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February

The cornerstones of a Marshall Plan with Africa – A new partnership for development, peace and a better future


Speech by Federal Minister Müller at the German-African Business Summit, 9 February 2017 in Nairobi

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Africa is a continent with its own very distinct history, greatness and culture. We are linked with each other through our common history, and we are committed to living up to our responsibility. Successfully managing the challenges facing Africa is not only vital for the fate of Africa – both its people and its natural environment – but also for the future of Europe.

After all, Europe and Africa are partner continents. That is why we are embarking on an effort to reach a new dimension of cooperation and partnership – at the political, social and economic levels. Germany, Europe and the world must understand that Africa is not the continent of crisis, war and disaster. No – Africa is the continent of opportunity and growth! Africa has a young population that is growing dynamically. Decision-makers in governments have voiced a new political commitment to reforms, to good governance, to anti-corruption efforts and to compliance with human rights standards.

Africa has tremendous assets. Eleven of the world's twenty fastest-growing economies can be found in Africa. The continent is home to the fastest-growing ICT market in the world. Africa has taken charge and is moving forward. Economic development and success hinge on countries' own efforts and greater ownership. The time of development assistance between donors and recipients must be replaced by a new partnership.

We count on Africa embarking on its own road through the AU's Agenda 2063. We will make a point of increasing our cooperation with reform-minded countries. We particularly support young people and women. We focus on education and vocational training – a key ingredient to success.

Germany has made 2017 a year with a special focus on Africa. One priority on our agenda for our G20 Presidency will be a Compact with Africa. We are working to update the Cotonou Agreement, creating a new future-oriented agreement between Europe and Africa. I have presented a proposal: the cornerstones for a Marshall Plan with Africa are a new outline for an integrated overall approach. The document presents ideas on how to design this new partnership – politically, culturally, in terms of peace and security, and in terms of an economic partnership.

There is no ONE solution, but it is important that Africa be in charge. You, our African partners and friends, laid down your own goals in the Agenda 2063. Based on that, we want to jointly develop strategies. We want to listen to your proposals – including here in Nairobi today, on this important day, at a big conference. Thank you very much for making this conference possible, President Kenyatta, and Minister Zypries, distinguished German and African business representatives, and Professor Große.

Here in Nairobi, for example, it is plain to see that Kenya is growing. You only have to look around: Kenya has attracted large German companies, such as Merck, BASF, Bosch, B. Braun Melsungen, and Volkswagen. And the German Business Association in Kenya has doubled its membership in a mere two years, from 70 to about 140 companies! It is my pleasure to present to you my cornerstones for a Marshall Plan with Africa. Our develop-ment money alone cannot meet the challenges. We need the private sector! Public money has to mobilize private investment, for instance through government guarantees. We have to expand our current programs. And we need additional instruments, especially for SMEs.

Africa is a continent of opportunity and growth. By 2035, Africa will have the largest potential workforce in the world. One in two African countries (23 out of 54 countries) is now a middle-income country, similar to India and China. As many as 400 million Africans are already part of the middle class. 50 years from now, that number will be more than a billion – almost half of the continent's people!

However, Germany has 400,000 companies, and less than 1,000 of them are active in Africa. Germany's trade with the African continent only accounts for two per cent of our foreign trade. Direct investment on a larger scale only goes to 13 countries. This accounts for about one per cent of German foreign direct investment. That has to change!

Africa needs investment more than ever. It is expected that Africa's population will double by 2050. 20 million jobs a year will then be needed. We can create these jobs together! Also, we finally have to see to it that Africa is able to feed itself. The problems can be resolved. A world without hunger is possible. The resources are there. Yet Africa is spending an annual 35 billion US dollars on food imports. More than 230 million people in sub-Saharan Africa, almost one in four, are still suffering from hunger.

We need a paradigm shift, a new dimension of cooperation. The African Union has already realized that. In its Agenda 2063, it has presented an ambitious vision: good governance, efforts against corruption, investment in education, and empowerment of women. Making that happen is, above all, a task for national governments. But we can and we must support Africa in its efforts to achieve its own goals more quickly. And we are going to do that – at multiple levels.

First, Germany is using the opportunity of its G20 Presidency, making Africa a focus of the agenda.

Second, the European level – things are moving forward on this front, too. The European Com-mission and the EU member states are working jointly with their African partners on a new EU-Africa strategy. Planning for the EU-Africa summit in fall 2017 has already begun. The Cotonou Agreement will expire in 2020. We are in the middle of our talks on an agreement to follow it.

