Deutsche Bundesbank has recently presented its
latest inventory of foreign direct investments (FDI).
The publication contains data on German gross assets from active direct
investment and, corrected for associated liabilities, also net assets. The key
figures of the German companies investing in the target countries are also
informative, i.e. number of firms, number of employees and turnover. Table 1
summarises Africa's role in German FDI for the last observation year 2017.
Table 1: German FDI in Africa, stocks 2017
|
bn Euro/number
|
Share Africa/World,
%
|
Gross claims, €
billion
|
9.2
|
0.6
|
Net claims, €
billion
|
8.4
|
0.8
|
Number of companies
|
849
|
2.2
|
Staff, thousand
|
201
|
2.6
|
Annual turnover, €
billion
|
30.8
|
1.0
|
Source: Deutsche Bundesbank (2019)
At the end of 2017, gross
claims of German companies from active direct investments amounted to €1,568
billion worldwide; Africa's share amounted to €9.2 billion, or 0.6 per cent. In
terms of net claims, Africa's share was slightly higher, 0.8 per cent.
Explanation: Direct investments can be hedged against exchange rate risks by
borrowing in the host country, which is why worldwide net claims amount to only
two thirds of Germany's gross receivables. In Africa, however, local financial
markets are less developed than in the rest of the world, which is why FDI made
there is relatively less hedged by offsetting loans.
Africa's share of the
worldwide turnover of German companies with active direct investments was just
one percent. Companies investing in Africa were relatively more numerous with a
share of 2.2 percent. The proportion of people employed in Africa was
relatively even more important, at 2.6 per cent of those employed in German
companies worldwide. These numbers indicate that the German companies invested
in Africa are smaller and more labour-intensive than elsewhere in the world.
This means that their developmental contribution in Africa is likely to be
relatively more significant than their percentage share of world investment
stocks would suggest.
The importance of
even Africa as a whole for German direct investment is very low; however, it
tends towards zero if North Africa, South Africa and the tax haven Mauritius
(keyword Mauritiusleak) are excluded.
German companies traditionally concentrate almost exclusively on North Africa
(especially Egypt) and South Africa. Germany´s development bank KfW recently
stated: "There are hardly any German companies between Cairo and
Johannesburg. The companies of the other major industrial nations, France,
Great Britain and the USA, have a broader regional base. The common language
and the cultural proximity due to the African diaspora are important reasons
for this".
Table 2: Geographical distribution of German FDI
in Africa 2016, $ billion
|
Germany
|
France
|
Italy
|
UK
|
USA
|
North Africa
|
3.7
|
16.2
|
18.2
|
16.3
|
28.4
|
Subsahara
|
1.8
|
30.1
|
2.0
|
30.1
|
23.9
|
South Africa
|
5.2
|
2.0
|
1.6
|
19.7
|
5.0
|
Total
|
10.7
|
48.3
|
21.8
|
66.1
|
57.3
|
Source: Tim Heinemann, KfW
The focus of German
companies outside the OECD area, on the other hand, is on Asia and Eastern
Europe. The level of direct investment in these regions is more than ten times
higher than in Africa. In Eastern Europe, low-cost production was available
close to the European sales markets. So far, Asia has attracted with a higher
degree of industrialization and a larger middle class. Of course, the Maghreb
is geographically close and Africa's middle class is growing - so an increase
in German FDI in Africa can certainly be expected in the future. However,
Africa's high unit labour costs act as a brake on direct investment in
industrial manufacturing.
As part of the ´G20
Compact with Africa´ (CwA), the German government has been trying since 2017 to
boost German direct investment in twelve selected African partner countries.
These include three promising emerging countries in North Africa (Egypt,
Morocco, Tunisia), but also nine poorest countries south of the Sahara
(Ethiopia, Benin, Burkina Faso, Côte d´Ivoire, Ghana, Guinea, Rwanda, Senegal,
Togo). Companies can participate in the implementation of the measures within
the framework of the current tendering and award procedures of bilateral
development cooperation. Germany is now trying to develop further instruments
and incentives of ´de-risking´ to complement the CwA, beyond her 25(!) measures[4]
(funding instruments, programs and other initiatives) already in existence meant
to foster private investment.
Table 3: German net FDI in Africa, 2016-18, €
million
Transaction
values according to balance of payments statistics
|
2016
|
2017
|
2018
|
North Africa
- CwA
|
1.198
1.037
|
418
-4
|
1.445
1.325
|
Subsahara
-CwA
|
82
23
|
145
8
|
66
15
|
South Africa
|
445
|
553
|
429
|
Total
-CwA
|
1.725
1.060
|
1.116
4
|
1.940
1.340
|
Source: Deutsche Bundesbank, Balance
of payments statistics, Xcel file, 14. August 2018
Note: Transaction values may be
negative; the positions listed are netted.
Unpublished flow data
provided by the Deutsche Bundesbank record German FDI in individual African
countries up to 2018. Morocco as an outlier received € 1,199 million in German
net FDI in 2018, presumably due to construction investments for the Ouarzazate
solar power plant,
which had been initiated long before the CwA. Apart from the individual case of
Morocco (and Ethiopia), the African CwA partners received less German FDI on
balance over the past two years. So now we have it officially. So far the CwA
ressembles a Potemkin village, with
colourful displays in the form of declarations of intent and of many conferences.
