Germany intent on boosting investment in Africa

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Although the Zambian economy is currently facing challenges, good news arrives in the form of a new G20 initiative led by Germany, seeking to promote private investment in several countries in Africa, including Zambia.

In March this year, Germany’s G20 presidency formally launched the new G-20 Compact with Africa (CWA), considered the first major initiative of its kind between the G20 and Africa, which includes all of Africa’s major partners – including China.

The new initiative is largely motivated by the refugee crisis in Europe; reducing the risk for private investment in Africa aims to promote sustainable growth by setting up agreements between African countries, international groups and other investors.

At a recent OECD Global Forum on Private Pensions in Mauritius, Holger Fabig of the German Finance Ministry spoke to the public of the amazing opportunities Africa could offer investors. He told ipe.com that his answer to critics was simple and based on common-sense.

“It is very easy to be cynical, in particular about Africa… in Europe, we have witnessed a refugee crisis of historic dimension. Even finance officers who have been very reticent to engage with Africa now agree that we cannot just stand by, but that we have to do more to support African countries on their way to sustainable development,” Fabig stated.

Some of the countries most in need of economic support include Ghana, which is at 70% debt to GDP, Zambia, and Angola (both of which are at 60%). Crucial to economic regeneration is the creation of more opportunities throughout Africa via investment.

Fabig noted that there were various reasons why the CWA was bound to succeed despite failed attempts in the past by other organisations. Firstly, the initiative is backed by the German Finance Ministry, which is known for its cautious stand to investment. Secondly, in the past, the focus has often been on development aid; this time private investment is key, which promises a win-win situation for investors and indebted countries alike. Finally, participating countries have an important say in how the CWA is carried out; each has complete autonomy over programmes and projects they are involved in. This bespoke approach puts the CWA inl ine with each country’s own economic agenda.

Recently, German Finance Minister Wolfgang Schäuble told French newspaper Le Monde that Africa holds a key position in the global economy for two reasons: the risks it can hold, and above all, its great potential. He identified two strategies for the upcoming months.

“We need to draw up a list of development needs and identify useful projects. On the other hand, we need to help set up a regulatory and legal framework that creates a good climate for business,” Schäuble said, adding that it would be up to African countries to set up the kind of governmental structure that would be more attractive to international businesspersons.

Germany’s recent announcement of its commitment to achieving CWA objectives highlights the need to provide a unified answer to the refugee crisis and the problem of debt in Africa. With a combined effort from the G20, individual African countries, financial organisations and private investors, an effective solution to our financial struggle is finally on the horizon.

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