Germany-Africa Relations Warm Up

Economic and cultural ties between Europe and Africa run deep, but Germany has been a relatively minor player in intercontinental trade flows. Today, however, a greater focus on business partnerships is reshaping bilateral relationships and the overall view of relations between African nations and Europe’s leading economy.

The opportunities for Germany and Africa to utilize historical ties and current political initiatives to boost enterprise are vast, and many German companies taking notice: Volkswagen continues its efforts to expand its operations in Africa, with the company starting production in Kenya in 2016; German-based Bayer officially opened its new subsidiary, Bayer Middle Africa Limited, in Lagos in 2015; Deutsche Bundesbank and the South African Reserve Bank finalized a deal to house a Bundesbank representative in South Africa; and, expanding on its African presence, Lufthansa just launched a new direct flight between Frankfurt and Cape Town. Germany is one of the most important trading partners for South Africa, ranking second in trading volume behind China.

Many in Germany, such as the Federation of German Industries (BDI), see Africa as an ideal place for investment and are working to rebuild and establish new relations with emerging economies on the continent.

Increasingly intertwined

Germany’s forays into Africa began in 1884 when the Berlin Conference regulated European colonization and trade in Africa. Though late to the fray in comparison to other European powers (South Africa was colonized by the Dutch in 1652), Germany quickly launched its own colonies in Ghana, Cameroon, Tanzania, Uganda, Namibia, and Togo.

In contrast to its European neighbors, however, Germany’s colonial conquests in Africa were quite brief and its claimed territory limited — Germany had relinquished control of its few African colonies by 1919, though this period established lasting ties between Germany and many African countries.

Germany’s involvement in Africa was limited post-World War II, and established diplomatic ties were divided between Western and Eastern Germany. Although most official diplomatic ties started after German re-unification in 1990, Germany now maintains a distinct cultural and economic presence on the continent.

Germany has been particularly active in South Africa, with trade and business ties well developed by West Germany before reunification. Today, relations with South Africa are governed by the Binational Commission that was signed in 1996 and the country receives a large tranche of trade and foreign direct investment from Germany.

Official bilateral relations between Nigeria and Germany regained momentum after military rule ended in May 1999, but German companies and cultural institutions have had a long presence in the country. The Goethe Institute of Nigeria in Lagos, for example, has been operating since 1962, according to the German Embassy in Nigeria, and Nigeria and Germany are celebrating 158 years of relations with plans to release a historical book detailing the different areas of cooperation between the countries.

Ghana also has close ties with Germany and business opportunities in the country abound. The Federation of German Industries has worked since 2009 to attract German investment to Ghana, establishing organizations like the Delegation of German Industry and Commerce in Ghana. The €40.1 million in loans for a solar plant in Ghana from Germany’s lead development bank announced in November 2016 is a prime example of these strong relationships.

Global competition for Africa

Though German actors in Africa are certainly not a new phenomenon, German activity on the continent is far behind its greatest competitors, especially China and India. German trade with Africa is only $60 billion annually, compared to $200 billion with China.

According to the PwC report The Future of World Trade, developing countries in Africa are poised to become a new source of demand for exports, as the middle class in Sub-Saharan Africa grows exponentially and demands for pharmaceuticals, clothing, green technologies, high-end manufacturing, and healthcare technologies grows substantially.

China is still projected to be Africa’s largest trading partner through 2030, but despite this clear lead, Germany has plentiful opportunities on the continent, according to Dr. Evita Schmieg of the German Institute for International and Security Affairs. Her report states that two-thirds of Sub-Saharan Africa’s imports are finished products, and many of those products are of great interest to German exporters, especially engineering products, vehicles, and chemicals.

The Federation of German Industries labels Africa a “continent of opportunities” and is working to establish a presence in West Africa and East Africa particularly.

Politicians aim to expand ties

German Chancellor Angela Merkel, recognizing the value of closer relations between Africa and Germany, sought mutually beneficial policies on development, peace-keeping, and migration in a three-day visit to Africa in October 2016. Her trip ended with a speech at the African Union in Ethiopia, in which Ms. Merkel vowed to make Africa a priority for Germany’s G20 Presidency.

Germany’s Presidency of the G20, which started in December 2016 and ends November 2017, has committed the group to achieve sustainable economic progress in Africa. Specifically, the German G20 Presidency “aims to promote infrastructure development on the African continent,” and will hold a separate conference in June 2017 entitled “Partnership with Africa” in Berlin.

Germany is continuously developing relations with African countries, sending $9 billion in foreign direct investment to Africa annually. The Minister of Foreign Affairs of Germany is soon to lead a high-powered delegation to Nigeria, the German consul-general for Nigeria announced in January, and a trade delegation is also set to visit Togo. Ms. Merkel recently hosted the Kenyan and Mozambican presidents in Berlin and German Foreign Minister Frank-Walter Steinmeier plans to visit Niger and Mali in 2017.

Germany is the world’s third-largest exporter and an established leader in technological innovations and industrialization. In contrast, Africa, as the world’s fastest-growing region, is a hotspot for investment and is in need of infrastructure, power, and industrialization. With an intertwined history and perfectly opposing needs, Germany and Africa are poised to create profitable partnerships in 2017.