G20 Compact with Africa Makes Digital Strides

Published on 26th November 2019

Be it peace, climate protection, economic development, migration or other major questions of our time – we all agree that Africa, with its more than 50 states and a growing population – indeed an increasingly young population – has an important role to play in tackling global issues. It is clear that Africans and Europeans are facing many shared challenges. This is why we have intensified our cooperation considerably in recent years – because we firmly believe that it is not only in the African interest, but also in the interest of Europe’s biggest economy, in Germany’s interest.

As well as engaging in development assistance, of course we need above all to shape the transition to a self-sustaining upturn. That was one of the reasons why we launched the Compact with Africa Initiative during our G20 Presidency in 2017. The aim is to increase private investment in particular in the participating countries.

In the past few years the African states have set themselves a very ambitious agenda. The most recent highlight, I would say, was the African Union Summit in Niamey, in the Niger, where the final decision was taken on the launch of an African Continental Free Trade Area. I believe this decision, alongside the regional organisations which are already very strong and active on the African continent, was a landmark one. With the European internal market, we have a bit of an idea just how hard it is to get something like that up and running. There are customs barriers, but above all there are lots of non-tariff trade barriers that you have to wrestle with. We Europeans have to admit that even after many years of the European Union, we still don’t have a perfect single market.

All the issues relating to the single market are coming to the fore again now, not least in relation to the digital transformation.

The Compact with Africa is and will remain a G20 initiative. It is not, in other words, a purely German initiative: it is supported by all G20 states. But because it was launched during our Presidency, we are, if I may put it this way, a sort of patron of this initiative. However, its main supporters now include the World Bank and the International Monetary Fund.

This initiative means, on the one hand, that the African countries themselves are taking steps to improve the transparency of their financial systems, to improve their tax systems and to improve debt management. So overall a lot is being done for better governance. We believe, I am firmly convinced, that greater transparency can also bring more investors into these countries, because it is very important especially for German SMEs or investors from other G20 states that there is confidence, that there is transparency, that it is clear what environment one is investing in.

On the other hand, we want to create incentives for the countries participating in the Compact with Africa, when they see some success, to grant our countries better conditions for investment. To this end, we have set up an investment fund. 

Investment fund pillars

The first is AfricaConnect. This financing solution is intended to help SMEs from Germany and Europe to finance investment in Compact countries. We launched it in June, and have already received over 220 inquiries. The first commitments will be made soon. And a few of these investment projects will be presented here today.

The second pillar is the Africa Business Network (Wirtschaftsnetzwerk Afrika), which provides German companies with tailormade advice on funding possibilities and on the economic and legal environment in African countries.

The third pillar is the AfricaGrow development investment fund. Through this fund and trusted African funds, we will provide venture capital for African start-ups – another very important element. I spoke only recently with this year’s recipient of the German Africa Award, Juliana Rotich, about the problems in getting loans locally. Now AfricaGrow gives African start-ups the possibility of easier access to funding.

In addition, we have made the conditions for export guarantees and investment guarantees more attractive. Since 2018, exports totalling 330 million euros to Compact countries alone have enjoyed Federal guarantees. Applications have been submitted for a billion euros in guarantees. We are improving; we started off from a fairly low level, compared to China and other countries. We also know that foreign trade is often the precursor to engagement on the ground, for instance in the form of investment. That’s why these figures are definitely promising.

Furthermore, we have taken a look at how the Compact countries’ ratings in the World Bank’s Ease of Doing Business Index, which is important to many investors, have evolved over the past few years. The ratings of the Compact countries in particular have improved greatly. We can now point to a host of practical examples.

The decision to invest in Africa remains one for the private sector. We cannot take the decision for businesses. We can, however, help. We can create confidence, and we can say that conditions in the Compact states are certainly more transparent than they used to be.

In another step, we – in the form of Gerd Müller and his team at the Federal Ministry for Economic Cooperation and Development – have entered into bilateral reform partnerships with some of the Compact countries, namely Ghana, Tunisia, Côte d’Ivoire and now also Senegal and Ethiopia. We can also say that the possibility of a reform partnership is open to all. We are talking about the conditions, and the Minister is speaking to many representatives of the other Compact countries too.

You will realise that there has been a great deal of movement; but I do not wish to paint too positive a picture, because there are still problems that need to be solved. These include the major issue of security, in the Sahel region in particular. Here we have different instruments to try and make security and development compatible. The challenges posed by terrorism are severe.

There is the matter of population growth. Africa has a young and incredibly proactive population. Basically the exact opposite from what we have in Germany. We talk a great deal about how many pensioners we are going to have in future. In Africa, though, they talk more about young people. That is why I am pleased about the cross-border special initiative on Training and Employment, which aims to create 100,000 jobs and 30,000 training places.

I would also like to remind you of the Federal Government’s decision to introduce an immigration act for skilled workers. From 1 March 2020, we will for the first time have rules on how skilled workers can move to Germany. Our Chambers of Commerce Abroad will be the points of contact. We will join with the German business community to organise a large-scale forum before the end of December to consider what countries we want to advertise in for skilled workers, and generally how we are going to go about it.

I would like to close by quoting an African saying: “If you want to know how business is going at the market, you have to go down there.” It’s as simple as that. True, today the market is being shifted here to Berlin for us, but if we really want to know about it, then, yes, we need to go there.

By Dr Angela Merkel

Chancellor of the Federal Republic of Germany. 


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