Infrastructure
Africa is on the move
Globalisation is not passing Africa by. Investments in the continent are turning out to be increasingly attractive, according to Joseph Mbuyi, Director of the KfW IPEX-Bank Representative Office in Johannesburg. He finds the continent's development encouraging.
The author
Joseph Mbuyi is director of the KfW IPEX-Bank Representative Office in Johannesburg and has his eye on the market and an ear for his clients.
Africa – over one billion people live on this continent which makes up more than one fifth of the planet's entire land surface. Many of them still live in poverty, but change is in sight. The African population is making increased attempts to stimulate their own economic development and participate in the move towards globalisation. In fact, this large continent is becoming an increasingly promising trade partner, sales market and investment location for German and European exports. It is true, however, that Africa's 55 countries mean it cannot be seen as one homogenous whole.
Key topics for investors, such as, infrastructures and established institutional conditions like legal security, reliable payment transaction systems or a functioning tax system, are very different in many African countries, particularly in sub-Saharan Africa. And even if relatively advanced economic conditions such as those in South Africa, Kenya, Tanzania and to some extent Nigeria are created, high fluctuations in the exchange rate and, in particular, corruption scandals, appear to frighten away international investment.
Financing experts from KfW IPEX-Bank
Joseph Mbuyi and Christian Bevc speak about the enormous potential for growth in Africa and the infrastructure desperately required there (KfW Group/Bernd Kliebhan).
Still, the West would do well to look more closely and with greater interest at the area of the continent south of the Sahara. And it should not only keep its eye on one of the largest, most developed economies in there: South Africa. The country certainly offers excellent conditions for the private sector with its substantial number of natural resources. It also has a diversified industry and a regulated financial sector with an independent central bank. Given South Africa's situation, it is no wonder that many companies use the country as a spring board into the African market, primarily into countries of the Southern African Developing Community (SADC) which together include more than 240 million people.
And yet other countries in sub-Saharan Africa also offer attractive opportunities for direct investment and exports. For European, and German companies especially, the region entails an interesting growth market in which their product quality is met with particular appreciation. The key to tapping into these countries is to hedge exports and projects using reliable cover instruments from state export credit agencies (ECAs). Most European ECAs are very supportive of investments in this part of the continent. In addition to business risks, they also provide hedging for political risks. A loud and clear signal for the European export industry.
Read more below the picture gallery.
Make way for Ethiopia
This would not have been possible without ECA coverage and international partners: the Ethiopian Railway Corporation is extending the connection between the cities of Awash and Weldia. The line is 464 kilometres long and connects the northern regions of Ethiopia to the heart of the country. Plans are in place to add further lines to connect the north with the capital, Addis Ababa, and to Ethiopia's neighbouring country, Djibouti, where there is access to the sea port. The financing project in the amount of USD 865 million is a strategic cornerstone in the development of Ethiopia's infrastructure
Opportunities for investment are also available through the cooperation of financing partners with local, regional and multinational banks. These partners are able to present themselves as intermediaries for large-volume, commercial financings. The Rwandan airline company benefited in 2016 from a special structuring form (on-lending). KfW IPEX-Bank provided the Trade and Development Bank (formerly the Eastern and Southern African Trade and Development Bank – PTA Bank) with a loan for two wide-body Airbuses. The Trade and Development Bank in turn channelled the funds as debt capital to the local airline
RwandAir.
These kinds of supranational financial institutions, such as the
PTA Bank founded in 1985, aim to make funds and services available for developing the economy in eastern and southern Africa. Their solid balance sheets and good prospects make it easier for suppliers and investors to gain a foothold in African countries.
Although the countries located in sub-Saharan Africa are still in a very heterogeneous stage of development, and are facing large, key issues such as health, security and education, it is quite clear that these markets require large amounts of investment on the one hand, yet offer enormous sales opportunities on the other.
Key issues regarding local infrastructure and energy can seldom be solved without the involvement of foreign economic partners. Sub-Saharan Africa is already busying itself with the construction and expansion of transport routes and mobile networks, renewable energy use such as wind and solar power, waste disposal and processing or raw material utilisation. Africa is still at the starting line when it comes to many of these issues, which is an incredible opportunity for the economy and society.
Published on KfW Stories: Monday, 26 June 2017
The described project contributes to the following United Nationsʼ Sustainable Development Goals
Goal 9: Build resilient infrastructure, promote sustainable industrialization and foster innovation
Non-existent or dilapidated infrastructure hinders economic efficiency and thus engenders poverty. When building infrastructure, the focus should be on sustainability, for example, by promoting environmentally-friendly means of transport. Factories and industrial facilities should also ensure that production is in line with ecological aspects to avoid unnecessary environmental pollution.
All United Nations member states adopted the 2030 Agenda in 2015. At its heart is a list of 17 goals for sustainable development, known as the Sustainable Development Goals (SDGs). Our world should become a place where people are able to live in peace with each other in ways that are ecologically compatible, socially just, and economically effective.
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