Africa Summit Preventing Europe's Next Refugee Crisis

Today, 400 development officials at the German-Africa Business Summit in Nairobi will explore ways to stimulate the economies of sub-Saharan Africa. German Development Minister Gerd Müller says industry needs to invest more in Africa, not only because it makes good business sense, but to fight the causes of mass migration.
Gerd Müller, the German federal minister for economic cooperation and development, has proposed a "Marshall Plan" of public and private investment, and corporate accounting and tax reforms, for Africa.

 

For Gerd Müller, the German minister for economic development and cooperation, the three-day German-Africa Business Summit starting today in Nairobi is another step toward a "Marshall Plan'' of investment and reforms for Africa. The German government through Mr. Müller's cabinet ministry spends about €4 billion each year on development in Africa, and the European Union spends another €5 billion annually on the continent. But the challenges of the vast region are immense, and the focus of attention at the Nairobi summit is encouraging private industry to invest in Africa, a continent where 23 of 54 countries are already middle-class in terms of income standards. Creating jobs in Africa not only makes sense for Africans, Mr. Müller told Handelsblatt Global, but for Europeans, Americans and others too because investment will help combat future mass migration. Mr. Müller spoke before the summit in Berlin with Handelsblatt Global Editor-in-Chief Kevin O'Brien.

 

In Germany, the European refugee crisis is a major issue. The country has taken in more than 1 million people from around the world over the last two years. Chancellor Angela Merkel wants to combat the root causes of the refugee flow by helping create jobs in those countries that are producing the most refugees. This is a big priority for your ministry. What is Germany doing in the refugee crisis now?

We in the rich countries have a responsibility in the world. Many of the refugees and migrants coming to Germany are fleeing war. We need to state more precisely that the majority have come mainly from the region in and around Syria. Our goals are to encourage an end to the war, and to guarantee the people a realistic future in their home countries, and their ultimate return. Another big portion of refugees coming to Europe are coming from regions plagued by crisis, terror, hunger and a lack of economic opportunities. In this group in particular there are many young people, and most recently, many from Africa. The African refugees are a reminder to Europeans of our responsibility as former colonial powers and of the grave mistakes we made. We have a special responsibility to address this. The refugees are also a reminder of our humanitarian responsibility to place Africa at the center of German and European politics. That is why 2017 is the “Year of Africa’’ for Germany and for Europe.

 

What does that mean in concrete terms for Germany? More money for Africa? More donations? Building more schools in Africa? What can Germany alone do to make a real difference?

 

We must first grasp the vast dimensions of Africa and the opportunities and challenges that the continent presents and view Africa not only as a continent of crises, wars and catastrophes, but as a continent with chances and growth. We must recognize that Europe is bound to Africa by its history. I am telling German and European lawmakers that this is not just an issue for Germany. We need the European Union and now, in 2017, we are at the point where Brussels is sponsoring its own Africa Summit to focus on the challenges. We are now preparing a new E.U.-Africa Contract for the Future, which starting in 2020 would redefine the E.U.’s commitments to the African continent. I am also calling on European industry to look to Africa. From 2035 onwards, Africa will have the biggest labor market with the biggest potential in the world. Today, and it’s often underestimated, 23 of 54 African countries are already middle-income countries. More and more Africans already belong to the middle-classes. That shows what kind of enormous economic prospects and dynamism this young continent will have over the next years and decades. Americans and Europeans must engage with Africa in a totally new dimension – in political, cultural and economic terms. I will cite two figures which show that we still have an enormous need to catch up in Germany. German trade with Africa is not more than 2 percent of total German foreign trade. Only 1 percent of German foreign investment is made in Africa.

I am calling on European industry to look to Africa. From 2035 onwards, Africa will have the biggest labor market with the biggest potential in the world. Today, and it’s often underestimated, 23 of 54 African countries are already middle-income countries. Gerd Müller, German Federal Minister for Economic Cooperation and Development

You are calling on German and European business leaders and politicians to focus more on Africa. What is the E.U. doing now in terms of money? What do you hope will come out of the new E.U. initiative with Africa that is supposed to begin in 2020?

