In the past 10 years, the economic weight of the trading partners involved with the African continent has shifted. Until the turn of the century, Americans and Europeans dominated the agricultural raw material and mineral resource industry with a share of 80 percent. Today, Chinese companies are making gains. Following is a summary of companies that are supplying notable investments and infrastructure.
Michael Monnerjahn has long been responsible for developments in the African market. The manager works for the Federal Republic of Germany for foreign trade and location marketing with Germany Trade & Invest (GTAI) and says: “The European engagement in Africa has been substantial in the past centuries. The colonial era has left considerable traces all over Africa.” He has a positive impression on the backlog of Chinese demand because China is an important export country for Germany. At the end of the last century, the Chinese were still exporting raw materials. Today there is a high demand for metallic ores and coal.
The automotive industry is a buyer for metallic materials. Here, German industry is traditionally well-positioned as a machine supplier. The car manufacturing centers are traditionally located in Morocco and in South Africa. The Rainbow Nation exports up to 600,000 Cape-made cars with the steering wheel on the right. In Morocco’s free trade zone around Tangier it is rather French suppliers who are doing well. Another 400,000 to 500,000 cars are built here.
The automotive business grew from the supply of spare parts to the billion dollar business it is today. The development of rotor blade production from Siemens Gamesa was also quite positive. The staff has increased since it was founded and rotors are now manufactured in two lines, says Sonia Adnane from Siemens Gamesa. Manufacturing on African soil is less automated and is often structured manually. However, these are areas in which Europeans can compete with the Chinese. Monnerjahn: “A strong argument can be the quality of the machines delivered. This benefits the German machine manufacturers.”
Germany is a country that has a share of eight to nine percent of the global machine market. It benefits from countries that invest heavily in machines. Monnerjahn: “When I started to deal with Africa over 15 years ago, the Chinese also began to take action. Now there have been a large variety of ‘firsts’ accomplished. There are very cheap suppliers of machines that can meet the new market demands, but they also tend to break faster than a quality German product. ”
Professor Stefan Liebing, Chairman of the Africa Association of German Business, also provides a colorful picture of export to the African continent. The association, which includes most German companies operating in Africa, advises companies on their business activities on the continent. There will be much more development in Africa, says Liebing. He sees population growth as a big cause. While population growth is stagnating in the rest of the world, Africa’s population will quadruple by the end of the century.
Liebing says: “Even countries that do not have the best reputation in Germany, such as Nigeria, have dynamic entrepreneurship. It is private entrepreneurs who invest their money in factories and buy machines all over the world.” One of his statements is: “There are great success stories and, unfortunately, the exact opposite.”
In addition to the question of customers, secure financing is crucial for business success. Liebing sees this as a crucial point because Chinese, Indian and French companies find financing and business protocol easier when it comes to Africa. On the other hand, banks in Germany are often more conservative because there is less precedent for doing business with Africa, explains the chairman of the Africa Association. This conservatism has a long history in Germany and the Federal Government’s stance has continued the tradition, despite Chancellor Merkel’s involvement. Until a few years ago, Hermes guarantees for business in Africa were still lacking. That’s why there is less business happening between African countries and Germany. Customers in Africa are well networked and trained. They know what quality they can expect from whom.
For some years now there has been a demand for a fund to support investments by German companies, as it already exists in the Netherlands. A similar fund has now been made available with a volume of 400 million Euros. Another important aspect is insurance of exports and investments. Here, too, other countries are often cheaper. Liebing explains: “I am aware of tenders in Africa, where bidders from Germany have to accept a price difference of 10 percent for the same price of the product only because they are financed in Germany and not in Asia.”
Liebing gives this analogy of the situation: “If you stand on a soccer field and one team has to stand still while the others are allowed to do anything – who has the better chance of scoring a goal?” Africa is a crucial question for the growth of the German economy, but its influence only has a limited influence on German companies. The other important impact on companies is the German government itself.
Matthias Boddenberg, head of the Chamber of Commerce and Industry for Southern Africa in Johannesburg, can assess the situation well. Boddenberg thinks there are major structural differences in business between Europeans and Asians. In the infrastructure area, this is evident in projects such as the airport in Mozambique, the hospitals in Zambia, or the railways in Kenya. Boddenberg explains: “First of all, the country concerned has an agreement with the People’s Republic of China. Then, the Chinese offer up a variety of companies.”
This then includes the financing of a state or semi-state bank by submitting an offer and a financing price, Boddenberg continues. The professionals of the African business world see a weakness among Europeans in this area, because it is hardly possible to put together similar consortia under a general contractor. The business of machinery could be different, however, because German machines are rated high-quality. Be that as it may, they are still more expensive than the Asian competition. In Asia, goods are mass-produced, but mass production is not ideal for special applications. German companies can differentiate themselves here by installing individual machines, training people, and offering service. However, there are also increasing numbers of Chinese service points in Africa. High tech machines from Germany are often considered over-engineered on the African market. The Asian technology is easier to use, which is also reflected in a lower price.
It’s clear that technology has to be tailored to the needs of the people of Africa. The same applies to the financing.
Der Beitrag ist in deutscher Sprache im MM Maschinenmarkt erschienen.
Kontakt: Dr. Thomas Isenburg, firstname.lastname@example.org