Drivers of change
Diaspora entrepreneurs do much more than run Afro-shops in Germany.
Entrepreneurship is on the rise among immigrants living in the world’s advanced economies. In the past, it mainly focussed on small corner shops that sold goods from Africa or Asia as well as other merchandise. However, many start-ups are more sophisticated and ambitious today. Some migrants, moreover, contribute to the economic development of their countries of origin. They do so in three important ways:
- Diaspora direct investments (DDI) fosters business development, job creation and innovation, all of which help to drive development in general.
- DDI also create social and political capital in global networks, linking developing countries to the international community and giving them access to advanced technologies and business models.
- Diaspora entrepreneurs have specific linguistic and cultural competences and thus provide opportunities for third parties.
In Germany in particular, African migrants are likely to start a business. There are three main reasons:
- Their personal, intercultural and professional competences empower them to take well calculated risks and discover market niches.
- Germany’s social environment is challenging, if not hostile, for Africans, and many members of the diaspora cannot find the kind of professional jobs they are qualified for. Many of them start companies of their own.
- Germany only had few African colonies, and lost them all after World War I. Accordingly, its ties to Africa are weaker than those of Britain, France or Belgium, for instance. Many German companies and entrepreneurs are hardly aware of Africa, so opportunities arise in Germany for Africans who understand Africa’s potential.
African-owned businesses are becoming more and more diverse in Germany. The first generation of diaspora entrepreneurs tended to open Afro Shops to sell African food, cosmetics, clothes and hairstyles. Today, some start-ups offer IT services and solutions or financial transfers. A number of young African have become business consultants moreover.
African diplomats are keen on German investments in their home countries. They point out, however, that, south of the Sahara, cooperation with Chinese or Indian companies often seems easier. Stefan Liebing of Afrika-Verein, the German African Business Association, admits that Germany’s important SMEs still tend to perceive Africa as “a continent shaken by crises and corruption”.
The good news is that German SMEs are increasingly relying on business consultants of African descent. Cheick Diallo is one of them. He is from Guinea. For two years, he has been working on assignment for MC-Bauchemie, a mid-sized company that supplies the construction industry with innovative and standard chemicals. It is based in the Ruhr area, has a labour force of 2.200 and runs production plants in Europe as well as overseas.
Diallo coordinated the establishment of an MC-Bauchemie’s subsidiary in his home country, and is now advising the company on how to market its products in countries like Sierra Leone, Ghana and Nigeria. The consultant says that there are many opportunities in Africa, but German companies are losing out to competitors from emerging markets, such as Brazil, China and Turkey. He is happy to be able to make use of his professional and intercultural competences and earn a good income. He says MC-Bauchemie is now confident “to establish long-standing relationships across the African continent”.
Other entrepreneurs of African descent have established money-transfer schemes. Their target group is the African diaspora, and they offer cheaper rates than Western Union and MoneyGram, the giants of this industry. More and more Africans are remitting money via diaspora start-ups.
Mamadou Diop lives in Berlin and has been running a company that transfers money to Senegal and Gambia for four years. He says he benefits from the diaspora’s lack of trust in the big money-transfer brands. Other competitive advantages include lower fees and his cultural proximity to the target group. His personal roots are in Anglophone Gambia and Francophone Senegal, which helps him to attract clients from both linguistic communities. Word-of-mouth advertising has helped him, he says. He is proud to have business relations in 12 African countries today.
Exporting merchandise to Africa is another fast expanding business sector for the diaspora. In the 1980s and 1990s, cars were what mattered most. Today, various consumer goods are relevant – from technical hardware to food, cosmetics and clothes. The goods are often procured in Asia. Traders travel from Germany to Asia, go on to Africa and return to Germany.
Ashioma Udechukwu is one of these commercial travellers. She is a 27 years old Nigerian and based in Berlin. She says: “I’m seeing more and more passengers from Ethiopia, Ghana, Kenya, Senegal and of course Nigeria on the planes to China, Thailand and Singapore.” Vietnam, Myanmar and Bangladesh have become relevant destinations too, she adds. “These countries are interesting for us because of the low prices and the variety of products. You can find cheap mobile phones, TVs, laptops, tablets and cloths of a remarkable quality.”
Udechukwu says the African middle classes who can afford these things are growing, and cheap travel makes her business viable. She came to Germany as a migrant and, thanks to the country’s strong economy, was able to earn the money she needed to start her business.
Some entrepreneurs of African descent import goods from their home continent to Germany. There is a growing market for fair-trade and organic products in Europe. African beverages like ginger lemonade, African beer brands, African teas, honey and natural cosmetic products attract ever more buyers.
Indeed, an increasing number of Germans is interested in Africa and appreciate African restaurants, art and fashion galleries. The demand for African music, films and artists in general is growing. At the same time, Germans’ interest in social entrepreneurship has grown. It has become easier to raise funds for renewable-energy infrastructure or business incubators in sub-Saharan rural areas. Moreover, German society is increasingly aware of the need to integrate refugees and migrants in main-stream society, and members of the diaspora find jobs in this field.
The most recent and perhaps most promising trend is to start technology businesses (see box, p. 33). Some of them generate jobs in Europe, some in Africa, and some on both continents. For example, Ethiopian ex-pat Ayana Alemu founded Meelogic ins 2001. The company develops IT solutions and employs more than 100 persons in Germany and Poland. Meelogic serves a number of industries, including telecommunication, automotive and medical technology, energy, transport, logistics and e-commerce.
Government action matters
Governments can help diaspora entrepreneurs by cutting red tape and facilitating international exchange. Indeed, many governments are keenly aware of the diaspora’s economic relevance. Tunisia is an example. It has a population of about 11 million people, and another one million Tunisians live abroad. Some of them are leading scientists, experts and professionals. Moez Ali, a Tunisian consultant, says: “It is fundamental for Tunisia to attract the diaspora to transfer knowledge and funds to their country of origin.” Tunisia offers members of the diaspora incentives to acquire real estate or to accept a position of leadership at home. In the course of the Arab spring revolution and the ensuing problems, diaspora investments went down, but it has started to increase again now that the country looks more stable with a democratic government and constitution.
Across Africa, about a dozen national diaspora ministries have been established in the past ten years. The EU is aware of the potential too. In 2013, it launched the ACP Observatory on Migration. The idea is to cooperate with countries in Africa, the Caribbean and Pacific (ACP) which have special ties to the EU and its members and to make all partners involved benefit from migration as much as possible. The need to do so was emphasised once again at the recent EU-AU summit in Malta.
Abdou Rahime Diallo is an international policy consultant who specialises in migration and development and lives in Berlin.