Stefan Liebing is chairman of the Africa Association of German Business. The manager calls for a better structure of African farms. Jan Rübel asked him about small farmers, the opportunities for German start-ups and a new fund.
Dr. Stefan Liebing is chairman of the Africa Association of German Business. He is the owner and managing director of Conjuncta GmbH in various management functions in the energy industry, most recently at EnBW Energie Baden-Württemberg AG.
Mr Liebing, sometimes people from the German business sector say that there is hardly any opportunity for smaller companies to get involved in Africa. Is that true?
Dr. Stefan Liebing: That's partly true. We still don’t have enough financing options for small volumes. It takes a lot of effort for banks to examine such projects. They are only able to recover their costs from a certain investment level up. This affects small businesses, making it harder to finance smaller ventures in Africa.
Can this burden be reduced?
No, I don’t think so. The transaction costs could be subsidised in areas where developmentally meaningful investments are being considered. If a bank can’t recover its previous auditing costs over the interest on the loan for a project in Africa, a cash infusion could help.
From the German agricultural market perspective, where do you see specific opportunities to become active in Africa?
The agricultural sector is one of the hardest areas for German companies. This is because only very few of the German mid-sized enterprises in agriculture or food processing are building factories or farms abroad. There are only very few investors. Hardly any German farmer ever gets the idea to expand by buying another farm in Malawi, for example. And there are hardly any large German food companies like you can see in our neighbouring countries. Therefore, I only see few investors in that arena.
And what about other industries?
Liebing: It’s better in other areas. For IT start-ups, I see great opportunities to help the agricultural sector in Africa. The focus is on optimising agricultural processes or supporting market transparency or logistics. German companies are well positioned in that area as well as in energy supply and infrastructure. 40 per cent of food in Africa spoils because it is not stored properly. This problem of post-harvest losses could be addressed by German logistics companies. And then we have exciting companies that are more interested in selling products and promoting agriculture, but that's where local investors are needed: The mid-sized sector has companies that would be of great interest to African agriculture, offering machines for food processing or packaging, fertilisers or seeds, and agricultural machinery or tractors.
'Africans need to develop their own initiative'
So what’s the problem?
There is a strong need for well-structured farms that can afford things like that.
AGRA wants to be involved in building these structures. As an entrepreneur, how do you assess this commitment?
I think it's important because in agriculture we need Africans to develop their own initiative. Again and again it becomes apparent: Africans rightly place great importance on defining projects and strategies – and then allowing us to contribute to them. If we jointly finance a processing plant or a tractor, it has enormous potential for both sides. A modern agricultural sector is the most efficient way to fight poverty and secure food provision – and it's also a profitable business opportunity. It is no coincidence that the African Development Bank plans on investing approximately 24 billion US-Dollar in agriculture and agribusiness by 2025.
Critics say: AGRA isn’t African at all, because the money comes from American foundations.
Well then, the question remains: Do we want to have a philosophical discussion or move forward pragmatically? African farmers are suffering from insufficient foreign investors willing to invest their capital there. The African people mostly have to dig into their own resources to make this leap. The quickest way to accomplish that is with the help of development funds or foundation endowments. Key is, however, that Africans ultimately decide. And at AGRA, the majority of decision-makers are Africans.
Do you foresee any risk that smallholders may be marginalised in this entrepreneurial approach?
Well, here in Germany nobody could be involved in land grabbing in Africa – even just theoretically. As I said, we have no such companies. Especially German medium-sized companies take great care that they adhere to sensible, social and environmental standards. I think we need large, professionally operating companies. I seriously doubt that the concept of solely promoting smallholders is the instrument of choice. We are facing such an enormous challenge: Africa's population is expected to double by 2050, and food demand will likely increase by 70 per cent over this period – and 20 million new jobs a year will have to be created in Africa. That’s more than what needs to be created throughout the entire European Union. We can only accomplish that if all possibilities are exhausted at the same time. Look at the population growth projection. We probably won’t even succeed if the G20 countries combine all their efforts. Therefore, no stone should be left unturned. Smallholders are supposed to be supported with development funds, and larger units must emerge that can afford innovation. I know, for example, that Airbus is moving around a lot in terms of weather forecasts. Should that be denied to the Africans, just because they are expected to continue to work in very small units?
'Investments are to be promoted'
After all, those are recommendations that our own agricultural sector doesn’t adhere to: the trend towards larger entities, the use of fertiliser and hybrid seeds ...
I mean, in Africa, that should be implemented as well. In light of the rapidly growing population, more and more production is needed. For me, the main goal is for the least amount of people in Africa as possible to suffer from starvation. If this necessitates the use of chemical products, we have to make sure that people are trained to use them properly and that it does not harm the environment. It’s hard to tell people that they can’t eat because we are reluctant to use more productive seeds for environmental reasons.
There are media reports about a fund that the Federal Government wants to set up for Africa. What's that all about?
Chancellor Angela Merkel announced a few weeks ago at the G20 Africa Summit of the German-African Business Association that there should be a Development and Investment Fund for a total of one billion euros. The idea behind that is to promote investment projects by German medium-sized enterprises that are developmentally meaningful and create jobs, especially if they can’t stand on their own legs yet because a bank is too cautious or a medium-sized company fears losing everything, if it is expropriated or if there are political difficulties.
Is this a type of export credit guarantee similar to a Hermes cover?
No, it will consist of several different components. But this is still being discussed. It includes guarantees, but also smaller loans. The billion euros are earmarked until the end of the legislative period.
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