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28/09/2016

African politicians criticise ‘risk averse’ German companies

Development Policy

African politicians criticise ‘risk averse’ German companies

The Congo River, proposed site of the Inga Dam 3, one of the valuable infrastructure projects important to Africa.

[MONUSCO Photos/Flickr]

While German politicians have labelled Africa as a “continent of opportunity” for the German economy, African representatives lament the perceived risk-aversion of German companies. EurActiv’s partner Tagesspiegel reports.

Thembinkosi Mhlongo believes that there has been enough discussion about large infrastructure projects in Africa. The Deputy Executive Secretary of the Southern African Development Community (SADC) regrets above all that although international donors want to build dams, power line, power plants and roads, when it comes to the “industrialisation of Africa, there’s no money.”

Inga 3 dam project equally as important as Suez Canal

Franck Mwe di Malila, the Democratic Republic of the Congo’s deputy minister of international relations, also believes that there isn’t enough foreign investment in large-scale infrastructure projects. He added that the Inga 3 dam project, located around 250 km down river from the capital Kinshasa, is “as important as the Suez Canal.”

The dam will be capable of producing around 40,000 megawatts of power when it is finished. The project has been in the pipeline for decades. According to the deputy minister it should supply Egypt, Nigeria and South Africa with power. Construction costs are estimated to be around $80 billion.

>>Read: Germany announces new approach to Africa development cooperation

Environmental impact assessments are still yet to be carried out, with critics suggesting the project’s impact will be twice that of China’s controversial Three Gorges Dam.

Germany is a “continent of opportunity” for German companies

Before and after the summit, foreign affairs minister Frank-Walter Steinmeier and development minister Gerd Müller once again labelled Africa as a “continent of opportunity”, which can offer German companies a lot. During the summit though, the atmosphere was a little more reserved.

This is because the memory of “white elephant” projects is still fresh in the mind, a pertinent example being the Nigerian aluminium factory that was built but never opened, as well as several gas power plants that, to this day, have still not generated a single watt of electricity.

For this reason, the impatience of the minister when he took to the stage was obvious. Mwe di Malila closed with a question, asking German companies whether they are at all willing to take risks for the sake of good business.

>>Read: German ministries spearhead new strategy for Africa

Incomplete project applications endanger investment

However, one of the speakers voiced opinions that did not tally with those of his colleagues. Madagascar’s economic affairs minister, Herriluto Raveloharion, spoke at length about “good governance”. Credit export guarantees and investment agreements become ever less important if an investor has to go before a court.

“It is our responsibility to strengthen our institutions,” he said. He went on to speak openly about the difficulties his government faces after two years of political crisis. If, for example, a large mining contract is negotiated, every minor detail must be clarified, as renegotiations are rarely possible.

Mhlongo pointed out one major shortcoming, namely, that project applications by many governments are often left incomplete, meaning that banks find it difficult to process their requests and funding is rarely granted.

The risk-adverse German economy and weak African governments will find it hard to do any business together at anything more than a snail’s pace.