16 January 2019
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African Expert Network (Washington, DC)

Germany Can't Afford to be Shy: It's Time to Invest in Africa

Photo: AXN
Paulo Gomes

Dramatic levels of migration to Germany have triggered a variety of muddled reactions from policymakers—on a scale from the tepid to the ludicrous . Last year, one tone-deaf German policymaker caused a media stir after he proposed that African states cede territory to EU administration to create economic zones and jobs for locals. He was unseeingly aware that his proposal had a smack of neocolonialism. In stark contrast, German Chancellor Angela Merkel has taken a primarily humanitarian approach, accepting almost two million migrants since 2014 and championing improved conditions for refugees both globally and locally .

Though laudable for its civility and compassion, her approach has run its course, at least in terms of public tolerance . Chancellor Merkel’s latest plan to help tackle the roots of migration is a €1 billion investment fund in sub-Saharan Africa. While the investment plan is a step in the right direction, it runs the risk of irrelevance if the limited funds are not invested strategically. In order to jump-start meaningful economic development in Africa to reduce migration, German companies should invest in sectors with catalytic impact -- renewable energy, engineering, and vocational training – and which also plays to their natural strengths.

With expertise in engineering, construction, and renewable energy, German companies bring immense technical experience to the table. Germany, as one of the world’s leading investors in green energy , could help Africa address its persistent energy deficit, which continues to keep people poor . For example, if German companies invest in solar mini-grids across Africa, which cost a fraction of the price of a hydropower station, recipient states can expand access to clean, sustainable, and affordable energy in the near term, along with the economic potential that such energy access unlocks. Consider Nigerian company Rensource : its “infrastructure-as-a-service” business built an approximately 1MW solar mini-grid in Kano, Nigeria, to provide electricity to 12,000 micro enterprises. Not only does a less expensive power source help the bottom line of merchants, but it also replaces 40,000 polluting diesel generators. Companies like Rensource are the ideal partners to utilize Germany’s technical expertise and manufacture of high quality electrical components and batteries for solar projects.

German technical know-how isn’t restricted to renewable energy. With its world-renowned engineering knowledge, German companies can also have an outsized impact on Africa’s infrastructure sector. One of the greatest impediments to economic development in sub-Saharan Africa is the infrastructure gap : sub-Saharan Africa is the only region in the world where road density has actually declined in the past 20 years, and about 40% of the population lacks access to clean drinking water. These conditions hamper overall productivity, manufacturing capacity, and export potential. Infrastructure projects often fail to get off the ground because they aren’t backed by strong feasibility studies that satisfy investors with comprehensive analysis of engineering requirements and risks. Luckily, Germany has some of the most advanced and experienced engineering consulting firms in the world, many of which are specialized in servicing infrastructure projects in emerging markets. German industrial manufacturing and engineering conglomerate Siemens, for example, has already lent its expertise to the development of road and rail projects across East Africa, in Sudan, Ethiopia, Eritrea, Djibouti, Kenya, Uganda, and Tanzania. Ideally, the government guarantees in Merkel’s program will make it worthwhile for companies like Siemens to replicate this work in more remote and previously underserved areas. The catalytic effect of such an effort would be vast as expert studies provided by an engineering giant like Siemens can unlock capital through improving the bankability of Africa’s infrastructure projects.

The lack of expertise in infrastructure development opens up a longer-term need for German involvement, as well—for technology transfer and vocational training. The lack of skilled labor and engineering talent in sub-Saharan Africa has exacerbated the infrastructure gap by calling into question the viability and sustainability of large-scale projects like bridges, dams, and highways. There is a concern that these projects cannot survive without continuous, expensive, and hard-to-come-by help from the outside, leaving many of them unfunded. The shortage of a skilled labor pool largely results from the continent’s underdeveloped technical and vocational education training (TVET ), which is hobbled by inadequate funding, low-quality training, and a misalignment between curriculum and industry needs. This stymies the development of technical expertise on the continent, which then puts funding for crucial projects further out of reach. Germany, with its strong tradition of vocational training , could set up skilled labor training programs to help produce future waves of technical talent.

While German companies have historically been slow to invest in Africa, this push by the German government could change that. Germany’s new African investment program, narrow though it may be, holds singular potential due to the competitiveness of German companies in precisely the areas where Africa could use strategic partners. Germany’s expertise in green energy, infrastructure, and vocational training could truly catalyze sustainable development in sub-Saharan Africa, if deployed effectively. The German government should treat this as a model for future engagement and partnerships in sub-Saharan Africa upon which it can continue to build—not only to stem the flow of migrants, but also to demonstrate that positive, practical, economic solutions are superior to reactive, inflammatory political ones.

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