With the recent ‘AfricaConnect’ €400 million initiative under DEG’s management, the German Development Ministry is looking to increase private sector investments and cooperation with the African continent.
The German government’s policy, in terms of targeting its ODA spending, has followed the principle of diffusing aid globally on the basis of need, with little geographical bias. Its development finance institution – DEG – has reflected this policy, having a global geographical focus for its investments portfolio.
The German Investment Corporation (DEG), a subsidiary of the KFW banking group is one of Germany’s development actors, is one of the largest DFIs in Europe. With more than half a century of experience in development finance, it provides funding and advice to German and local companies operating in developing countries and emerging economies.
The DEG’s priority investment areas are the financial sector, the manufacturing industry, infrastructure and agribusiness. The fund’s portfolio includes investments and financing in the following regions: Asia, Latin America, Africa (with a focus on sub-Saharan countries) and European countries outside the EU, as well as the financing of supra-regional projects.
In 2019, the German development minister, Gerd Müller, announced a new €1 billion Development Investment Fund for boosting private investments in Africa. The fund’s goal is to facilitate and support the entry of German businesses into African markets or to help African businesses grow. The new fund has three pillars: ‘AfricaConnect’, ‘AfricaGrow’, and the ‘Business Network Africa’.
The fund’s first initiative is the DEG led ‘AfricaConnect’ initiative, under which German and European companies can apply to receive loans on attractive terms for their projects in Africa providing their planned investments are ecologically and socially sustainable.
The funding is provided particularly to companies investing in the G20’s Compact with Africa countries: Benin, Burkina Faso, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia. “This is where the future growth markets lie. Africa is home to six of the world’s ten fastest-growing economies”, stated Müller of the initiative.
The fund expects 2020 to be particularly challenging due to the spread of the COVID-19 pandemic which will also have an impact on the economic climate in developing and emerging market countries. DEG states that it is working on finding the appropriate short- and medium-term solutions and tools to the issues currently encountered by partner companies working in developing markets.