European Union Pushes Forward Its ‘G20 Compact With Africa’ – OpEd


Within the framework of the working European Union group spear-headed by Germany, United Kingdom and The Netherlands, a number of African countries have been listed to receive considerable investment support and further engage in forward-looking projects under the EU flagship titled the G20 Compact with Africa.

The G20 Compact with Africa conference, which aims to help bolster private investment in the world’s poorest, but fast-growing continent, was held November 20 in Berlin, Germany. The conference underscored a strong renewal of business interest in Africa. It further portrays efforts by the European Union members in strengthening economic relations with the continent, especially Africa’s potential for renewable energy.

As widely known, Europe and the United States are jostling with Russia and China for geopolitical influence, critical minerals and new economic opportunities in the world’s second most populous continent. In practical terms, Africa wants the European Union to remain as its partner for mutually beneficial cooperation and play a constructive multifaceted role in promoting the positive development of Africa-EU relations.

G20 Compact with Africa Conference hosted by the Federal Chancellor of Germany with preceding “G20 Investment Summit – German Business and CwA Countries.” According to documents, the member countries of the G20 Compact are Morocco, Tunisia, Egypt, Senegal, Guinea, Ivory Coast, Ghana, Togo, Benin, Burkina Faso, Rwanda, Democratic Republic of Congo and Ethiopia. 

Reports said German Chancellor Olaf Scholz, who has visited Africa several times since taking office in late 2021, held bilateral talks with several African countries before finally hosting a German-African investment summit at Berlin’s Marriott Hotel, Germany. The conference focused on fostering economic reforms, investment in Africa.

At the opening on November 20, German Chancellor Scholz pledged €4 billion ($4.4 billion) for the Africa-EU Green Energy Initiative through 2030 and said Europe’s biggest economy will import “a large proportion” of its green hydrogen needs from the continent.

“This is not about development aid according to the outdated patterns of donors and recipients. This is about investments that pay off for both sides,” Scholz said in a speech marking the opening of a Group of 20 investment summit in Berlin. “For example, on the road to climate neutrality in 2045, we in Germany will need large quantities of green hydrogen and will import a large proportion of it from Africa.”

Scholz urged African leaders attending the conference to speed up efforts to forge an African Continental Free Trade Area (AfCFTA), which he said could create one of the world’s largest free-trade zones. Such a move would enormously increase the market potential for investors, Scholz said, and underlined: “We want to continue to closely support this forward-looking project, which is why we are backing the negotiations and implementation of the agreement as the largest donor.”

The African Union, in September, was made a permanent member of the group of the G20 group of the world’s most powerful countries. “We will not make a common declaration, we do not want to force our African partners into a tight corset,” a German government official said. “Instead, we want concrete results.”

German government officials say Africa can play a key role in helping Germany better diversify its supply chains, secure skilled labour, reduce illegal migration and achieve its green transition.

African countries have long complained that while Europe talks about investment, China actually provides financing without any moral lecturing. Still, Chinese lending in Africa is currently declining, while European interest is rising as it seeks to diversify supply chains. 

But reports also indicated that from March 2020 to August 2023, IMF-approved financing requests reached $25.7 billion. In the last 12 months up to August 2023, 9 percent of its capacity development direct country spending went to CwA countries. All CwA countries receive assistance from the African Training Institute and regional technical assistance centers.

German trade with Africa was 60 billion euros ($65.4 billion) last year, which is a fraction of its trade with Asia but up 21.7% on 2021. Nearly two thirds of German companies want to expand their business in Africa, according to a study by KPMG and the German-African Business Association.

According media reports including the British Broadcasting Corporation (BBC), President William Ruto was in Berlin to explore business opportunities and to secure 200,000 jobs for Kenyans, amid a worsening unemployment crisis in his country. More than a dozen African leaders were there for labour export deals and increased investment in Africa’s economy.

Nigeria’s President Bola Ahmed Tinubu attended the G20 Compact with Africa conference to attract investments in energy and infrastructure and boost trade with his country. Nigeria, as an investment destination, seeks to boost investment rather than rely on debt to revive its economy that is weighed down by sluggish growth, record debt, double-digit inflation, foreign currency shortages and thefts of crude oil, its main export.

Germany, through its KfW development bank, signed an agreement to lend South Africa €500 million ($543 million) at below commercial market rates to help it transition away from the use of coal-fired electricity.

The concessional finance forms part of the $8.8 billion in climate financing offered to South Africa by some of the world’s richest nations in a 2021 agreement known as the Just Energy Transition Partnership. It adds to the €600 million Germany and France extended to South Africa last year. The interest rate on the most recent loan was not disclosed.

This is a boost for the troubled agreement, which has been beset by delays and political infighting in South Africa. Ruling party ministers and officials have expressed concern that the country is being pushed to close down its coal-fired plants, jeopardizing energy security and threatening jobs.

“The signing represents another significant milestone in the implementation of the Just Energy Transition Partnership,” Germans said in an official statement.

European Union has been targeting a comprehensive partnership with Africa. The EU members and business investors keep eyes on exploring emerging opportunities offered by the newly introduced African Continental Free Trade Area (AfCFTA), which provides a unique and valuable access to an integrated African market of 1.4 billion people. In practical reality, the initiative aims at creating a continental market for goods and services, with free movement of business people and investments in Africa.

There great rivalry and keen competition among key global players now. That however, the Compact with Africa, which was created in 2017 under the German G20 presidency, aims to bring together reform-minded African countries, international organizations and bilateral partners to coordinate development agendas and discuss investment opportunities.

Furthermore, the EU-Africa relations have previously adopted a working document to examine: support for AfCFTA implementation and the green transition; improve trade and investment climate between the EU and Africa; reinforce high level public private dialogue.

It also plans to enhance long-term dialogue structures between EU and Africa’s business associations; and unlock new business and investment opportunities, including in the areas of manufacturing and agro processing as well as regional and continental value chains development.

It is now left for African leaders and business people to explore available possibilities and windows that have been opened. The European Union has unveiled €300 billion ($340 billion) alternative to China’s Belt and Road initiative — an investment programme the bloc claims will create links, not dependencies.

The Joint EU-Africa Strategy takes into cognizance the most common interests such as climate change, global security and other significant aspects of the United Nations Sustainable Development Goals (SDGs).

Kester Kenn Klomegah

Kester Kenn Klomegah is an independent researcher and a policy consultant on African affairs in the Russian Federation and Eurasian Union. He has won media awards for highlighting economic diplomacy in the region with Africa. Currently, Klomegah is a Special Representative for Africa on the Board of the Russian Trade and Economic Development Council. He enjoys travelling and visiting historical places in Eastern and Central Europe. Klomegah is a frequent and passionate contributor to Eurasia Review.

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