africa.
So far, Germany allocates only two to three percent of its overall foreign investment to Africa, which is considered very low. "Even though we are continuously talking about Africa as a continent of opportunities, the German economy has to play an enormous catch up," said Heinz-Walter Grosse, chairman of the Sub-Saharan Africa Initiative of the German Economy (SAFRI), the organizers of the summit.
Grosse emphasizes that more and more foreign companies are taking keen interest in Africa. "I believe that the African continent has also evolved over the past twelve months to an extent that its attracting interests from German companies," said the SAFRI boss in a DW interview.
More security for German investments
Nonetheless, many German companies are still afraid of investing in Africa. German CEOs are afraid of the political instability in some African countries. The high rates of corruption are also an obstacle to investment. Economic associations such as SAFRI are therefore pushing for more state guarantees to safeguard potential risk investments. Development minister Mueller also proposed a number of steps in his "Marshall Plan with Africa."
But this alone is not enough to boost German investment in Africa, according to SWP's expert Schmied. She thinks it is important for medium-sized companies to have political stability and a good balance of payment from their African partners: "In the long run, it will be absolutely crucial as to how the general conditions in Africa evolve. [For now,] we can only work with the current limited development tools at our disposal," she said.