German investors navigate turbulent waters

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In recent years, German companies doing business on the African continent have expressed their delight at the supposedly record-breaking trade between Germany and Africa.

This year, though, it's a different story.

Due to the coronavirus pandemic, German imports from Africa fell sharply to US$12,1 billion from January to July 2020, according to Germany's Federal Statistical Office. That's a decline of nearly 26 percent compared to the same period in 2019.

Exports aren't looking much better. They fell by around 18 percent to around US$13,6 billion from January to July 2020 compared to the same period last year.

This negative trend is expected to continue for the rest of 2020.

"Based on company surveys, we assume that German imports and exports (to and from Africa) will decline by up to 25 percent," said Heiko Schwiderowski, Africa specialist at the Association of German Chambers of Industry and Commerce, known by its German abbreviation DIHK.

"Even during the financial crisis a decade ago, we didn't have this kind of figures. These are major setbacks for many German companies doing business in Africa," Schwiderowski told DW.

"African exporters who sell products to Germany are also facing major challenges," he said.

As for DIHK members, they are skeptical about their business dealings with Africa. Eighty-two percent of all German companies in Africa and the Middle East fear a drop in sales, a survey conducted earlier this year by the association found.

In addition, more than half of the German companies surveyed said they are planning to cut staff in South Africa and Nigeria, Germany's two top trading partners.

German companies are also investing less in African countries. According to Germany's central bank, net direct investments by German companies in Sub-Saharan Africa in the first six months of 2020 totalled US$709 million, which is 23 percent less than in the same period in 2019.

This is a major setback for a continent that needs to create 20 million new jobs a year in order to employ its young population, who will be moving into labour markets in the next decades.

"In recent years, economic development has been positive: more and more foreign companies have come to Africa," Kenyan development expert James Shikwati told DW.

This outlook has changed owing to the new coronavirus pandemic.

"It largely means the economic development projections we had in Kenya and across Sub-Saharan Africa cannot be." Shikwati said. "Things are not moving. Transactions are not happening. Jobs are not getting created. And that is stagnation."

Before the pandemic hit, Sub-Saharan Africa's economy was forecast to grow by around 3,9 percent in 2020.

Now, the COVID-19 outbreak has triggered the first recession the continent has seen in 25 years, with the region's economy forecast to contract between minus 2,1 percent and minus 5,1 percent, according to the World Bank.

As well as alarming governments on the continent, such forecasts are also worrying German policymakers.

The German government has been urging German companies to invest more in African countries for years. As well as ensuring important markets aren't completely lost to China, investment and trade are seen as a way of fighting hunger and poverty.

The German government is trying to help with several investment programmes, some of which have been adapted to better target businesses needing support for their investments in Africa during the COVID-19 pandemic.

Heads of government and business leaders from Germany's African partner nations have already met twice with Chancellor Angela Merkel as part of an economic conference known as Compact with Africa.

The programme, DevelopPPP, run by Germany's Development Ministry, provides loans for companies investing in developing countries. The program's resources are now being focused on mitigating the consequences of the pandemic in developing and emerging countries, with more than 200 projects already being selected.

Usually, the AfricaConnect programme, supported by the German Investment and Development Agency, offers loans to European companies for activities in Africa. Now, under its COVID-19 response, the programme is offering crisis liquidity financing.

More than 3,000 jobs have been secured in Africa under AfricaConnect, which is supporting ten projects, the programme said in response to a DW inquiry.

German companies are showing increased interest in such programmes, said trade expert Schwiderowski.

"From the point of view of German companies, this is more than the famed drop in the ocean. But, in the long run, it won't be enough to keep businesses going," he said.

Optimists, though, are seeing a cautious improvement in the economic situation. Some African countries have begun to relax coronavirus restrictions: borders are opening and some airlines could soon restore international flights.

Kenyan economist Shikwati believes Africa could provide important impulses to the global economy looking to recover from the COVID-19 downturn.

"I think Africa will still offer opportunities to other economies seeking to kick start their economies. Africa is really a perfect place where this could happen," he said.

After all, he added, the continent has a huge need for investment in sectors such as energy, logistics and construction and these sectors will still exist when the current crisis is over. - DW

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