Bavarian Africa

The Impact of the European Green Deal on African Businesses

What is the European Green Deal?

The European Green Deal (EGD) is a set of policy initiatives that aim to make the European Union (EU) the first climate-neutral continent by pursuing the goal of net zero emissions by 2050. It was approved in 2020 and focuses on the decoupling of growth and resource use as well as on the paradigm to “leave no one behind.” While the programme is primarily targeted at intra-EU changes, global value chains and international trade ensure that a change of this magnitude also impacts the rest of the world.

As emissions happen while pursuing any economic activity, the EGD promotes a holistic approach to climate neutrality. Nonetheless, there are certain sectors it concentrates on. These include energy, agri-food activities, transport, and industry as well as finance and regional development, science and innovation, and the protection of biodiversity.


Opportunities and Challenges for African Businesses

Especially the EGD’s focus on energy can provide major opportunities for the African private sector. After the war in Ukraine has curbed the EU’s import of Russian gas, the bloc is in dire need of long-term and trustworthy energy partnerships. African has a high potential for many renewable energy sources such as wind, solar power, and hydrogen, and could thus aim to fill this gap. European companies, too, have recognized this, and are already partnering with Morocco, Mauritania, and Namibia in pilot projects on green hydrogen production and export. Nonetheless, it needs to be taken into account that the production of hydrogen is not dependent on the extraction, but on the conversion of energy, and is therefore less lucrative than the export of fossil fuels. Additionally, there is no geographic concentration: In principle, every country can produce hydrogen. This, in turn, creates higher competitiveness, which can negatively influence the price structure of renewable energy in general and hydrogen specifically.

Additionally, renewable can be difficult to transport. Countries that are located in North Africa and thus in close proximity to the EU might have an advantage, as regular shipping traffic and access to ports is readily available. Sub-Saharan African countries, however, need to invest in robust supply chains that are difficult to interrupt, even with the distance at play.

This could also be useful for other trading between EU and African companies: Besides wind and sun, many African countries possess resources that are important for the EU’s green transition, as they are needed for the production of batteries for electric vehicles or wind turbines. These resources include, for example, nickel, cobalt, and lithium, but also manganese, graphite, copper, and aluminium. While the extraction and export of said materials provides comparably easy access to the European market, it is important to work collaboratively so that African countries will not be seen as a mere provider of resources but an equal partner active throughout the entire value chain.

Notwithstanding this concern, there are already multiple successful private sector-partnerships between Europe and Africa. The Kenyan company SOLINC, for example, creates solar panels and was founded as a joint enterprise of two businesses from the Netherlands and Kenya. Similarly, German vaccine producer BioNTech has started setting up a mRNA-based vaccine manufacturing site in Rwanda and aims to produce vaccines with a high relevance for the African continent, e. g. against malaria, tuberculosis, or HIV.

European Universities are also increasingly looking for partnerships in Africa to further their research and innovation process especially in the area of climate-friendly technologies. Many African businesses are uniquely equipped in contributing to this research, as they are experienced in combining digital telecommunication with renewable energy.

Some sectors, however, are affected more than others by the European Green Deal. The EU Deforestation Regulation, for example, requires EU countries to take measures to combat deforestation and to map supply chains down to the field where the raw materials were grown. The sale of goods associated with heavy deforestation will be forbidden from December 2024 onwards. Oftentimes, coffee is one such product. Ethiopia, which generates about 30% of its total earnings from coffee and exports a quarter of it to Europe, will find it difficult to meet the new criteria. As there are challenges when it comes to internet coverage, land rights disputes and law enforcement coverage, the country cannot yet guarantee a stringent monitoring of deforestation activities. Thus, some European companies are already taking their business elsewhere and looking for alternative suppliers. At the moment, it does not look as if the millions of farmers who depend on the crop will get a grace period to comply with the new EU rules.


Support Structures to Help African Countries in Their Transition

A transition towards net zero emission or even a climate-friendlier approach to economic growth is never easy. Accordingly, the EU has committed about 35% of its external action funding in the 2021-2027 budget to fighting climate change.

Probably the most important of those support structures for Africa is the Global Gateway Africa-Europe Investment Package. It focuses on a green and digital transition, sustainable growth, employment, healthcare, and education, and aims to help in market integration and in creating an enticing environment for private investments in the African agri-food sector. To do so, it aspires to mobilise up to €300 billion in total investments. Applications to calls for proposals are possible for both private and public entities.

If businesses already have a base in the EU or work with European partners, they might be eligible to apply for funding through the European Regional Development Fund (ERDF) or the Just Transition Fund (JTF). In line with the EGD’s “leave no one behind”-paradigm, both funds are designed to further cohesion and correct imbalances between EU regions. To do so, they invest in locally-led development projects that lead to a greener, more connected, or more social Europe. While this is, at first glance, not necessarily relevant for Africa, the funds offer the possibility for African companies to work with European partners and develop solutions that can be implemented in both Europe and Africa.

Research and innovation projects, especially for small and middle-sized enterprises (SMEs), can also be funded by Horizon Europe. The programme facilitates cooperation in tackling global challenges such as climate change and offers funding for innovations with potential breakthrough character that might be too risky for private investors. It also supports dispersing knowledge and new technologies. This, however, means that open research practices are mandatory to receive a Horizon Europe-grant. While this might not be a problem for some, other SMEs might want to consider whether they want to disclose all of their sources and research practices for open access.

In the end, the jungle of EU funding and support possibilities has to be navigated on a case-by-case basis. Researchers, businesses, and governments need to make decisions while regarding their specific regional and personal context. It is, however, likely that there is a funding opportunity available for most projects that further the EGD’s goal of net zero emissions in the EU by 2050.





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