Our ministry invests 50 percent of its budget in bilateral cooperation with 35 nations in Africa. This is classical development cooperation in job training, rural development, government advisory work and health. That is our focus. Our total budget is about €8 billion. The European Union also spends each year about €5 billion in Africa. But public investment alone is not enough to solve the challenges of this continent. What we need is an exponential increase in private investment in Africa. Today alone, 90 percent of investment is private investment. Here there is a need for new incentives to encourage trade in Africa. That is one of my main messages. This “Marshall Plan With Africa’’ will propose new financial incentives for German and European companies to invest in Africa and we will specifically expand trade credit support to export businesses and also especially for investments by small- and mid-sized German businesses (the so-called Mittelstand) in Africa. That is my initiative but our aspiration is to motivate our European partners to do the same.

Can I play devil’s advocate for a second? How optimistic are you that the European Union will be able to cooperate on these challenges when its members can’t even agree to implement a pact to share the incoming refugees among nations in the E.U. bloc?

Brussels is strongly engaged in Africa. But as I’ve said, starting in 2020 there will be a new initiative. Germany already has very good collaborative activities going on the continent with France, Britain and Italy, to name just three partners. In 2017 we will make Africa one of the focuses of the G20 Summit (Germany is the host nation.) Not only is the German chancellor hosting the summit, but the finance minister and our ministry are preparing a “Contract With Africa.’’ That means we will attempt to win the support of the G20 nations for specific projects – in investment, but also for cooperative schemes to fight corruption and tax fraud as well as the shifting of global corporate profits that are earned in Africa but then sent out of the continent. In trade with African countries, we estimate that about $100 billion leaves Africa each year through corrupt tax practices and the shifting of profits by international multinationals, especially firms that are based in G20 nations. We are hoping very much to reach a new understanding during the G20 on these points.

So it’s not a donors’ conference per se, but you are seeking to change tax practices and close loopholes that are detrimental to Africa’s own development?

We are seeking to close tax loopholes to strengthen and expand the real income of African nations and to increase the value creation of African countries and set new guidelines for investment. That means both supporting and challenging Africa. Support means we help African nations meet the goals they are also setting for themselves. The “Agenda 2063,” a vision of growth in Africa, is about goals set by African governments. We Germans and Europeans shouldn’t try to tell Africa what to do. Africa has to go its own way. And the Agenda 2063 is their way forward. That means combating corruption, having good governance, human rights for all, especially for women, education and job training. That is the program devised by African governments that was just reconfirmed at a recent African Union Summit. Those African countries that have set these goals and followed them are doing well economically. Seven of the 20 fastest-growing economies in the world are in Africa. African countries that are serious about rule of law and good governance receive not only public funds – we will in the future have a preference for dealing with these countries, in so-called reform partnerships. And, even more important, they will attract private investors from around the world. Just one example: Rwanda sold a state government bond that was more than seven times oversubscribed by investors. What makes Rwanda so special? According to the latest report by Transparency International, Rwanda has climbed to 50th place on the Anti-Corruption Index. Botswana is in 35th place and Namibia is now 53rd. In the battle against corruption the index ranks these three African countries ahead of Hungary, Romania, Italy, Greece and Bulgaria. That is the reason for the inflow of private investment. There’s more than enough money in the world. We need new forms of investment. That is a challenge for the African Development Bank, but also for European banks, or the World Bank. The countries which battle corruption and institute good governance attract private investment.

Mr. Müller in November 2014 speaking with African farmers in Abeokuta, Nigeria.

From today through Friday, the German government and business and industry associations are sponsoring the second annual German-Africa Business Summit in Nairobi. The event will draw about 400 business and government representatives from Germany, Europe and Africa. What do you hope to achieve?

Our message in Kenya is: battle corruption and improve legal guarantees for contracts for European companies seeking to do business in Africa. In Nairobi, there will be a top-level exchange among leading representatives from German industry and politics, including the foreign minister and myself, with our African counterparts, in particular from the east African region. We will launch several concrete initiatives there, and will not only talk about the issues, but take action. For example, I plan to seal a jobs training initiative there between Germany and Kenya. Germany’s main emphasis in official development cooperation is on job training and job training partnerships with governments but also with companies. Our message is: We are betting on Africa’s youth. African youth need education and job training and vocational training possibilities.

