MIL-OSI Banking: Opinion: After Merkel’s exit, Germany must remain committed to Africa

9

Source: African Development Bank Group

In August, at a meeting of the G-20 Compact with Africa in Berlin, I had the distinct pleasure of joining some 30 African heads of state and government, and fellow heads of international organizations, to bid farewell to outgoing German Chancellor Angela Merkel.

Chancellor Merkel has been a dear and loyal friend of Africa.

I know that I am not the only public figure involved in furthering the continent’s development who will miss the truly productive interactions we have had with her.

The Compact with Africa, launched in 2017 under Germany’s presidency of the G-20, was a result of Merkel’s initiative. She has long taken a genuine interest in the continent and shown a keen desire for strong economic growth and development.

And I am confident that our collective efforts — homegrown and those from friends of Africa like her — will ultimately serve our continent well.

At the African Development Bank, we have felt Chancellor Merkel’s influence through Germany’s consistent contributions to the African Development Fund, the bank’s concessional lending window. The fund advances economic and social development in 38 least developed African countries for projects and programs, as well as technical assistance for studies and capacity building activities. Since 1973, as the third largest contributor, Germany has cumulatively made €4.2 billion ($4.7 billion) in contributions.

The chancellor’s confidence in the future of Africa is in sync with my own well-known optimism for our continent. One of the many areas where we both see eye-to-eye is in renewable energy investments. We agree 100% that expansion in renewables is critically important if we are to achieve our global climate targets and accomplish a key goal of the African Development Bank’s High 5 strategy to light up and power Africa.

Germany is a major contributor to the Africa Climate Change Fund, which supports African countries in building resilience to climate shocks and transitioning to sustainable low-carbon growth. Under Chancellor Merkel’s leadership, Germany has also supported the adoption of the African Renewable Energy Initiative, which is hosted at the African Development Bank.

Keeping COVID-19 under control is essential for Africa’s economic recovery and growth. Recognizing the inherent inequalities in global access to vaccines, Merkel has consistently called for an increase in production, a fairer system of distribution, and a shift towards building Africa’s own vaccine production capacities.

For Africa to thrive and grow, the drive to do so must come mainly from within Africa.

This much is without question.

Buoyed by the German leader’s enthusiasm for our continent, German companies are more active in Africa today than ever before, with considerable growth over the last few years. We have witnessed an uptick in German interest and participation at the Africa Investment Forum, an unprecedented marketplace that crowds in regional and global infrastructure investments. European and German participation at the 2021 Africa Investment Forum from Dec. 1 to 3, in Abidjan, Côte d’Ivoire, will be no exception.

This is thanks, in no small part, to the confidence that Merkel has helped inspire. From 2017 to 2019, German investments in Africa rose by roughly $1.84 billion. And while this is still a minute fraction — 1% — of the country’s global investments, it is a step in the right direction. With African countries continuing to make their investment environments increasingly attractive and transparent, I expect investment inflows to grow.

As Chancellor Merkel prepares to make a graceful exit from the political scene, I earnestly look forward to strengthening the partnership between Germany, Africa, and the African Development Bank.

Germany should support expanded investments by the private sector from the G-20 in Africa through the Compact with Africa and the Africa Investment Forum, supported by the African Development Bank.

We similarly expect Germany’s continued support for the bank’s drive to optimize its capital base with the inclusion of hybrid capital. Such investments will help accelerate much needed development and bridge the continent’s almost $100 billion a year infrastructure investment gap.

Germany can further help with political support for the reallocation of International Monetary Fund-issued Special Drawing Rights to multilateral development banks, including the African Development Bank, which is a prescribed holder of SDRs and can leverage any allocated SDRs by 3 to 4 times. Such allocations would also be complementary to the IMF’s support for the microeconomic stability of countries.

The bank needs further support in its efforts to leverage the balance sheet of the African Development Fund — the bank’s concessional finance window for low-income countries — by accessing capital markets, boosting resources for countries, leveraging resources, and ensuring value for money for its donor countries.

Lastly, support from Germany and G-7 countries for the bank’s Just Energy Transition Facility can help African countries accelerate their transitions to renewable energy sources.

What a resurgent Africa needs today are productive and mutually beneficial partnerships. In this regard, Chancellor Angela Merkel has been one of our most ardent champions.

We bid her farewell with a deep sense of appreciation and gratitude. And I am confident that our collective efforts — homegrown and those from friends of Africa like her — will ultimately serve our continent well.

This Op-Ed was previously published on the Devex  Global Views page on November 29. Click here for original version.

MIL OSI Global Banks