Flensburg, 16/04/2021: A study by the Africa Centre at Flensburg University of Applied Sciences expects more industry and booming energy sector.
The fact that the African continent has so far come through the Corona crisis better than expected has also surprised experts. The number of infections remained well below forecasts. And the economic slump so far has also been limited. The decline in gross domestic product (GDP) last year was just over two percent. By contrast, the decline in GDP in Europe was seven percent.
A study by the Centre for Business and Technology in Africa at Flensburg University of Applied Sciences has now looked at the future prospects of our neighboring continent. The authors have come to some surprising conclusions. For example, the centre expects a very rapid recovery. “The main drivers of the GDP decline were collapsed commodity prices and the lack of tourism. While commodity prices have already risen significantly again, we can probably assume that tourism sales will also return quickly once the pandemic is over,” said Kay Pfaffenberger, professor at the university and director of the centre. “We therefore assume that the pre-crisis level will be reached again by next year at the latest.”
For the post-recovery period, the study expects growth to be far steeper than before the crisis. “The years 2018 and 2019 were record years for German investment in Africa. In addition to this general trend toward Africa, we see two other important developments that could be positive for the continent,” explains Professor Nelly Oelze, co-author of the paper. During the crisis, many companies realized that the one-sided focus on supply chains in Asia was risky. Currently, the German economy is drawing conclusions from this experience and is planning to diversify. Particularly for labor-intensive simpler production processes, Africa offers an alternative with its geographical proximity to Europe and its low labor costs. “We are already seeing automotive suppliers greatly expanding their presence in North Africa. And further investments can also be expected in East Africa, not least in the leather and textile industries,” Oelze said. However, it is important to get these new economic relationships right from the start. Because of the high cost pressure in these industries, it is particularly important to focus on compliance with international standards right from the start. This will tend to be the case with family-owned companies from Germany rather than Asian corporations. “However, I think the supply chain law currently being discussed in Berlin is the wrong way to go. It harbors high risks that SMEs in particular will refrain from investing out of fear of confusing bureaucracy. The space that then becomes free will then be taken by Chinese investors, for example. I don’t think that will lead to better working conditions for the people,” says Dr. Stefan Liebing, honorary professor at the Africa Centre and chairman of the Africa Association of German Business. The university’s Africa Centre places one of its research focuses on the issue of sustainability in supply chains and in the textile industry in Africa.
A second factor that the authors believe will contribute significantly to growth and development in Africa in the coming years is the development of a hydrogen economy. They say that the German government has recognized that a complete conversion of German society to renewable energy is only possible if green energy can be imported. One way to do this is to convert solar power from Africa into hydrogen and transport it to Europe. Africa lends itself to such large-scale projects because of its high solar radiation and geographical proximity to Europe. “I am sure that a whole new industry will emerge in Africa. In the future, we will no longer transfer to the oil countries of the Middle East, but will also buy our energy in Africa,” Liebing is certain. At present, a large number of projects are being pursued by German companies, and the German government has already signed several cooperation agreements with African countries. This will lead to a significant increase in trade relations and investment and thus also to a further increase in economic growth. “Especially in this area, there are many opportunities for northern German companies to get involved in Africa. In this respect, Africa will also gain in importance for the regional economy.”
The university’s Africa Centre will discuss the potential of the hydrogen economy for cooperation between northern Germany and Africa in an online conference on May 27, and expects guests from European and federal politics, business and science, and Africa to attend.
More information on the conference and the study is available at www.africacentre.de.
