Is the new Compact with Africa a pragmatic approach?

31st Jul.
BTP Advisers

Last month saw the inaugural G20 Africa partnership Conference, the highlight of Germany’s 2017 G20 Presidency. Germany’s “Marshall Plan with Africa” came as a surprise, its first ever major plan for African development. Previously it had acted under the guise of multilateral organisations like the European Union or the G8. Yet the Compact with Africa initiative clarifies Germany’s preferred approach to the continent.

2 Mins (380 Words)

Compact with Africa is effectively a platform for private investors, African nations, and international organisations to promote foreign investment into African infrastructure and businesses. The platform is an archetypal piece of German diplomacy. Multilateral and “mutually beneficial”, its objectives are vaguely defined and its interests’ left unstated.

The motives behind the Compact with Africa are perhaps revealed by its current signatories: Côte d’Ivoire, Ethiopia, Ghana, Morocco, Rwanda, Senegal, and Tunisia. In contrast to the EU Commission’s Cotonou Agreement, the German plan targets the frontrunners for economic growth. Its fundamental aim is to accelerate the growth of Africa’s promising economies, while doing little for the stragglers.

Relying on overlapping development roadmaps, from the IMF’s Capacity Development for Africa to the African Union’s Agenda 2063 Programme, the onus of Germany’s plan lies with private sector investment. Be it long-term loans or foreign direct investments, private sector funds will inevitably diffuse to the most financially profitable areas.

The leading companies from the leading African economies will probably benefit most.

Yet, if Germany seeks to build truly sustainable economies in Africa, the G20 initiative will have to do more than rely on partner organisations to lower the risk for private investment. Without strong new investor incentives, it is difficult to see how this new G20 platform will suddenly direct funding to the infrastructure and institutions required to lower such risk.

In African countries that already have strong infrastructural and institutional foundations, the initiative could indeed be “mutually beneficial”, in the words of the German Finance Minister. It encourages African countries to help domestic prospects engage with foreign investors. African businesses would benefit from a more clarified relationship between international organisations and foreign investors. However, it offers little for the majority of African nations that remain at the bottom of the league table as Least Developed Countries – many of whom would be better served by Germany supporting a new non-reciprocal trading relationship between them and the EU.

This initiative reveals the essentially pragmatic, rather than altruistic, nature of Germany’s Africa policy. While China has been accused of directing foreign aid to spread its geopolitical influence – it is hard to see how Germany’s G20 policy fundamentally differs, except that  it denies a route from aid to trade for African LDCs, preferring to direct funds into Africa’s existing winners.

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