German engineering companies are missing out on a chance to offset slowing growth in China and Latin America because they are shying away from investments in sub-Saharan Africa, trade group VDMA said.
“The boom in China appears to be over for now. And South America is also slowing. We are in a difficult environment, and Africa is an opportunity that is worth the trouble,” VDMA President Reinhold Festge told a news briefing on Friday.
Sales of German-made equipment to Africa have risen 65 percent to 4.4 billion euros ($4.9 billion) over the past decade, 2.5 billion of which went to sub-Saharan Africa, driven especially by demand for food and packaging machines as well as construction equipment, according to VDMA.
But that is still only a fraction of German engineers’ overall machinery exports of 151.5 billion euros as many have stayed on the sidelines while China, Italy and the United States scramble to set up shop in Africa’s fast-growing economies.
A VDMA brochure on business in Africa — compiled with KPMG and the Handelsblatt Research Institute — highlighted 10 markets where it saw particularly big growth opportunities for German companies, including in Ethiopia, Angola and Ghana.
“The big problem is of course financing. We cannot finance big projects on our own. We need (trade credit insurer) Hermes, we need insurers. But we see hesitation there, partly due to bad experiences made in the past,” Festge said.
The VDMA represents more than 3,000 mainly small and medium-sized companies but also large companies such as Siemens, MAN SE and ThyssenKrupp.
The engineering sector is Germany’s largest industrial employer, with just over one million workers.
[www.af.reuters.com]