German companies join new scramble for Africa

Better late than never

BERLIN, May 28, (RTRS): German industry’s representative in Angola, Ricardo Gerigk, has a tough job drumming up business in Luanda, the costliest city in the world for expats, where contracts tend to go to firms from China, Portugal and other countries with a bigger presence.

Although Angola has dynamic growth and a wealth of resources including oil, gas, rare earths and diamonds, only about 15 German companies have taken what Gerigk calls the “leap of faith” to set up business there. “None of them have any regrets,” he adds.

The world’s second-biggest exporter has woken up late to the potential of Africa’s fast-growing economies and is scrambling to catch up — not just with an aggressive China and France, in its West African sphere of influence, but also smaller European rivals such as Spain and Italy. Emerging powers India, South Korea and Brazil have also been quicker to spot opportunities.

German trade with Africa totalled $60 billion last year, while China managed $200 billion. Beijing wants to double that figure by 2020 and has sent its president and premier to the region to sign infrastructure and credit deals.

Energy

German firms do only 2 percent of their overseas business on the continent of 1.1 billion people. Of the 9 billion euros of German investments there, 8 billion are concentrated in South Africa and on energy deals in Algeria and Nigeria.

Africa makes up only 2 percent of German new car exports, according to the auto industry body VDA, which says the market is “still in its infancy”. Again, South Africa accounts for almost 60 percent of sales, though its economy has weakened. “Germans still find the continent challenging and perhaps overwhelming to deal with,” says Vera Songwe, an economist at the World Bank and country director for West Africa.

At the consultancy African Development Solutions (Adesol) in Berlin, Saschsa Meyer says the attitude so far has been: “South Africa and Nigeria are where the money is, but where is Ivory Coast? Where is Togo? They are just blank spots on the map.”

Now German companies, from industrial giants to start-ups, are overcoming their caution, keen to profit from the combination of rich resources and economic growth. The OECD estimates that growth in sub-Saharan Africa will total 5.8 percent this year.

“Mittelstand firms are now starting to look at Africa,” said Meyer, seeing special potential in the burgeoning African middle classes, who “don’t need a third Porsche” but goods and services like “decent middle-class housing, modified for African needs”.

Africa’s population is growing at twice the world rate, while Europe’s is stagnating. German exports to Europe, the market for nearly 60 percent of its shipments, grew 0.1 percent in 2013, but the dynamic African market, surpassed only by Southeast Asia, is expected to take 5 percent more German exports this year.

This has prompted Europe’s biggest economy to review what experts say remains basically a “donor-recipient” relationship.

With the foreign ministry drawing up new African policy guidelines, the armed forces playing a bigger role in French-led missions and industry bodies urging members to venture into new territory, Germany is jostling for its “place in the sun”, a phrase coined by statesman Bernhard von Buelow in 1897.

The Berlin Conference of 1884 launched the first “Scramble for Africa”, and Kaiser Wilhelm’s “Weltpolitik” began a colonial experiment that led to the genocide of the Hereros in South West Africa — now Namibia — and ended with defeat in World War One.

Even so, it has relatively little colonial baggage compared with some other European countries, which could be an advantage in a region often sceptical about postcolonial powers and asset-stripping, as Chancellor Angela Merkel looks for a geo-political role to match German economic might.

Denying any interest in “Germanising” a continent that has seen too much outside interference, Merkel said in a podcast at the end of March — ahead of an EU-African summit — that Germany could play a useful role as an “honest broker” in the region.

Alex Vines, head of the Africa Programme at Chatham House, said Germany, like all foreign powers, wanted to get its hands on uranium from Niger and Namibia, cobalt from the Democratic Republic of Congo, chromium, manganese and platinum from South Africa and oil and gas from Nigeria, Angola and Algeria.

“But there is growing awareness of another narrative — the emerging African middle class, rising consumerism and growth of 6-7 percent — which Germany shouldn’t miss out on,” said Vines.

One German firm that has been quick to spot this trend is Rocket Internet, which with Sweden-listed Millicom and South Africa’s MTN has launched ventures in Africa such as e-commerce outfit Jumia and delivery service Hellofood.

“There is a huge middle class and very little on offer for them. Even in Lagos there are only a few shopping malls, and you spend lots of time in traffic,” said Sacha Poignonnec, coCEO of Rocket and partners’ Africa Internet Holding.

Muhereza Kyamutetera, a 34-yearold advertising executive in Kampala, said that instead of spending lunch finding a parking space and a restaurant, with Hellofood “you spend a few minutes on your computer and, bang, food finds you on your desk”.

Traditional

Germany’s traditional industrial exports were facing tough competition from China, Kyamutetera said, but they could find a niche in what he called “offbeat areas” like this.

The hope is that Germany’s late arrival will not just boost its own exports but signal that Africa’s economy can “move up the value chain to do some industrialisation”, said Songwe.

“More than 60 percent of the population of Africa live in the dark, so there are huge opportunities in energy, not just solar but hydro and other forms of renewables,” she said from Dakar. “That is a market the Germans can competitively get into and benefit both German and African businesses.”

Engineering giant Siemens, which first entered the African market in 1857, sees a demographic “tipping point” in 2035, when more than half the population will live in cities. This will boost demand for energy, water, transportation and healthcare, sectors where Siemens is already well positioned.