Is more money for Africa the answer?

The solution to the situation in Africa is not a question of providing enough money. The solution to the challenges in Africa lies in the African countries themselves. By taking their own initiative. I repeat: good governance, the fight against corruption, investment in the country and its youth. Take 1960 in Ghana as an example. Back then, Ghana had a bigger gross domestic product than Spain and South Korea. Looking at where these countries now stand, 55 years later, in relation to each other, then something obviously went wrong.

So more money isn’t the answer?

With the population of Africa expected to double by 2050, the challenges in Africa will not be solved with public money alone. We need private investment and fair trade. Africa is a continent of endless resources that were exploited by Americans and Europeans -- raw materials, rare earths, metals, oil, everything that the continent had. We have up until this day no fair pricing or fair standards for the people at the beginning of the value chain in Africa, or for their environment. That must change on a global scale. The goal must be the implementation of standards that we have committed to already. We have already committed in the World Trade Organization to not using child labor, to paying decent wages, and to not destroying the environment like the rain forests or mangrove forests in Nigeria. These are standards that have been around for a long time but unfortunately they are undermined at the local level. We must require international multinational companies to observe these standards. Controlling, transparency and sanctions must be built up. Companies like Apple must guarantee, if they don’t do so already, that they mine rare earths in the Congo under fair conditions. Cocoa and coffee companies like Nestle must guarantee that no children are working at slave wages to pick cocoa and coffee beans. When I consider that 90 percent of the coffee harvest in Africa and especially in West Africa is taking place under inhuman conditions, and we in Europe and also in the United States only pay €10 per kilogram of coffee, of which only a tiny share remains on the plantation, then we are all responsible for this situation. Not only as nations and international corporations, but also every consumer.

The solution to the situation in Africa is not a question of providing enough money. The solution to the challenges in Africa lies in the African countries themselves. By taking their own initiative. I repeat: good governance, the fight against corruption, investment in the country and its youth Gerd Müller, German federal development minister

Last question and thanks for your time: We are living through a time of increasing populism and nationalism.  Germany is trying to rally support on a global level for Africa and wants to elevate the continent to a major focus of the G20 Summit in Hamburg in July. Isn’t this a pipe dream considering the current isolationist mood?

We are living in one world, a world that has become a global village. That means big challenges such as protecting our climate can only be addressed when we all get together and develop common approaches, by setting common standards for industry, for transportation, for controlling greenhouse gases. We could overcome world hunger if we worked together. Global challenges like the Ebola epidemic are a threat to us all. Each day, 7 million people around the world travel by plane. Infections that 50 years ago could have never reached the U.S. or Europe are now in airplanes. These dangers are not over. But we could conquer them by working together globally. We’re also bound together by our common values and world ethos, which is: each person has a right to life. And those who are strong have a responsibility for those who are weak. That is true on an individual level as well as for nations. Americans, Europeans and Germans are strong nations with strong economies that are strongly dependent on the resources of emerging markets and have exploited their people and environments for hundreds of years. And because of that, we, as nations who are in a stronger position, are responsible for investing more in these people and their future. Together we can solve the problems.

Then despite the current populist mood, you think this argument is still persuasive?

Whoever in this world doesn’t recognize that they have this responsibility will ultimately pay a big price. If we don’t help to solve the problems in crisis countries, then the problems will come to us. A continent like Africa whose population will double by 2050 – that’s on the near-term horizon – require answers to questions like adequate food supply and proximity to jobs for young people. This is all possible through a collaborative global effort. But if we ignore the situation, and think only of ourselves and erect walls, then the people will come to us and take what is their right, namely a life lived in dignity.

Mr. Müller, thank you for your time.

Thank you.

 

Kevin O'Brien is the editor in chief of Handelsblatt Global in Berlin. To reach him: [email protected]