Drinking water at public standpipes, new jobs, higher school enrolment rates: Helmut Gauges, member of KfW Development Bank’s Management Committee responsible for Africa, talks about the continent's progress and opportunities.
About Helmut Gauges
Helmut Gauges has been a member of KfW Development Bank’s Management Committee since 2015 and is responsible for Financial Cooperation with Africa and the Middle East. Before moving to his current position, he was Head of Group Development/Economics at KfW Group from 2011 to 2014. From 1989 to 2011 he held various positions at KfW Group.
Mr Gauges, which three challenges do you see for Africa that KfW also has to deal with?
HELMUT GAUGES: At first glance, the challenges are very similar to those of other continents and developing countries. The biggest problem in Africa is poor governance, dysfunctional government administrative structures and widespread corruption. The second serious challenge is inadequate infrastructure in all areas. The inadequacies are much greater than on all other continents – they span education and health systems, but also transport systems and energy and water supply. For example, it is more expensive and takes longer to transport goods from one side of Africa to the other than from China to Africa. The third major challenge is the rapidly growing population that continues to grow. Africa has a very young population structure, combined with the risk of high youth unemployment and lack of opportunities.
I would also like to mention a fourth challenge, which is perhaps not yet quite as visible: we are all talking about climate change, about an increase of two degrees in the global average – this poses a particular challenge for Africa, because there is no resilience or capacity to deal with the consequences of the change. This means that droughts in parts of Africa will continue to increase, while severe weather events will increase in other areas and ultimately the food supply will dwindle. Take the example of Mozambique, which has already been hit hard by two cyclones this year. Incidentally, malaria has also returned to the country with the floods.
If all four challenges are taken together, it’s easy to predict that migratory pressures will increase – if we don’t overcome these challenges.
Africa is high on the agenda – also due to the issue of migration. What does this mean for KfW Development Bank?
The migration and refugee flows that we have experienced in recent years have made it clear to politicians and society that Africa’s problems are not just problems faced by a neighbouring continent. Europe’s well-being is inextricably linked to that of our neighbour Africa. A prosperous Africa is essential to achieving sustainable growth and stability, both in Africa and in Europe. Human trafficking and illegal migration can only be overcome if there are economic prospects for young people. In this respect, one of the measures adopted by both the German Federal Government and the European Commission is to increase funding for development cooperation in Africa, and this of course also applies to KfW. As a result, we have significantly increased our FC commitments with Africa.
You have travelled to Africa many times to have a look at projects on the ground. What has made a lasting impression on you and what makes you optimistic in spite of the challenges?
When you are on site, you can see and measure the progress that’s been made. For example, you meet children who are happy they are allowed to go to school; women who can now take family planning into their own hands. We meet mothers with their children who have access to safe drinking water so that their children don’t become ill or even die from water-induced diseases. We see households with electricity – where the people who live there can now read and study in the evening. Not to mention the many young entrepreneurs that we extend loans to and want to grow their businesses and create new jobs. These observations are underpinned by socio-economic evaluations that show significant progress in terms of life expectancy, infant mortality, school enrolment rates, growth rates and more.
"Africa is a rich continent and there are good reasons to be optimistic."
The image of Africa conveyed in the media, poor and without hope, lost in wars, plagued by epidemics – is not the full picture from the ground. Sure – the positive trends just mentioned are not as newsworthy as the renewed outbreak of Ebola or a military coup. Africa is a very, very rich continent. Africa has so many resources, for example, the potential for renewable energy – enough to supply the entire continent, but untapped to date. Africa has wind and hydropower but also solar energy – with twice as much potential as Germany. Experts estimate the capacities for solar energy at 9,000 to 11,000 gigawatts – in Sub-Saharan Africa. By way of comparison: in 2016, the region generated a total of only 122 gigawatts.
So, Africa is a rich continent and there are good reasons to be optimistic. The potential has either not yet been fully exploited or is unevenly distributed.
What new approaches is the German Federal Government pursuing and how is KfW helping to implement them?
The German Federal Government has realigned some things with its focus on Africa. The Federal Ministry for Economic Cooperation and Development ( BMZ) has presented a Marshall Plan with Africa that addresses the above problem areas with an integrated and partnership-based approach and supports six selected “reform champions” in “reform partnerships”. In these new partnerships, reform commitments are agreed as well as substantial financial support, i.e. requirements and expectations are defined. Where we can, we finance these reform efforts both with the BMZ’s federal funds as well as with our own funds. The reforms aim to improve the overall conditions for private investments. We at KfW Development Bank support partner governments, for example, in reforming the energy sector, expanding a deposit guarantee fund to improve financing for small and medium-sized enterprises and in risk hedging for private-sector investments. We are seeing the first reform steps, for example in Tunisia, and are confident that other countries will follow suit.
This article appeared in FC – The Financial Cooperation magazine in 2019.
Last but not least, I want to mention that we are working very hard on the development investment fund of EUR 1 billion announced by the Chancellor at the Africa Summit. The aim is to support European and African companies, both in the SME sector and young innovative enterprises, with their investments in Africa. Given the scale, this will trigger completely new catalysts to stimulate economic development in Africa. Cooperation with Africa has never been this exciting.
Published on KfW Stories: Monday, 7 October 2019