Africa is booming with the fastest growing middle class in the world. European countries are investing heavily in several key sectors across the continent.
There has been a massive increase in investments by European countries in a multitude of projects in Africa. This investment campaign aims to strengthen ties between the two continents, help the faster development of rural sub-Saharan regions of Africa, and fully leverage Africa's potential in developing sustainable resources that will eventually benefit both sides. The sixth summit between the African Union (AU) and the European Union (EU) in 2020 concluded the commitment to develop the Global South.
Africa shows tremendous potential, as it has the youngest and fastest growing middle class in the world. The continent is brimming with potential for an economic boost: large-scale investments in digital transformation, critical infrastructure and low-cost renewable energy. Following the EU-AU Summit, more and more European organizations are making 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 one is creating a shift toward cleaner energy and 100 percent energy access. African countries such as Kenya, Ethiopia, Egypt, Rwanda, Tanzania and Nigeria are at the vector of growth in the development of cleaner and greener energy. The main sources of green energy in Africa are hydroelectric, geothermal, solar and wind energy. However, these countries and the continent are massively prey to global warming and climate change, hampering the rapid growth of the renewable energy industry. Investments aimed at improving Africa's technological capabilities catalyze the creation of a healthy ecosystem. The creation of low-energy, low-carbon and climate-friendly technology will allow these countries to access and take advantage of most of the natural resources granted to the continent. Investments aimed at improving Africa's technological capabilities catalyze the creation of a healthy ecosystem. The creation of low-energy, low-carbon and climate-friendly technology will allow these countries to access and take advantage of most of the natural resources granted to the continent.
Significant investments made by European organizations
European Investment Bank-
Approximately 20 percent of the total investments made by Europe in Africa come from the European Investment Bank (EIB). Located in Luxembourg, the EIB is the main lending arm of the European Union. In 2019, the bank had provided financing worth €3 billion to support transformative investment of €10.7 billion in Africa. Sixty percent of EIB investment supported the private sector and created new employment and business development opportunities in Africa. They supported 58 new investment projects in 22 African countries. Most of these projects helped improve sustainable transportation, develop renewable energy, provide access to clean water, and improve agriculture. In June 2021, the EIB approved €4.1 billion in new financing for renewable energy, clean transport and COVID-19 recovery in Africa.
KfW Development Bank
German development bank KfW is second on the list of top European organizations investing in Africa. In 2019, on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW Bank financed around €2.1 billion for numerous projects in Africa. In 2021, KfW invested €20 million in the Regional MSME Investment Fund for Sub-Saharan Africa (REGMIFA). REGMIFA helps small businesses that are creating jobs in sub-Saharan Africa. KfW represents 17 percent of the total investments made by European countries in Africa.
French Development Agency
The French Development Agency (AFD) aims to create job opportunities for young Africans. AFD represents 9 percent of the total investment of European organizations in Africa. AFD invested in projects in 44 countries in Africa and invested €4.9 billion during 2021. They support South Africa's sustainable urban development policy, in addition to providing loans to metropolitan municipalities for infrastructure projects and development policies. AFD is one of the leading institutions supporting carbon-efficient technology spending in Africa for climate change and fostering resilient urban development.
Other European organizations that have made significant investments in Africa are:
- Commerzbank (Germany) 5 percent of total investment,
- OPEC Development Fund (Austria) 4% of total investment,
- Swedish Export Credit Corporation (Sweden) 3 percent of total investment,
- Netherlands Development Finance Corporation (Netherlands) 3 percent of the total investment, and
- Swedish Export Credit Scheme (Sweden) 3 percent of total investment.
Main beneficiaries of European investments
Many African countries have directly benefited from the investments made by different European countries. Among them, Nigeria It is the main beneficiary of foreign direct investment. About 27 percent of total European investment goes to Nigeria, and for the right reasons. Nigeria is the main oil producer on the African continent. However, it aims to diversify its economy. Some of the top countries investing in Nigeria include the United Kingdom, the Netherlands and France. The country attracts large scale investments due to its huge domestic market (the most populous country in Africa) and has the largest GDP in Africa. More importantly, the Nigerian government has undertaken policies of economic liberalization and strategic alliance with foreign companies.
Egypt is another raging fad among investors due to its status as Africa's second largest market. Almost 20 percent of the total investments made by European countries are in Egypt. The main driver of this trend is Egypt's diversified economy, along with the repositioning of North Africa's global investment destinations. In 2018, Sahar Nasr, the country's Minister of Investment and International Cooperation, named Egypt as a global investment destination. Its population size is also substantial. With around 100 million, Egypt has potential for growth and demand for consumer goods.
Tanzania It has also benefited from European investments, close to fourteen percent of the value of the facility. 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 loaded with abundant natural and mineral resources. Mineral resources such as gold, diamonds, copper, coal and even natural gas deposits along its coast have attracted investors. Sectors such as agriculture, transportation, manufacturing and oil mining are some of the investment opportunities in Tanzania. The Government has also planned to use technologies in new media to diversify Tanzania's economy to one that is technology-based.
Other African countries such as Ethiopia (4,65%), Kenya (4,36%) and Morocco (3,85%) are also among the main beneficiaries of European investments. These regions have a fertile tourist market, especially Morocco. Ethiopia and Kenya have renewable energy development projects; Kenya is among the world's leading producers of geothermal energy, and Ethiopia has the largest hydroelectric project in Africa.
Africa's prime location and enormous potential in numerous sectors such as sustainable energy development, tourism, agriculture, mining and oil production have attracted investors from around the world. European countries have also decided to take advantage of this opportunity and invest their funds in countries across the African continent.