German Investment Fund Increases Aid to Developing World

With Chancellor Gerhard Schröder touring Africa, Germany has been taking stock of its economic ties to the continent and reviewing its development aid schemes.

Development financier DEG (German Investment and Development Foundation) has been making investments in Africa for some four decades, in 2003 committing a total of €80 million to businesses in South Africa, Mozambique, Kenya and Nigeria alone. Its projects aim to encourage sustainable growth and improve living conditions.

Among other things, funding went to a leasing company in Egypt, the cement industry in Algeria, and mobile phone networks in Algeria and Nigeria. The DEG also has close to €4 million invested with the Industrial Promotion Services Kenya, which furnishes East African companies with capital and management expertise.

A high volume of new business

Despite the global economic slump, the war in Iraq, SARS in Asia and political and economic unrest in Latin America, the DEG has had a good year.

The bank, which lends money to German medium-sized companies investing in developing countries and emerging markets, saw its highest ever volume of new business since its founding 41 years ago.

With a portfolio of €2,400 million, the DEG is one of the biggest specialist banks concentrating on private sector promotion in Europe. Its spokesman Winfried Polte points out that "without such institutions, many investment projects in Asia, Africa and Eastern Europe simply couldn't be financed." DEG invests in private companies that create jobs and income, thereby boosting the market economy and helping the individual. In Polte's words, the "long-term investment financings render a major contribution to a sustainable development in the target countries."

Regional awareness

"Our perception of Africa is marked by wars, famine and suffering," says Polte, but he's quick to point out that "there are countries and industries with promising developments offering interesting business opportunities for foreign investors."

Polte is proud of one DEG-backed scheme in particular."One of our projects in Egpyt won the Alternative Nobel Prize," he explains, adding that "the Sekem Holding makes organic pharmaceutical products and is exemplary in its benefits program for employees -- the farmers -- as it makes available broad social services such as schools and health centers."

DEG focuses on long term investments under market conditions. But it is aware that Africa has its unique problems and writes clauses into its contracts designed to help stop the spread of AIDS, for instance.

Polte explains that the "contracts include a paragraph in which companies agree to offer staff a free test, regular information events and then practical things such as condom vending machines."

End of an era

Here in Europe, the entry of 10 new member states into the European Union will be a new departure for many in the business world. But for the DEG, it means the end of an era.They will be leaving the new EU states in eastern Europe and moving even further to the east.

These days, the focus of DEG's activities is on Asia. The bank has committed some €18 million to a total of six projects in China alone. Polte points out that "in China we concentrate mainly on the agricultural sector. We have three excellent companies there, two of which have now gone international". He also observes that the DEG sees promoting networks as part of its task. "We brought these Chinese companies together with other companies working in Uruguay and Argentina," he says.