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Representative office in Johannesburg
Our gateway to Sub-Saharan Africa
South Africa is the largest and furthest developed economy in Africa with considerable natural resources in mining. The country offers good framework conditions for the private sector, has a diversified industry and a heavily regulated financial sector with an independent central bank.
Due to its role in political and economic stabilisation, South Africa is for many companies a stepping stone into the African market, above all for those countries that are part of the Southern African Developing Community (SADC), whose population adds up to more than 240 million people. Mainly for European - especially German - businesses, southern Africa is an interesting albeit difficult growing market in which European quality and commitment are particularly appreciated.
After China, Germany is the second most important supplier country for South Africa with EUR 8,8 billion annually in exports and one of its most important direct investors. 600 German companies have offices here, employing about 100,000 workers in the key sectors of basic industries, chemical industries and mechanical engineering.
For KfW IPEX-Bank, Sub-Saharan Africa is an important future market in which we support our customers in financing European exports and German direct investments. The mandate of KfW IPEX-Bank also comprises the support of projects to secure raw materials supply to Germany.
"Africa is the market of the future"
An interview with Joseph Mbuyi, Director of the KfW IPEX-Bank representative office in Johannesburg, responsible for Sub-Saharan Africa
Economists have repeatedly forecast a rapid upswing for Africa in recent years. However, the African economy is currently growing at a relatively slow pace. Has the former euphoria now given way to disillusionment?
The African continent is not in great shape at the moment. The optimistic economic prognoses were largely based on a boom in raw materials which never came to fruition. Ultimately the disillusionment with the current situation is the result of a recurring unilateral approach, which has focused too closely on pure exports of natural resources as a source of income. Many countries are lacking sustainable economic structures. In addition, governance issues and fragile political systems still pose a problem in Africa, although this varies greatly from country to country.
What does the continent need?
Peace, political stability, mature institutions and a solid economy.
First and foremost, in economic terms, investment in developing and extending infrastructure must be increased and the private economy needs to grow considerably. A strong middle class will drive this growth, which will benefit the majority of the population in the long term.
Can African countries develop private sector structures under their own steam?
It is a fact that the majority of the entities engaging in economic activity in Sub-Saharan Africa are organised privately as single or family-owned companies. However, it is also true that most of these companies are not registered and work informally.
In addition to involving citizens and building their trust in state structures, along with creating more reliable conditions and infrastructure in the respective countries, external support is also needed, particularly to promote participation in the global exchange of goods. It is imperative that Africa be used as a production site for global products but also that the continent be recognised as a significant sales market and integrated accordingly.
How should the Western economy proceed?
Let's take the example of using Africa as a sales market. I recommend that particularly medium-sized enterprises expand their sales activities to include African countries. If they are successful in marketing their products and have good experiences with local partners, they will invest in the medium term. It is partly a question of trust: investors not only have to recognise Africa's amazing potential, they also need to believe equally strongly in their local cooperation partners, as economic success cannot be planned to the last detail. Trust does not happen overnight. It has to develop, which takes a lot of patience.
In which sectors do you see the greatest opportunities?
One key area is definitely infrastructure, which has a lot of catching up to do in the areas of communication, electricity, mobility and technology. We at KfW IPEX-Bank have already initiated activities in these sectors and are financing, for example, railway lines, mobile phone networks and cargo terminals. All of this is a prerequisite for economic development - and a great opportunity for medium-sized enterprises too, as it enables them to get involved in major projects. Engineering skills are also in great demand. Made in Germany is considered a mark of quality for machines across a wide variety of sectors and despite the price, it is a convincing selling point.
And what about Africa as a production site?
Machines and technology products are already produced in Africa. However, the lack of skilled workers is often an issue. Insufficient qualification usually forces the company owner to invest large sums in vocational training. For someone to be prepared to take on such advance expenses for their business they need a clear vision and a certain amount of courage. Cooperation with an existing African company can reduce the risk, as you have a basis of already qualified staff, which is also on hand to support further expansion.
To summarise, in future all roads lead to Africa?
Exactly! Demographic change cannot be stopped: Africa is home to 1.2 billion people and has the youngest population in the world. The cities are growing exponentially. Africa is the market of the future, especially given that globalisation will intensify competition in the traditional markets and will shave margins. Nevertheless, German investors should not see this as a danger but as a huge opportunity.
KfW IPEX-Bank's representative office in Johannesburg does not conduct any bank business of its own. Instead, its sole function is to support the bank's headquarters in Frankfurt.
