Aid experts wary of G20’s ‘Marshall plan’ for Africa

G20 leaders in Hamburg will on Saturday hail their “Africa Compact” as a bold new initiative to boost investment and end poverty on the continent.

Germany has billed the “trade, not aid” deal it developed during its G20 presidency as a quantum leap, supplementing traditional development aid with a new public-private partnerships to create jobs and improve infrastructure. For Europe it comes at a crucial time, Berlin says: throttling the flow of migrants to Europe.

“We in Germany have a fundamental interest of good economic development in Africa and that’s why we are discussing a Marshall plan for Africa,” said Chancellor Angela Merkel, in a nod to the American plan that rebuilt postwar Europe.

But Berlin’s proposal has been castigated by aid analysts for, in their eyes, ushering in a new era of private sector exploitation of Africa – with state subsidies. At its heart the Africa Compact is a quid pro quo: African countries who commit to reforms and welcome investors benefit from public-private funds.

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One such fund is the Africa Agriculture and Trade Investment Fund (AATIF), a public-private partnership dedicated, it says on its own website, “to uplift Africa’s agricultural potential for the benefit of the poor”.

Using public money, it aims to attract private investment to invest “patiently and responsibly” into projects that improve food security and provide employment – to farmers and labourers alike.

The Zambian example

Not everyone is sure the new G20 deal for Africa will deliver on its promises. German state television station WDR visited one farm in Zambia that produces soy, wheat and corn for export, run by a private investor using €10 million from German development aid public-private fund.

The investor promised to create 1,000 local jobs and give back to the local community. Locals complain of part-time jobs and their subsistence farming land lost to the investor.

The Zambia farm manager interviewed by WDR spoke with pride of “negligible” labour costs on his highly mechanised farm. Company reports show employment having dropped from 258 in 2011 to 208 last year, with about 40 locals working the fields.

The AATIF fund is based in Luxembourg because, according to Berlin’s federal development ministry, “Germany lacks the legal framework”. And, according to WDR research, the AATIF legal construct puts investors to the front of the queue for profits from their African investments – but at the back of the queue for losses, behind the public purse and banks.

“Africa has to look like a beautiful bride,” said Jane Nalunga, a trade expert at the Alternative G20 summit in Hamburg. “Investors only want profit; that is the bottom line.”

Entrepreneur turned philanthropist Bill Gates was diplomatic on the Africa Compact during a visit to Hamburg. On Germany’s main evening news, he welcomed Merkel’s leadership on Africa but warned G20 leaders not to “take our eyes off the current situation”.

“Even if child mortality has halved or we boost agricultural productivity, the challenges facing Africa affect us all,” he said.