The continents Africa and Europe (EU) are not only connected through their shared history and geographical proximity but also through prosperous trade relationships and economic ties. In this article we explore some of the trade and investment opportunities between both continents, the Covid-19 impact and entrepreneurship in Africa.
Cooperation between the EU and Africa
In 2007, the Joint Africa-EU Strategy (JAES) was signed by the African Union and the EU which has guided the partnership dialogue between the two continents ever since.
According to the EU Commission and its initiative report on a new EU-Africa strategy from July 2020, investment in the African communities through education, technology and skill development is crucial. A further aim is to mobilise foreign investments is to support Africa’s economic growth structurally and sustainably.
Combating climate change and environmental degradation is a common goal of the EU and Africa. Therefore, the European Commission has released a statement in 2020 after a summit with the African Union, stressing that finding solutions together in the areas of sustainable energy, transport, and agriculture is of crucial importance for both continents.
One example of a German initiative that supports investment in Africa is the CONNEX unit that focuses on advising African governments in the process of negotiating investment contracts. Commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ) and implemented by the German society for international cooperation (GiZ), CONNEX was established at the G7 summit in Brussels in 2014. The overall objective is to guarantee the maximum benefit for the African partner countries, increase economic growth and thereby contribute to sustainable development. In order to achieve this goal, multidisciplinary experts from different industries work together with financial and legal advisers. So far, they have worked among other projects on contract negotiations in Tanzania, Mali and Mozambique.
Direct Investment and Trade
With direct investments worth €222 billion in 2017, the EU was the highest investor in Africa followed by the United States (€ 42 billion) and China (€38 billion). In 2019, almost 70% of goods exported from the EU to Africa were manufactured goods and over 65% of goods imported to the EU from Africa were primary goods like food and drinks, raw material and energy.
In particular the Northern African region has become a large trading partner of the EU in 2019 due to its geographical proximity to Europe.
Nevertheless, Africa still accounts only for around 2% of the German exports. With exports worth €9.3 billion in 2019, South Africa remains the most important customer country for German goods.
The Impact of Covid-19 on German-African Trade
German imports from Africa fell to around €10.4 billion in the first half of 2020, according to the Federal Statistical Office, which is 26% less than in the same period of 2019. Additionally, around 2.6 billion fewer goods and services were exported compared to the period January till July in the previous year. This represents a decline of around 18%. Moreover, the net direct investments by German companies in Africa have likewise decreased in 2020.
Entrepreneurship and Innovation in Africa
Another important issue to tackle on the African continent is the improvement of the digital infrastructure that enables young businesses and entrepreneurs to succeed and as a result, generates economic growth. After substantial investment in Africa’s infrastructure, exports and correspondingly domestic economic growth will follow. In order to generate this development, it is necessary to connect African communities to electricity and the internet.
According to the African development bank, 22% of Africans are currently starting their own businesses, placing Africa as the continent with the highest entrepreneurship rate worldwide.
In particular in Sub-Saharan Africa small and medium sized companies account for the largest share of employers, stressing the importance of entrepreneurship for this region. In the past years, this area has experienced economic growth and therefore presents opportunities for business.
Successful case studies of entrepreneurs in Africa
- Thobo Khathola from Botswana is the Founder and CEO of Lion Tutoring and part of the Forbes 30 under 30 Africa list of 2020. Through his mobile app, students from Africa have access to tutors from all over the world with the aim of delivering the best education possible. The services range from primary school to master’s classes. With offices in South Africa and Botswana, Thobo is expanding his services throughout Africa. As the payment and classes are conducted online, Thobo stresses the need for faster internet speed and lower data costs throughout Africa in order to scale his business further.
- Nthabiseng Mosia is the founder of the Sierra Leone-based solar energy company Easy Solar and also a member of the Forbes Africa 30 under 30 list. Her company offers solar energy solutions not only for individuals but also commercial projects. The products include solar lanterns, home lighting systems, appliances and cookstoves. Her aim is to make energy affordable in riskier countries as 600 Million Africans are still living without power.
- The Austrian green technology start-up plasticpreneur supports entrepreneurs in Africa by sending affordable plastic recycling machines to local African communities. This machinery enables users to transform plastic into new products. The start-up further emphasises the process of educating local communities in Africa and around the world in motivating them to create innovative products through recycling. This aims to empower the communities to become entrepreneurs.
Centurion Plus
Trade and Investment between the African and European countries represents a wealth of opportunities across different sectors. Whether you are a European investor wishing to do business in Africa and need legal support, or an entrepreneur in Africa looking for investment from Europe, Centurion Plus has a strong record of expertise and experience in Africa and Europe. Our pool of internationally trained lawyers can give you legal advice concerning immigration, taxes or IP issues and support you in the process of expanding or relocating your business.
Contact us today for an initial consultation.
