Africa: German industry urges government support for AfCFTA to cut Russia, China dependence

By Xolisa Phillip, in Johannesburg
Posted on Friday, 9 December 2022 13:12

German Economy Minister Robert Habeck speaks during the annual meeting of Federation of German Industries (BDI), in Berlin, Germany June 21, 2022. REUTERS/Michele Tantussi

The Federation of German Industries (BDI) has recommended that the German government throw its weight behind the African Continental Free Trade Area (AfCFTA) Agreement, arguing the continent is pivotal in efforts to diversify markets.

Speaking to The Africa Report at the 4th German African Business Summit, the BDI’s Matthias Wachter says a majority of affiliates view Africa as key in the bid to broaden the country’s source and export markets. Wachter is head of department, international cooperation, security policy, raw materials, and space at the BDI.

The BDI – whose 100,000 members range from multinationals, such as VW, Bosch, and Mercedes-Benz to family-run small and medium enterprises – published its new Africa strategy ahead of the summit and places the continent at the forefront of the diversification drive.   

Following consultation with members and partners in Africa, “we strongly propose German support for the AfCFTA Agreement”, Wachter tells The Africa Report.

Africa is growing rapidly, and there is a lot of potential for German companies to invest here in the long run

As a net importer of raw materials and one of the biggest exporters in the world, Germany has historically relied on Russia for the former and Southeast Asia, in particular China, for the latter, whilst keeping Africa at arm’s length.

However, in recent times, the risks of Germany’s dependence on cheap Russian gas to fuel its manufacturing activities and the Chinese market to export goods have become apparent.

“Africa is growing rapidly, and there is a lot of potential for German companies to invest here in the long run,” says Wachter, adding, “Africa … is not nice to have, it’s a must have. We need to get more involved. The government can support German companies in doing that.”

He adds that “things are changing now – and rapidly so. Out of our own interest, we need to diversify”, Wachter says.

Such diversification requires a change of German perceptions about Africa and a new view on the continent, Wachter says.

Africa footprint

The main goal of the strategy is to increase German activities and investment in Africa. The BDI has made 39 recommendations to the German government on how it can support companies to increase their footprint in Africa.

“As a net importer, we need raw materials. We urge the German government to increase its cooperation with African partners. Germany needs to diversify the places from where it imports its energy sources. Africa can play an important part in that,” says Wachter.

Wachter adds that the big mistake Germany made in the past was fully relying on Russian gas. “Of course, we had the pipeline infrastructure and it was relatively cheap.”

An additional benefit of the low-cost Russian gas was that it offset Germany’s relatively high labour costs.

“We used […] cheap Russian gas to produce and manufacture – manufacturing is energy intensive. We sold our manufactured goods to Southeast Asia and China, which made us dependent,” he says. However, “we need to diversify that […]”.

Wachter says the summit is important because it is a flagship conference that brings together African partners with German companies on a business level.

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