European countries investing in Africa

Africa is booming with the fastest-growing middle class in the world. European countries are investing heavily in a number of key sectors across the continent.  

There has been a massive spike in investments from European countries in a multitude of projects in Africa. This investment drive aims to strengthen ties between the two continents, aid the faster development of rural Sub-Saharan regions of Africa, and make the most of Africa’s potential in developing sustainable resources that will eventually benefit both parties. The sixth summit between the African Union (AU) and European Union (EU) in 2020 concluded the commitment towards developing the Global South.

Growth       

Africa shows tremendous potential, having the youngest and the fastest-growing middle class in the world. The continent is teeming with the potential for an economic boost—large-scale investments in digital transformation, critical infrastructure and low-cost renewable energy. After the EU-AU summit, more and more European organisations are coming forward with strategic investments in Africa with five dominant partnerships in mind- partnership for a green transition, digital transformation, sustainable growth and jobs, peace and governance, migration and mobility. Of these themes, the dominant is creating a shift to cleaner energy and hundred per cent access to power. African countries like Kenya, Ethiopia, Egypt, Rwanda, Tanzania, and Nigeria are along the growth vector when developing cleaner and greener energy. The leading green energy sources in Africa are hydro-, geothermal-, solar- and wind power. However, these countries and the continent are massive prey to global warming and climate change, hindering the fast-growing renewable energy industry. Investments directed towards improving the technological capabilities of Africa catalyse creating a healthy ecosystem. Building power-efficient, low-carbon emitting, and climate-friendly technology will enable these countries to access and make most of the natural resources bestowed upon the continent.

Significant Investments made by European organisations

European Investment Bank- 

Approximately 20 per cent of the total investments made by Europe to Africa are from the European Investment Bank (EIB). Located in Luxembourg, the EIB is the European Union’s leading lending arm. In 2019, the bank had provided financing worth three billion euros to support the 10.7 billion euro transformational investment across Africa. Sixty per cent of the EIB’s investment supported private sectors and created new job opportunities and business development in Africa. They supported 58 new investment projects across 22 African countries. Most of these projects helped improve sustainable transport, develop renewable energy, provide access to clean water, and improve agriculture. In June 2021, the EIB approved 4.1 billion euros in new financing for renewable energy, clean transport, and COVID-19 recovery in Africa.

KfW Development Bank- 

Germany’s KfW development bank is second on the list of major European organisations to invest in Africa. In 2019, on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), the KfW bank had financed around 2.1 billion euros for numerous projects in Africa. In 2021, KfW invested 20 million euros in the Regional MSME Investment Fund for Sub-Saharan Africa (REGMIFA). REGMIFA help small enterprises that are creating jobs in Sub-Sahara Africa. KfW accounts for 17 per cent of the total investments made by European countries in Africa.

French Development Agency- 

The French Development Agency (AFD) aims to create job opportunities for the African youth. The AFD account for 9 per cent of the total investment of European based organisations in Africa. The AFD invested in projects across 44 countries in Africa and invested 4.9 billion euros during 2021. They support South Africa’s sustainable urban development policy, in addition to granting loans to metropolitan municipalities for infrastructure projects and development policies. The AFD is one of the major institutions to support carbon-efficient technological expenses in Africa for climate change fostering resilient urban development.

Other European organisations that have made significant investments in Africa are: 

  • Commerzbank (Germany) 5 per cent of total investment, 
  • OPEC Fund for Development (Austria) 4 per cent of total investment, 
  • Swedish Export Credit Corporation (Sweden)3 per cent of total investment, 
  • Netherlands Development Finance Corporation (Netherlands) 3 per cent of total investment, and 
  • Swedish Export Credit Scheme (Sweden)3 per cent of total investment.

Top Beneficiaries of European Investments

Many African countries have directly benefitted from the investments made by the various European countries. Amongst them, Nigeria is the leading beneficiary of foreign direct investment. Approximately 27 per cent of total European investment is geared towards Nigeria, and for the right reasons. Nigeria is the top oil producer on the African continent. However, it aims at diversifying its economy. Some of the major countries investing in Nigeria include the United Kingdom, the Netherlands, and France. The country attracts large-scale investments owing to its enormous domestic market (most populous country in Africa) and, it has the largest GDP in Africa. Most importantly, the Nigerian Government has undertaken policies of economic liberalisation and strategic alliance with foreign companies.

Egypt is another raging vogue among investors owing to its status as the second-largest market in Africa. Almost 20 per cent of total investments made by European countries are in Egypt. The main driver behind this trend is Egypt’s diversified economy, coupled with the repositioning of North African global investment destinations. In 2018, Egypt was made the global investment destination by Sahar Nasr, the country’s minister of investment and international cooperation. Its population size is also substantial. At about 100 million, Egypt has the potential for growth and demand for consumer goods.

Tanzania has also benefitted from European investments, close to fourteen per cent of the facility value. Tanzania has a growing population and the new port in Dar Es Salaam with a connecting railway, strategically located on the east coast of Africa. It is laden with an abundance of natural resources and minerals. Mineral resources like gold, diamond, copper, coal, and even natural gas deposits along its coastline have attracted investors. Sectors like agriculture, transportation, manufacturing, and petroleum mining are some of the investment opportunities in Tanzania. The Government has also planned to utilise technologies in new media to diversify Tanzania’s economy to one that is technology-based.

Other African countries like Ethiopia (4.65 per cent), Kenya (4.36 per cent), and Morocco (3.85 per cent) have also been among the prime beneficiaries of European investments. These regions have a fertile tourism market, especially Morocco. Ethiopia and Kenya have renewable energy development projects- Kenya is among the leading geothermal energy producers globally, and Ethiopia boasts the largest hydroelectricity project in Africa. 

Africa’s prime location and tremendous potential in numerous sectors like sustainable energy development, tourism, agriculture, mining, oil production have attracted investors from all over the world. European countries have also decided to capitalise on this opportunity and dabble their funds in countries across the African continent.

For more information on who the largest investors in Africa’s infrastructure are, please contact us here.

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