Introduction:

In the third segment of our exclusive interview with Prof. Dr. Stefan Liebing, CEO of Conjuncta GmbH and ex-Chairman of Afrika-Verein der deutschen Wirtschaft e.V., the focus shifts to the intricate web of challenges and opportunities in African development. Dr. Liebing shares his views on the role of the German government, private sector investment, and the need for innovative approaches to address the complex issues at hand.

R:Ed: What efforts are been made to inform the African population that the more illegal immigrants there are, the more legal immigrants will be hampered? 

Stefan: My impression is that there is not enough and the people in charge of international service will be waiting for decisions before they start communicating about what the new project is going to be. This is still at the political level, but the German approach to Africa has a lot of misunderstandings and it makes a lot of mistakes. There are even more important problems when it comes to how to support development in Africa. It should not be our main objective to pull all qualified or high-potential people out of their countries so that they can work in Germany. In the mid to long- -term, our objective should be to support development locally so that a lot of those people can contribute to their society’s development and can help economic growth in their own countries. The type of traditional development that we do is just not suitable in most cases..

R:Ed: Trade laws are crucial but often overlooked. Why is this the case?

Stefan: When considering how to structure economic development in Africa, it’s crucial to emphasize that the responsibility lies with African governments and societies to determine their strategies. While external assistance can play a role, the framework, direction, and strategy should be decided by the African partner countries. The ultimate goal is to generate employment, a task best undertaken by the private sector rather than the government. Hence, there’s a call for support from Germany or Europe to aid Africa, focusing on private-sector investment.

Many African economies possess the capability to foster gradual growth. Despite having innovative, hardworking, and well-trained individuals, certain elements are still missing. Accelerating this growth to keep pace with the significant population increase requires two essential components: capital and technology. By facilitating the import of these components, we can expedite the development process. Although we do not want to dictate or influence the strategy’s direction, we can contribute to expediting the process by providing capital and technology.

In Africa, numerous private sector players, including over 1,000 German companies, are keenly interested and invested. However, a common challenge is the necessity for bank financing for their ventures on the continent. A pertinent example is a friend planning a major solar power plant in Africa. While everything is in order with the host government, securing the required 60 million euros in financing remains a hurdle.

Presenting this case to German banks, the challenge lies in convincing them to accept a contract with an African government as the sole security for the 60 million euros. This intricacy stems from European banking regulations that, unfortunately, hinder the European financial system from financing projects crucial for African development, projects desired by African nations and German investors alike. Despite having economically viable and beneficial projects that could contribute to development, they remain unrealized due to the difficulty in arranging financing. 

Let’s stop traditional development aid and let’s use some of the money to issue a guarantee for these loans to European banks, so that we can start financing private investments that are going to create Jobs, and this is what is not happening”

R:Ed: Is Europe aware of the risk of losing ground to China and Russia in Africa?

Stefan: Business investors are very much aware and still they do need some Government support to get projects across the line. We have a lot of projects that are 99% ready for implementation. But sometimes we need a Government institution to close the remaining 1% gap, when it comes to guaranteeing, currency risk, and financing aspects. Now, looking at the Government side, people are aware in general, that it is important for Germany to do more in Africa. However, the approach from many of the ministries is different from what is needed on the ground. Germany said, that for the past 60 years, we have been doing traditional projects, and this is what we want to continue.

The German government has issued a new paper, saying they are going to streamline cooperation with the private sector, in making development happen. And their priority number 1 is, we need more German Trade Union representatives in steering committees for development projects. That is the first point that shows up in the Government strategy for business support and development in Africa, I can just say, are you serious? 

We have the projects that will contribute to economic growth. People need jobs in Africa, the German private sector can help in providing some of these jobs if they have the support required from the German Government to make these projects happen. And the German Government said we need more German trade union representatives in steering committees, this is just completely absurd. 

R:Ed: Does Germany believe there is an excess of civil servants, or is there a need for more jobs for civil servants?

Stefan: Maybe, but I can’t confirm. I had an online seminar, where I was speaking, about the Compact with Africa Summit that is coming up. Olaf Scholz (the German Chancellor) invited 17 African heads of state to Berlin. During the seminar, I was trying to make just two points on the summit. First of all, we are very good at taking PowerPoint presentations about the big potential for investment in Africa. Usually, we only look at, what we believe might be required in Africa. However, what politicians and developers in this country forget is that there is a specific structure in German industry, that will only allow German investors to go for certain sectors and business models because we don’t have representatives in other sectors. 

Let me give you an example, I have been working in Africa for twelve years and in that period, I had more than a dozen ministers of mining who came from African countries to see me. They all said let’s talk about mining activities and investment in Africa. And I said, it is great you are coming but, I have to tell you, there is just simply no mining industry in Germany. I know there is a lot of potential in mining in Africa, but I don’t have anyone who pursues the business model of investing in mining in Africa, there is no German mining in Africa. There is also no German mine in Russia and Brazil. So let’s not fool ourselves by organizing mining conferences,  power points or whatever about mining investment in Africa, with no single German company with any interest in investing. 

Let us not spend and waste German Taxpayers’ money on all sorts of initiatives that German Development aid is doing for investment in Sectors in Germany does not have an industry.

