1. Introduction
There are growing economic links between the economies of Central and Eastern Europe (CEE) and sub-Saharan Africa (SSA) in terms of both trade and investment. In the scope of this paper, Central and Eastern Europe is defined as including eight of the 10 member states that joined the European Union (EU) in the 2004 accession wave, as well as the three member states that joined in the accession waves of 2007 and 2013.1 Trade between Central and Eastern Europe and sub-Saharan Africa has increased significantly in the last decade and a half. Total exports from Central and Eastern European countries to sub-Saharan Africa more than doubled in value from $2 billion in 2005, to exceed $4.5 billion in the early 2010s, before declining to just under $3.5 billion in 2016. The share of all imports to sub-Saharan Africa from Central and Eastern Europe rose from around 1.3 per cent to exceed 4 per cent over the same period.2
Politically, too, Central and Eastern European countries have begun to increase their diplomatic representation and networks in sub-Saharan Africa. Precise figures are hard to gauge, but available data show that investment is on the rise for some Central and Eastern European countries. In the case of Poland, for instance, the total stock of Polish foreign direct investment (FDI) in sub-Saharan Africa had reached some $238 million by 2017. South Africa is the principal sub-Saharan African investor in Central and Eastern Europe, while, from the latter, Poland invests the most in sub-Saharan Africa. Interest among private-sector actors in deepening engagement is gradually increasing on both sides, but while political efforts to promote commercial relationships have certainly intensified after the steep drop-off that followed the transitions in Central and Eastern Europe in the 1990s, economic re-engagement remains tentative.
There is a strong case to be made for greater economic re-engagement, especially in terms of investment. During the 2017 summit meeting of the African Union (AU) and the EU, held in Abidjan, Côte d’Ivoire, the EU committed to greater investment to promote job creation in Africa. In Central and Eastern Europe, particularly for the Visegrád Four (V4) – the Czech Republic, Hungary, Poland and Slovakia – the political commitment is strongly linked to the migration agenda. The V4 countries are part of the EU’s ‘anti-migration bloc’ and want to demonstrate to their populations that they are doing something. There is a perception that investment can create jobs and thus deter economic migration.
Economic re-engagement between Central and Eastern Europe and sub-Saharan Africa has the potential to support inclusive growth in both regions. For the countries of sub-Saharan Africa, economic transformation that will lift citizens out of poverty and ensure quality jobs and secure livelihoods for a rapidly expanding youth population is contingent not only on greater intra-African and global trade, but also on industrialization and value-added production. Some Central and Eastern European countries are looking for new markets for their goods and services, as well as investment destinations with cheaper labour costs to maintain strong growth rates in line with their economic development strategies. These countries can contribute technology and skills that will help countries in sub-Saharan Africa achieve their growth and development goals. As such, the private sector in both regions can provide a real impetus for development, provided the right sort of job-creating investments and policies are put in place.
Investors – whether from some more traditional investor environments such as the US or more recent sources such as China, India and other Asian economies, as well as investors in Central and Eastern Europe – are intensifying their focus in sub-Saharan Africa. A greater role for the private sector in development initiatives is the latest trend in the EU’s policy actions towards Africa, as evidenced by the EU’s External Investment Plan (EIP) or, more broadly, the Africa-Europe Alliance for Sustainable Investment and Jobs. This is partially a result of the assumption that development aid is more effective if complemented by inclusive private-sector growth.
Central and Eastern European countries are adept and flexible in terms of engaging with new markets. Unlike economic actors from traditional investment countries, particularly in Western Europe, they do not carry colonial or, in the case of the US, great power ‘baggage’, so may more easily be viewed as equal partners. Notably, too, their small and medium-sized enterprises (SMEs) and multinationals can offer genuine partnership opportunities in sub-Saharan Africa. Of course, cooperation with Central and Eastern Europe alone is not going to satisfy Africa’s development or job creation needs, but an increasing orientation towards the region promises dividends.
For Central and Eastern Europe, it is imperative to improve outward investment promotion strategies and adopt a more proactive role in encouraging sustainable investments in sub-Saharan Africa.
While continuing to promote policies aimed at fostering trade between the two regions, the countries of Central and Eastern Europe and sub-Saharan Africa could pay greater attention to strengthening their investment relationships, for both economic and political reasons. Incentivizing responsible private-sector investment is a complex endeavour with many variables. Adjustments in investment policy – both outward and inward – and greater political commitment will be needed on both sides if private-sector engagement is to increase. Policies in Central and Eastern European countries directed at boosting private-sector investment into sub-Saharan Africa will fail if investment destinations in the latter region do not play their part in enabling a predictable and stable business environment that can both attract and sustain investment in those countries.
