Expert interview on the economic potential of Sub-Saharan Africa
KfW IPEX-Bank
Specialist financier for the German and European export industry and project finance
Sub-Saharan Africa is rapidly gaining in strategic and economic importance for Europe and especially Germany in the face of increasing global system competition.
Thorsten Metz , Head of KfW IPEX-Bank ’s Representative Office in Johannesburg, talks about the chances and challenges of the region.
Thorsten, with over two years of experience as the Head of the Representative Office in Johannesburg, how would you evaluate the impact of Sub-Saharan Africa on Europe's and Germany's economic interests and objectives?
Sub-Saharan Africa hosts some of the world's fastest-growing economies, showcasing remarkable diversity not only in culture but also in economic sectors. Countries like Botswana, the Democratic Republic of the Congo, Tanzania, and South Africa are prominent in mining, while Nigeria and Angola excel in energy production. Additionally, South Africa and Kenya serve as significant manufacturing and services hubs.
Despite ongoing challenges in certain parts of the region, this presents an opportunity for European companies to invest and expand their exports in this market. Furthermore, fostering increased trade between Europe and Sub-Saharan Africa will contribute to diversifying Europe's global business relationships.
What challenges do you believe the expanding South African market is currently encountering, particularly in light of the election in May 2024 and the expectations for improvements in vital sectors like energy and logistics?
The country's energy supply has recently shown improvement, paving the way for higher growth. However, it remains to be seen whether the new government will address the significant challenges in the infrastructure sector. Heavy investment is required for the rail network and ports to facilitate the flow of goods in support of the country’s export sector that has faced significant logistics constraints in recent years.
You mentioned the significant impact of electricity supply on economic development. How can the expansion of green energy in Sub-Saharan Africa help address this issue, and what business opportunities exist for European companies?
Africa boasts abundant natural resources such as wind and solar energy, and there is a growing private sector involvement in the region. European companies are well-positioned to support the energy transition in Sub-Saharan Africa, with utility-scale investments.
While still in its early stages, green hydrogen presents the potential to create a substantial new industry for local green transition and export. The success of this transition will hinge on the consideration of local needs and the empowerment of the local population.
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Despite minor hiccups here and there, East Africa seems to be economically resilient, while being represented by a lot of politically stable countries. What are the major trends there?
Infrastructure development is booming in Africa in general, but in particular in East Africa, where projected growth is anticipated to hit 5.1% in 2024 and 5.7% in 2025 (up from 3.5% in 2023[1]). Regional integration of mobility networks and advances in legislation & regulation (e.g. adoption of common protocols such as the Luxembourg protocol) are driving large scale investments into rail, ports and roads.
As KfW IPEX-Bank, we believe that especially our engagement in the infrastructure and mobility sectors will not only support European exporters but also drive economic growth for the people in Africa.
Sub-Saharan Africa is rich in various metals that are essential for electric vehicles (EVs) and renewable energy technologies. The green economy is driving the demand. What are the major EV metals found in the region and how would KfW IPEX-Bank be able to support?
The region boasts abundant reserves of metals such as cobalt, lithium, copper, nickel, and graphite, positioning Sub-Saharan Africa as a key player in the global shift towards sustainable energy supply. Additionally, rare-earth metals, crucial for the energy transition, are readily available in the region. With a longstanding track record of financing mining projects worldwide, KfW IPEX-Bank offers tailored financing instruments for the import of these metals into Europe, as well as support for local investments.
We are committed to upholding environmental, social, and governance standards, particularly in Sub-Saharan Africa, to ensure responsible business practices that promote sustainable living and secure the well-being of future generations.
Feel free to get in touch with?Thorsten Metz?and talk about the current topics in Sub-Saharan Africa!
[1] Source: East Africa | African Development Bank Group ( afdb.org )