8. Conclusion
Economic links between Central and Eastern Europe and sub-Saharan Africa have intensified since 2004, when a number of Central and Eastern European countries acceded to the EU. However, the current levels of engagement should not be the ceiling for either region, nor should trade be the most dominant form of engagement. There are clear potential benefits – inclusive economic growth, quality job creation, transfer of technology and skills – on both sides to not only keep this relationship alive but elevate it to a new level, thereby increasing investment partnerships. An examination of investments from emerging economies and areas of the world that have traditionally been less active economically in sub-Saharan Africa serves to demonstrate that it is possible to forge closer ties.
This trend has become even more evident as investment in Africa moves away from its traditional focus, which was primarily based on resource extraction. There are indications that Africa could in some instances replace South and East Asia – including China – as a manufacturing base for global businesses, due to the rising costs of labour in the latter.93 Investments into Africa are no longer solely motivated by a desire to exploit the abundance of natural resources on the continent. This creates new opportunities, and should provide impetus for deepening investment ties.
Businesses in Central and Eastern European countries bring to the table a mix of advantages as part of the private sector of developed economies, but having emerged out of transition experiences. While the Central and Eastern European private sector offers the technologies, and skills in sectors such as agribusiness and ICT, that are important to development in Africa, it also offers advantages that some other players might lack, such as the ability to navigate difficult markets (an area in which it already has experience), and a positive image created through a meaningful contribution to African development in the past, as well as a lack of colonial ‘baggage’. However, businesses need to be wary of the context within which they operate. Among businesses that have successfully entered the sub-Saharan African market, there is a strong understanding that a long-term perspective is needed, rather than an expectation of short-term gains.94 This sort of thinking needs to extend across the Central and Eastern European region, to counter the perception that Africa is a place to make quick wins.
Improving investment levels between sub-Saharan Africa and Central and Eastern Europe will require significant efforts on both sides. In each case, a different set of policies will have to be pursued by national governments to bring about a noticeable change in investment levels. While sub-Saharan African governments will need to pursue inward investment promotion policies to attract investors, Central and Eastern European governments will need to pursue policies to incentivize their own businesses to pursue opportunities in Africa.
Policy options
No quick solution can bridge the gap between the potential and current reality of investment ties between Central and Eastern Europe and sub-Saharan Africa. Strengthened investment ties, with linked development and governance outcomes, between Central and Eastern Europe and sub-Saharan Africa will require a multidimensional approach and effort on both sides, as well support from the EU.
Central and Eastern European governments could:
- Define a strategic long-term commercial strategy towards sub-Saharan Africa centred on responsible investment, identifying the priority countries and sectors of engagement with sub-Saharan African counterparts based on comparative advantages and opportunities.
- Consider concentrating economic diplomacy in fewer sub-Saharan African countries, thereby increasing key embassy staff in selected countries. To compensate for their absence in some countries, encourage companies to use available EU structures for advice and information.
- Increase top-level political engagement in priority countries, either at ministerial or heads-of-state level, if diplomatic practice permits, accompanied by business delegations. Perhaps consider using the platform provided by the rotating presidency of the Council of the EU.
- Introduce outward investment mandates of domestic investment promotion agencies (IPAs), increase coordination between intergovernmental bodies, and initiate partnerships with target country IPAs in sub-Saharan Africa.
- Reform bilateral development assistance programmes to offer financial incentives for investments with a development-driven outcome.
- Create financial instruments to support businesses in terms of equity financing.
- Facilitate business visas for African business executives who are interested in private investment partnerships.
- Provide accessible information and analysis, for instance through local CCs and other reliable partners, to counteract stereotypes and negative perceptions and improve information sharing.
- Encourage companies to operate to the highest standards regarding products, integrity and labour welfare; offer priority sub-Saharan African partners useful transfer of technology, help in enabling local products to EU standards, and share experience gained in transitioning, for example (i) towards a conducive climate for business, including sanctity of contract; (ii) towards building better anti-corruption institutions; and (iii) from a state-owned to a private-sector-led economy.
- Review scholarship programmes, and review what improvements can be made to collaborating on the ground, in order to reduce administrative burdens and share mutually useful market insights.
Sub-Saharan African governments could:
- Further improve business climates through enhancing predictability and integrity, and communicate results to potential Central and Eastern European partners.
- Initiate the conclusion of BITs and DTTs with Central and Eastern European counterparts to improve investor protection and remove obstacles to investor confidence.
- Increase political commitment to strengthening the investment relationship and adopt national commercial strategies towards Central and Eastern Europe. Increase annual bilateral political exchanges, at least at deputy ministerial level, and ensure some ministerial-level engagement.
- Improve understanding of the host country by maximizing the provision of information on business conditions.
- Use opportunities, such as Central and Eastern European-hosted Africa Days, for advocacy on a range of issues, including doing business in their country and nuancing debates around migration.
- Facilitate business visa application procedures to allow smooth business operations to take place.
For the EU:
- Include Central and Eastern European national financial institutions as partners in the EU’s EIP and ensure equal access opportunities to Central and Eastern European enterprises.
- Work with the AU and RECs to support efforts remove obstacles to trade, most notably in terms of harmonization of standards across different EPAs.
- Strengthen economic diplomacy – using powers enshrined in the Treaty of Lisbon – and enhance work and information-sharing practices between businesses originating in the EU.
93 Smith, N. (2019), ‘Africa’s Only Hope Is Industrialization’, Bloomberg, 24 April 2019, https://www.bloomberg.com/opinion/articles/2019-04-24/africa-s-only-way-out-of-poverty-is-to-industrialize (accessed 12 Jun. 2019).
94 Research interviews (2019).