How German firms can tap into Africa’s diversification drive

NJ Ayuk

While recent years have seen renewed interest from German companies to do business with Africa, the continent currently accounts for only about 2% of their overseas business. We talk to NJ Ayuk, CEO of Centurion Law Group and a speaker at the upcoming Germany-Africa Business Forum, about how Germany can take greater advantage of the continent’s opportunities.

Describe the potential you see for German companies in Africa?

The natural resources and commodities sectors – which many African economies rely on – have suffered a lot in recent times. For this reason African countries are now looking at diversifying their economies away from oil and mining. I believe German companies – who are strong in areas such as renewable energy, construction, healthcare, chemicals and agricultural machinery – can play an important role in this diversification drive. Companies are also beginning to pay attention to the high demand from Africa for German exports. There is a strong push for ‘made in Germany, sold in Africa’.

Although a variety of industries – from cocoa to fintech – has benefitted from German investment, the country has not been as aggressive in the continent compared to China, India or France. Despite annual trade with Africa of about US$60bn, Europe’s biggest economy has lagged behind others that have done more to seize opportunities. I believe there remains a really big opportunity for German businesses to make respectable returns by bringing their expertise and knowledge to the continent.

In addition, the bulk of German investment in Africa to date has focused on countries such as South Africa, Nigeria and Algeria. They should also explore the opportunities in other countries.

What are some of the misconceptions that German companies have about Africa?

Most Germans are relatively risk averse. Uncertainty is a lethal disease for German investors. Some German companies have shied away from the continent due to issues such as political stability and a lack of an enabling environment to do business. While these are valid concerns, they should also understand that many African countries have made great strides regarding these challenges.

There is also a perception that Africa has no infrastructure, when in fact over the last few years German companies themselves have played a prominent role in developing the continent’s infrastructure. For instance, German architectural and engineering firms have been responsible for South Africa’s World Cup stadiums; in Gabon, a German engineering firm is currently working on a complex road project linking Port-Gentil with Omboué; and they’ve also been involved in the construction of the Mongomeyen airport in Equatorial Guinea.

Your firm, Centurion, is especially active in the oil and gas industry. Can Germany play a role in this sector?

Although Germany is a significant importer of hydrocarbons from Africa, historically it hasn’t played a big role in upstream oil and gas exploration and production. However, where I do see significant opportunities is in the midstream and downstream petroleum industry. Germany has a strong chemicals industry, with unmatched skills in this area. For example, investors can use Africa’s natural gas to produce fertiliser – both for the export market as well as for African farmers to boost the local agricultural industry. There is also potential for gas-fired power plants to help reduce the continent’s severe electricity deficit.

Power generation and distribution is becoming an increasingly important industry, with Siemens and wind power company Nordex already leading the way in this regard. Just like the internet, Africans see power as a right, and they are ready to pay for it. Africa cannot run its industries on generators.