#02 Business
Heiko Schwiderowski

The Relevance of CSR for German Companies in Sub-Saharan Africa

According to an estimate by the German African Business Association, in 2005 there were approximately 2,500 German companies that had invested in Africa or were involved in import and export relations with African partner companies. This figure is nowhere near as impressive as similar numbers for involvement in Latin America or Asia. Indeed foreign trade between Germany and sub-Saharan Africa does not even reach the 2% mark of Germany’s overall exports and imports. The challenge here is to significantly increase South-North and North-South trade and investment relations. Only a common approach in cooperation with our partners from the South can help us achieve this ambitious target, and our partners from African embassies in Germany play a crucial role in this process. The development of common long-term strategies to foster trade and investment in Africa is a central part of our overall joint activities.

German companies enjoy a high reputation in sub-Saharan Africa. This is due to the fact that German investors combine their involvement in Africa with high ecological and social standards. Furthermore, German companies commonly transfer know-how to their local partners, not only through on-the-job training of staff, but also by establishing comprehensive educational schemes. These activities are performed on a voluntary basis in coordination with local business partners and authorities. We view this as the way forward: Standards should be determined mainly by local authorities in combination with the philosophy of sustainable investment by a German company. This simultaneously strengthens the capacities of local authorities by promoting innovative solutions by the private sector.

The South African government’s Broad Based Black Economic Empowerment (BBBEE) act is a positive example of how a governmental approach can motivate the establishment of high standards. A score-card system assesses investors bidding for a public tender, such as in the field of infrastructure projects. Bidders collect points according to the price and quality of their application. Additionally, there are incentives for CSR-related projects. Here the cheapest bidder is not always the one who wins the tender. The tendering authority can select the most sustainable project according to an absolutely transparent process. The scheme motivated the Southern African German Chamber of Commerce and Industry to establish a CSR consulting branch. New investors are guided through the BBBEE jungle. They benefit from a system that supports those companies in particular that combine making profits with the establishment of standards and the comprehensive transfer of know-how.

Other countries in sub-Saharan Africa do not have the capacity to run similar schemes. Here German companies can act as role models by establishing even higher standards than stipulated by national rules and regulations. This could mean the loss of public tenders to competitors mainly from the Asian continent. It seems, however, that African governments are willing to accept more expansive offers combined with higher standards, since these might be advantageous in the long run. With respect to huge infrastructure projects, which are implemented by consortia of several companies from different continents, the German partner often takes over the role of supervising, monitoring and evaluating projects, while other partners are responsible for the labour-intensive components. Concrete examples can be seen in Angola (implementing the Angolan government’s housing schemes) or in the DRC in the field of energy supply.

These examples demonstrate the readiness of German companies to fulfil the task of delivering high standards without being forced to do so by international rules or regulations and by arrangement with local partners. The enforcement of CSR by German or European entities in Africa would be counterproductive for the following reasons:

  1. African decision-makers would feel that partners from the North were imposing their own will on them. This means interest would shift from European to other international partners, who do not support the establishment of high standards.
  2. The aim here needs to be to strengthen the capacity for making laws and enforcing laws and sanctions in our partner countries. If we and not our partners define standards for investment in sub-Saharan Africa, we weaken national and local authorities.

Another idea international NGOs confront foreign investors and their local partners with concerns the liability of a parent company in the North for all the activities of the subsidiary in the South. If this goal becomes reality, German SMEs will face another burden when investing in Africa. As a responsible investor, the parent company should transfer management of the daughter company to a local partner as soon as possible. This means a reduction of influence on day-to-day activities, so that a possible undermining of national standards or other rules and regulations cannot be avoided as it could if an expatriate management ran the subsidiary. However, should the parent be held liable in this scenario, it would be almost impossible to find a source to finance investment. This would not be a problem for multinational companies, as they do not depend on an external financial source. This would result in those companies in particular that stand for the most innovative solutions in the field of standards being driven out of markets and would favour multinationals and investors who do not care about standards at all.

African embassies in Germany are fighting to increase the involvement of the German business community in their markets. We should support our partners in identifying German companies to invest in sub-Saharan Africa. Best practice examples of sustainable investment and trade linkages should be spread to motivate other companies to join in paving the way for successful involvement in Africa. This voluntary approach has proven to be the most sustainable solution in the past. It also meets the demands of our African partners, with whom we work hand in hand to reduce poverty sustainably.