And third, the Marshall Plan with Africa. It represents an overall concept that goes far beyond development policy. It brings together economic, financial, trade, security, legal, environmental and health policy.

After all, there are six prerequisites to sustainable development:

First, well-trained and healthy people.We need a revolution in education. To me, this is the key element. If you have no vocational education, you have no skilled labor, no investors, no jobs and no tax revenue. Africa's young people are the continent's future and a great opportunity. That is why we are launching, together with the AU, the Skills Initiative for Africa. We are financing infrastructure, materials, scholarship programs, and teacher training. In particular, we want to empower girls and women. We will start in Kenya, Tunisia, Nigeria, Cameroon and South Africa. 15 further countries will follow.

One key element for the success of Germany's economy is our dual vocational training system. In Kenya, together with all our partners we are today launching a system of practice-oriented training. We want to assist the market all across East Africa in introducing common vocational training standards and relevant certificates.

Second, businesses need reliability and confidence. Good governance and anti-corruption efforts are thus a matter of priority. But when it comes to corruption, it takes two to tango. German companies have to set an example! Transparency creates confidence. Accountability, legal certainty and the rule of law are prerequisites for companies to be willing to invest. In Rwanda, for example, we are supporting the government's efforts to set up an audit institution.

Third, peace, security and political stability are the basis for everything else. Nobody invests in a place where bullets are flying. The AU and Africa's regional organizations are tackling the challenges. We continue to help strengthen the African Peace and Security Architecture (APSA), through funding and through strategic and administrative know-how.

Fourth, enterprises need reliable financing. For SMEs in particular, better risk coverage is vital. We will strengthen our relevant programs. This is about export credit guarantees – in other words, more "Hermes" guarantees for more African countries –, and about investment guarantees. At present, the German government has given guarantees for almost 5 billion euros in a total of 44 African countries.

We also want to reinforce private investment through new investment products. After all, there is enough money in the world, and that money is looking for meaningful, sustainable investment opportunities. It should be possible to finance local investment in local currency. To that end, we are creating funds and bonds for African banks.

Fifth, enterprises need a stable infrastructure. There will be no investment if there is no reliable power and water supply, if there are no good roads and accessible ports, if there is no broadband internet. This is both a huge challenge and a huge opportunity. Africa has a chance to leapfrog to a resource-conserving infrastructure for the 21st century. This is an opportunity for German companies. Through your know-how, you can make Africa's industrialization climate-smart. Take power generation. Kenya is a leader in this field. It relies on hydropower, geothermal power and solar energy – with massive support from German development cooperation, by the way. Infrastructure requires investment. In other words, governments need tax revenue! In some African countries, the tax ratio is a mere ten per cent. The average in Europe is 35 per cent. This is money that is not available for development!

Thus, one of the best possible investments is investment in better tax and customs systems. For example, we are supporting training programs for tax officers carried out by the African Tax Administration Forum in South Africa. And here in Kenya we are currently supporting the envisaged African Tax and Crime Academy.

Germany is also using its G20 Presidency to make headway on the fight against tax fraud and profit shifting through a Compact with Africa. After all, the world's developing countries are losing an annual 385 billion US dollars in tax revenue as a result of these phenomena – almost three times the amount of annual official development assistance.

And finally, sixth, companies need attractive and large markets. The closer the integration of African trade areas, the more attractive these areas will become for foreign investors: more potential customers, more mobility, lower transaction costs. This is, above all, a task for African governments. But Europe has to do its share, too. We have to give African countries access to the EU Single Market and reduce discrimination, and we need fair trade that fosters value chain development in Africa. What we need is a Mediterranean partnership and, in the long term, a "fair trade zone" between our two continents.

To sum up, we will give a new focus to our development policy. In the future, we will concentrate on reform champions. Countries that fight corruption, develop their tax systems, invest in education and work for gender equality will be able to count on more support from us. Private investment has to be increased and protected against risks.

And Africa needs a stronger political voice. This means that the continent needs a seat on the UN Security Council and a stronger role within the WTO. The relations between the African Union and the European Union, too, have to be strengthened. We need to reposition EU-Africa policies. We have to concentrate scattered responsibilities within Brussels, and we need better trade relations.

For Africa and Europe, we want a new partnership for development, peace and a better future. The future of us all depends on this. The Marshall Plan with Africa is our invitation to enter into a dialogue. Nobody would be so bold as to say "I know how it works." But we are making proposals on how we could get active together these coming years. And these proposals are up for debate.

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