German policy needs a decisive "Africa shift", association says

The Sub-Saharan Africa Initiative of German Business (SAFRI) is advocating for a decisive "Africa shift" in German economic policy to address geopolitical tensions and critical raw material dependencies, particularly on China. SAFRI proposes legally binding strategic raw-material deals with African partners for vital resources like lithium and cobalt, essential for Germany's industrial transformation, and calls for strengthening the African Continental Free Trade Area to encourage investment. This strategic reorientation aims to enhance Germany's economic resilience and diversify supply chains by fostering a partnership-based approach with African nations.

Analysis

The Sub-Saharan Africa Initiative of German Business (SAFRI) advocates for a decisive "Africa shift" in German economic policy, driven by escalating geopolitical tensions and critical raw material dependencies. This strategic reorientation aims to bolster Germany's economic resilience and diversify its supply chains, particularly reducing reliance on China. SAFRI Chairman Thomas Schaefer emphasized Africa as a vital partner for future growth and raw material security, rather than merely a market.

Germany's reliance on specific nations for critical raw materials, such as lithium, copper, and cobalt, has become a significant vulnerability, with lithium battery imports from China surging from 18% in 2014 to approximately 50% a decade later. SAFRI proposes legally binding strategic raw-material deals with African partners to mitigate risks like China's export stoppages, which are already impacting German production. This initiative seeks to secure essential resources for Germany's industrial transformation.

To facilitate this shift, SAFRI calls for strengthening the African Continental Free Trade Area (AfCFTA) and implementing EU economic partnership agreements, fostering a more robust investment environment. The initiative promotes a partnership-based approach with African nations, moving beyond traditional views of risk and development aid. The overall tone of the proposal is optimistic, suggesting a moderately positive outlook for future German-African economic ties.

Key Decisions for Investors

• Investors should monitor the progression of German and EU policy towards an "Africa shift," particularly regarding legally binding raw material deals, as this signals a strategic pivot in global supply chain management.
• Evaluate companies with exposure to critical raw materials like lithium, copper, and cobalt, especially those with existing or potential partnerships in African markets, given the push for diversification away from single-country dependencies.
• Consider the long-term implications for industrial sectors in Germany and Europe that rely heavily on these resources, as successful diversification could enhance resilience but also shift competitive landscapes.