What we need is to focus on areas, where Germany can contribute as there are German private-sector investors who want to do something in these African countries. What we need to do is to help them, from a Government perspective to make funding or financing of their projects feasible, nobody is looking for subsidies, and no German player wants a subsidy for investing in Africa. 

What they need is access to loans from commercial banks. And they are not going to have these loans unless there will be Government guarantees for some of the projects. The German Government needs to stop trying to set the agenda for the private sector. That is not going to work. Instead, they should try to understand what realistic opportunities the German private sector can pursue, and they should help them by making financing possible and by reducing bureaucracy, including the bureaucracy for hiring people in Africa and providing them with visas. 

R:Ed: Your insights suggest a mismatch between German industry structure and African needs. How can this be addressed?

Stefan: It is not enough to invite heads of state for a summit, the question is what you discuss and decide there. And what we do at the moment is not very consistent.

We make bureaucracy and financing more complicated because of additional banking regulations or supply chain laws. At the same time, we want more private investment to happen and then we focus development aid on sectors where there is no German investor. So, let’s rethink it and the summit that is coming in two weeks will be a good occasion to excite Berlin and also towards development in Africa. I am far from seeing any of these being realised. 

R:Ed: I was talking to some people from Russia yesterday. They said, it is fantastic to work when the competition comes from Germany, because Germany is not competitive. The Germans put in people the Russians call “plankton”, they are people who are doing nothing else but stop the wheels from turning.  They wonder if the German government deliberately puts not very bright people in charge to stop things from working. The Russians of course put the brightest people forward.

Stefan: There are some very bright people in the sector, but we also have a lot of bureaucratic and traditional development aid approaches that are making things very difficult and slow. I have given up the traditional way, I don’t think it is worth the effort to try and convince those who do not want to change their approach. 

What we need to do is to turn things around, we need to speak to our friends in Africa, to understand what projects they are doing and if they need German partners. Then we assess if these projects have a realistic chance of finding German partners, and we approach those who can add value to the project on the German side. Put everyone around the table and there we see if there can be an agreement and this might require, if there will be certain gaps for foreigners to fill. 

If it is not possible, to convince the German Government to issue financing guarantees, then maybe I need to work with investors from the UK, Luxemburg, Mauritius, and China. But at least I have certain pieces that are done by Germans so that this project can happen. So if the approach is not a holistic approach from the German side, maybe we need to turn around and look at it from an African perspective and look at the individual project level and try to put teams together, including but not restricted to Germans, so that this projects can take off and can be done.

R:Ed: This is R: Ed’s experience too. Overall, most Africans, see it as well, they notice the problem, and cannot understand why it is not dealt with. I think your insights are incredibly interesting, and I wonder what will happen next.

Stefan: At the seminar, there was a representative of the German Finance Minister, who is in charge of the Compact with Africa summit initiative, and he said, with the CwA initiative we are not interested in German companies investing in Africa. He thinks it should be a private-sector decision; there should be no Government involvement.  He said they are organizing the summit so that Africans can meet and discuss reform that is required to attract more private investment, but we are not going to support any of the German companies directly who want to go into Africa.

R:Ed: What was your response?

Stefan: I had finished my speech by then and did not have any chance to respond. I am teaching business administration at a German University, and yes from a theoretical standpoint of view, I would say the Government provide the framework and private investors make the decision on where to invest and you better not subsidise in the long run. 

However, there is one exception in theory. The theory suggests that government intervention is justified in areas where market mechanisms fail to function efficiently, often observed in fractional markets defined as public goods or natural monopolies. In instances where there is no market competition, such as in the case of electricity utilities needing to build multiple power lines, a natural monopoly is created and regulated. In such scenarios, where consumers don’t have the option to choose between multiple service providers, government involvement becomes essential to ensure fair regulation and effective service delivery. 

Also German Financial market are still malfunctioning because banks do not have a full overview as to what risk are etc, they are not investing because of regulatory requirements. We have projects that are desirable from a development perspective and I believe is important for Africans to have this investment in their continent. 

If this is the case for justification for Government involvement, you could say, we use taxpayer’s money to close the small gap a private investment is away from being implemented. 

The alternative option. that the German Government is keen on, is that you have a private investor who sponsors himself, and builds a solar plant, say, that brings a return on investment. If this perfect solution of a 100% private investor sponsoring himself doesn’t work, because you cannot mobilize financing and there is a misfunction in the market, then there is a second alternative. This is to use taxpayer’s money to get a return, that is, you do as much private investment as possible and if there is a small gap to be closed, you use the taxpayer’s money for that in terms of guarantees. 

Either you have a full private investment, or you spend 100 million taxpayers’ money, or we have a private investor who can do 95 million but has a gap of 5 million because projects are not profitable, there is too much risk, interest rates are high, banks regulation etc. So why not take 5 million of taxpayers’ money and still get the project going? The problem is that nobody feels responsible for the 5% solution because it is neither a development aid nor a classic business promotion. 

R:Ed: Is this approach applied by other countries?

Stefan: Yes, it’s not new, that is why I said, we should also do it, in Germany, instead of discussing for the next 10 years why there are no jobs in Africa and the number of illegal immigrants keeps rising..

Stay tuned for more in-depth discussions on pressing issues in future segments.

Co author- Rosalie Lalhensia Ngassama