For Central and Eastern Europe, it is imperative to improve outward investment promotion strategies (internationalization services) and adopt a more proactive role in encouraging sustainable investments in sub-Saharan Africa. This is an all-encompassing task that will require an overhaul of existing national development assistance policies together with greater state financial and non-financial support (the latter consisting largely in economic diplomacy and its ‘matchmaking’ services). First and foremost, however, governments will be required to rethink their approach in devising a comprehensive and coordinated strategy – that actively includes the private sector – towards sub-Saharan Africa.
At the same time, governments in sub-Saharan Africa should maintain a policy course aimed at improving the business climate (rule of law, transparency, infrastructure, a predictable regulatory environment) to accommodate foreign investors. Consideration should be given to signing bilateral investment treaties (BITs) and double taxation treaties (DTTs) to encourage greater investment protection and financial incentives. Critically, too, commercial strategies towards Central and Eastern European countries need to be put in place before a strategic and targeted presence can be pursued in certain markets in that region. As in the case of the Central and Eastern European countries themselves, resource constraints may make it more prudent to focus on establishing a diplomatic presence in a few select countries, rather than on attempting to open embassies in every country of the region.
Equally important to these endeavours will be the continued development of the EU investment framework, which has recently expanded to include ambitious initiatives such as the EIP and the Africa-Europe Alliance for Sustainable Investment and Jobs. Such initiatives aim to include the private sector in overseas development opportunities and to provide the same access point – provided the latter meets the development objective of the fund – to Central and Eastern European private-sector partners as to private entities in the more established member states.
Governments in Central and Eastern European countries can bring valuable insights to bear in terms of creating a favourable business environment. Having undertaken the necessary reforms to transform their economies from socialist to market-based models over the course of the past 30 years, albeit in very different contexts and with different types of support, Central and Eastern European countries are uniquely positioned to share their experience (upgraded as ‘transitional experience’ in official EU development documents) of attracting inward private investments to spur their economic growth.
Chapter 2 of this paper presents an overview of economic relations between Central and Eastern Europe and sub-Saharan Africa, with a particular focus on investment. In Central and Eastern Europe, greatest attention is placed on the countries of the Visegrád Four (V4) – the Czech Republic, Hungary, Poland and Slovakia – which are not only some of the most economically advanced countries of the region, but which were also very active in sub-Saharan Africa during the socialist period. However, references are also made to other Central and Eastern European states, including Romania and Bulgaria. Chapter 3 offers a rationale for greater investment links. It then reviews perceptions of the Central and Eastern European private sector regarding investment in Africa, thereby highlighting challenges and opportunities (Chapter 4), before examining sub-Saharan African countries’ policies to promote inward investment (Chapter 5). Chapter 6 identifies areas of cooperation and mutual learning for the regions, and Chapter 7 analyses policy measures to attract sustainable investment into Africa from both national governments and the EU. In conclusion, Chapter 8 sets out options for strengthening investment links to all relevant actors.
This paper is part of a series of publications produced by the Chatham House Africa Programme on the topic of re-engagement between Central and Eastern Europe and sub-Saharan Africa, with particular reference to the utility of transition experiences to capacity-building, inclusive growth and good governance. In 2017 Chatham House published a research paper titled Central and Eastern Europe and Sub-Saharan Africa: Prospects for Sustained Re-engagement. The current paper draws on roundtable discussions and semi-structured interviews, conducted between October 2018 and April 2019, with businesses, chambers of commerce (CCs), business associations, senior policymakers in Central and Eastern European and sub-Saharan African governments, and senior EU civil servants, as well as a number of ambassadors and embassy staff.3
1 The following are considered as the CEE for the purpose of this paper: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia (all of which joined the EU on 1 May 2004); Bulgaria and Romania (both of which joined on 1 January 2007); and Croatia, which became the 28th member state of the EU on 1 July 2013. Cyprus and Malta, which were part of the 2004 enlargement, are excluded from this study.
2 Cibian, S. (2017), Central and Eastern Europe and Sub-Saharan Africa: Prospects for Sustained Re-engagement, Chatham House Report, London: Royal Institute of International Affairs, p. 17, https://www.chathamhouse.org/publication/central-and-eastern-europe-and-sub-saharan-africa-prospects-sustained-re-engagement (accessed 19 Jun. 2019).
3 Roundtables were held under the Chatham House Rule: ‘When a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.’ Research interviews were confidential.