Volkswagen has a large plant in Kariga, South Africa. (Photo: Volkswagen AG)

You want to talk about financing growth, economic integration, digitization and many other topics: The Sixth EU-Africa Summit, which takes place today and tomorrow, is full of topics and dates. With the meeting, the EU wants a renewed and deepened partnership between the African Union and the European Union. The goal is to launch an “ambitious Africa-Europe investment package that takes into account global challenges such as climate change and the current health crisis”.

Because the latter in particular has caused controversies since the beginning of the epidemic. For example, there has been criticism of the export restrictions on medical protective equipment imposed by the European Union at the start of the Corona pandemic. There are also disagreements about economic relations. “We still live in a colonial model, where Africa is just a source of raw materials,” Carlos Lopez, a professor at the University of Cape Town, tells Deutsche Welle. There is a lot of frustration for Africa to create new partnerships in order to pursue the industrialization of the continent – for example with China, Russia or Turkey.

So what about European-African and German-African economic relations?

Unequal relations between Europe and Africa

If you look at imports and exports, it soon becomes clear to you that inequality still prevails. The European Union mainly imports raw materials from Africa, and oil and gas production plays an important role. For example, the German oil company produces oil and natural gas in Egypt and Libya.

On the other hand, African countries mainly import high quality goods such as industrial products from Europe. In 2020, the European Union was Africa’s most important trading partner, accounting for about 30 percent of exports and nearly many of its imports.

However, reliance on imported goods is also viewed critically: “The unilateral structure cannot help solve the problems of the continent: high unemployment, a large informal sector,” says German Africa researcher Robert Kapel, Deutsche Welle.

So last year the European Union decided A new African strategy for equal cooperation. Closer cooperation should be achieved in five areas. These include the green economy, digitalization and sustainable growth.

Criticism of the strategy: “We would like such a strategy to be developed with the African Union and African and European civil society. This would not be seen as ‘the EU is offering something and Africans can still do it once'” Matthias Moog of the umbrella organization for German development organizations explained at the end year 2020.

Raw materials from Africa mainly go to China

But back to the top. Infrastructure financing will also be discussed there. According to GTAI, this could also help German companies. Because so far, China has occupied this sector in Africa in particular, and Chinese suppliers have been selected for China-funded projects. Meanwhile, the People’s Republic has fallen behind when it comes to infrastructure financing – an opportunity for service providers from around the world. As is known, China has been investing in the African continent for years, in order to secure valuable raw materials, among other things.

An example is the Democratic Republic of the Congo, which is one of the most resource-rich countries in the world. Among other things, gold, copper, manganese and lead are mined. China was by far the largest consumer of goods in 2019, with exports reaching $625 million. For comparison: exports of raw materials to the United States amounted to seven million dollars and Germany four million dollars.

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German economy and industry in Africa

What about German companies in Africa? “We are seeing a growing interest from German companies to do business in Africa,” Christoph Kanengeser, Director General of the German-African Business Association said in August 2019.

But: the neighboring continent It continues to play a secondary role as a production and sales site for German companies, summarizes GTAI. The German economy invested only about 1% of direct investment in the African continent.

German companies are investing more in South Africa. Two-thirds of the total sales of German companies are generated there. Above all, German car manufacturers are very present in South Africa – for example BMW, Mercedes-Benz Group and Volkswagen. According to GTAI, they are benefiting from an attractive investment law for the auto industry.

In 2018, for example, the Mercedes-Benz Group announced that the South African plant would be expanded in East London. Cost point: 600 million euros. Among other things, it was to expand the existing assembly hall, build new logistics facilities and a new building hall.

The Volkswagen plant is located in Karriga in the south of the country. More than 3,500 people work there. Among other things, the Polo Vivo was built on site, is only available in South Africa, and, according to VW, is the best-selling car in the country. Polo shirts for right-hand drive markets around the world are also made there. In 2021, a total of 129,119 vehicles were built in Kariga – nearly 90 thousand of them were for export.

Why Morocco can become important

Another country where there are many German investors is Morocco. According to Andreas Wenzel of AHK Morocco, the country’s advantages include adequate infrastructure, production factors, and political stability. The auto industry is very much present here, especially since Renault built a plant there in 2012.

Germany ranks seventh in terms of new investments. France, which also focuses on the airline industry there, is leading the way. According to GTAI, Wenzel sees great potential in the country: “Morocco will Benefiting from diversifying supply and production chains after the Corona pandemic. The country is an ideal location for integrating modern production structures into European value chains.”

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