Content

Pillar 1

Economic activity, trade and employment


Click here to download the full draft (as at January 2017, PDF, 1.3 MB).


Where are we now? Where do we want to go?

Over 50 million young people in Africa are in precarious employment. Youth unemployment there stands at 50 per cent (OECD, 2016). The continent needs some 20 million new jobs each year (IMF, 2016).

There are still far too few training opportunities for young people. And often the training on offer does not match the needs of the private sector. Africa needs many more training opportunities, the status of crafts and trades must be raised and technical and vocational education and training must be made available to all. That also means giving the agricultural sector a more modern image as an attractive area to work in. We need to explore new ways of developing structures for small and medium-sized enterprises. At present, not enough value is added to local resources, trade areas are too small and there is a lack of business initiative and industry.

The declining demand for commodities has meant a slowdown in gross domestic product growth for many African countries. That shows just how dependent Africa is on those commodities. Now it needs to focus more on economic diversification. Africa is not well integrated into the world economy, offers an insecure environment for private investment and some countries face a growing risk of remaining permanently in debt.

Yet there are signs of hope. According to the World Bank, net flows of capital to sub-Saharan Africa have more than trebled since 2000, particularly in stable and well-governed countries where conditions are conducive to development. Local financial systems are emerging in many countries, meaning that businesses can find funding locally.

The World Bank’s 'Doing Business Index' points to a general improvement in the business climate in sub-Saharan Africa since 2010. And Africa also now has innovation clusters, such as Kenya’s Silicon Savannah, which is at the heart of the continent's high-tech boom.

Resource wealth, fertile soils, a growing SME sector – these are just some of Africa's greatest assets. But its greatest asset remains its young people. By 2035, Africa will have the largest potential workforce in the world (Mo Ibrahim Foundation, 2013). It is critical that it use those assets to generate a demographic dividend.

As the world's last untapped market – and one that is right on Europe's doorstep – Africa holds great opportunities, not least for the German private sector.

Our vision can already be found in the AU strategy: "a prosperous Africa based on inclusive growth and sustainable development".


What needs to happen?

 Africa

  • Improve the environment for doing business (including climate for investment and innovation)
  • Develop stable and inclusive financial systems
  • Promote intra-African trade (AU and regional organisations)
  • Achieve rapid and successful conclusion of negotiations on a Continental Free Trade Area (CFTA)
  • Introduce protective tariffs to provide partial and temporary protection of domestic markets against global competition
  • Expand technical and vocational education and training and focus more on the needs of the local labour market
  • Ratify the WTO Trade Facilitation Agreement

Germany

  • Launch an alliance for jobs and vocational training for African's youth in collaboration with the German private sector and international partners (ILO, AfDB etc.)
  • Collaborate with various ministries to put together a package of investment incentives for businesses:
    - conclude pro-development double taxation agreements with more African countries
    - create tax incentives for investment in Africa
    - better dovetail the German Ministry for Economic Affairs' business promotion instruments with German development policy
  • Expand the network for advising German businesses in Africa
  • Support the private sector in establishing sustainable supply chains, for example "no-deforestation" supply chains for soya and palm oil and "fair supply chains" for cocoa, coffee and bananas
  • Support African financial markets and financial service providers (for example through local currency funds or acceptance of currency risks or guarantees)
  • Use Official Development Assistance (ODA) to mobilise private capital to boost employment
  • Develop risk transfer mechanisms (e.g. credit and loan guarantee schemes) and expand such mechanisms (create a new ODA-financed guarantee scheme)
  • Create new investment products (funds and bonds) for private investors
  • Found a digitalisation centre for African business in collaboration with African partners

Internationally

  • Support an economic and energy partnership between the EU and North Africa (e.g. promoting renewable energies, research cooperation and infrastructure partnerships)
  • Expand political and economic cooperation within the Union for the Mediterranean
  • Conclude and implement pro-development trade and economic partnership agreements
  • Support the European External Investment Plan, using it to achieve the goals and focuses of this Marshall Plan
  • Continue integration into and opening of the EU single market
  • Promote local value chains
  • Support the African private sector in satisfying EU quality standards so as to be able to realise their export potential and use the opening of the EU single market to create more value within Africa
  • Review existing investment agreements with African countries and update them in a way that boosts development
  • Promote value creation within Africa (for example using the local workforce for infrastructure projects)
  • Provide information on and promote legal migration opportunities to the EU for the purposes of specialist training
  • Support private investors in preparing funding-ready projects
  • Prevent development banks from crowding out private capital and mobilise private capital instead
  • Deploy Official Development Assistance (ODA) only when projects are not suited to private funding
  • Prevent the foreign exchange risks involved in dollar or euro loans from placing excessive strain on partner countries' budgets; more loans in local currency from development banks

continue to Pillar 2


BMZ glossary

Close window

 

Share page