Export from Germany to Africa: A guide for German SME Exporters

Germany is one of the world’s largest exporters, distributing cars, machinery, aircraft, pharmaceuticals and medical apparatus all over the world. The German economy grew by 8,5% in the 3^rd quarter of 2020 despite the Covid-19 pandemic. Thus, if you are a German exporter looking to export German products into Africa, now would be a good opportunity.

Exporting products into Africa has always been a daunting and risky task, as Africa is well known for its lacking infrastructure, complicated payment methods and wide-spread corruption, this is a valid turn-off. Therefore, we have created an online B2B E-Commerce platform, Enterprise Africa International, to assist companies exporting into Africa. Enterprise Africa International (EAI), allows exporters to sell products in African countries without the setting up of a permanent establishment, to test the products in a particular African market and to sell locally. Additionally, EAI also assists with tax authorities and B-BBEE policies (in South Africa), gives the exporter a choice between dropshipping or warehousing and allows the exporter to work with trusted logistics partners across Africa.

Exporting from Germany:

Before any German goods can be exported, they need to be evaluated by the Federal Office for Economic Affairs and Export Controls, known as BAFA. BAFA has the ultimate decision when it comes to whether a product is to be deemed fit for export. Thus, BAFA needs to be provided with all information of the product’s potential uses for their evaluation prior to export.

Because Germany is a key member of the European Union (EU), it has adopted the EU’s export policy. It is notable that there are restrictions on certain goods such as agricultural goods and armaments.

To export out of the country, German sellers need to apply for an Economic Operator Registration and Identification (EORI) number, which is provided by the German authorities free of charge. This number is mandatory and can be used both for import and export in Germany. The EU requires all exporters, importers and transporters of goods to use the EORI reference number when in contact with customs.

After goods have been packed for export, certain documents are required for clearance by German customs. The invoice, packing list and other required documents must be prepared prior to movement of the goods into the customs port. These documents are then electronically filed with customs and the goods are moved to the export hub. There they undergo the export process and once permission is given by customs; they can begin their journey to the importing country prior to a final inspection.

Required documents for export:

Customs Entry Document
Weight Certificate
Certificates of Inspection
Customs Declaration
Export License
Purchase order or Letter of Credit
Commercial invoice and packaging list
Certificate of Origin
Insurance Certificate

Additional Documents that may be required:

Customs bond
Legal Undertaking
Temporary Shipment Certificate
Certificate of Analysis
Certificate of free sale
Consular Invoice

The top exported goods from Germany:

Vehicles
Machinery
Chemical goods
Electronic products
Electrical equipment
Pharmaceuticals
Transport equipment
Basic metals
Food products
Rubber and plastics

The top export destinations from Germany:

Germany’s major export destinations are the United States, France, China, the Netherlands and United Kingdom. It is notable that the top importers of German products are all well-developed countries with a strong economy. Many of Africa’s economies are rapidly growing which will only spike the demand for the well-known high-quality German products. With the formation of the African Continental Free Trade Area (AfCFTA), Africa could well become one of the globes top export destinations.

Why German SMEs should sell internationally:

Taking one’s business international may have many benefits.

It allows for the access of millions of new potential customers and gives businesses a chance to research new markets, thus increasing sales.
Allows for the access of new markets, such as lesser-known African ones.
It will give a business a new customer base and allow it to offer new services, thus increasing business and sales.
If your business already has a good reputation, selling internationally will further spread your businesses good name, as new customers meet your products.
Selling internationally will allow a business to diversify, thus making it more able to adjust to changing markets.

Why German SMEs should sell in Africa:

In January 2021, the African Continental Free Trade Area (AfCFTA) entered its operational phase. The AfCFTA is a trade agreement between the African nations, that is set to boost trade on the African continent exponentially. 54 of the 55 African states have already signed the agreement, making the African continent one of the largest trading areas to date. Thus, any German seller looking to sell their products internationally should strongly consider exporting to the growing markets in Africa, as they are likely to become one of Germany’s top exporters.

The Benefits of Exporting from Germany:

Whether it is a car, kitchen appliance or industrial machine, it is well known globally that German goods/products have adopted the German standard of high quality, strict hygiene and good research. The term ‘Made in Germany’ has become the seal of quality, reliability, durability and excellent innovation over the years and with such a good reputation it comes to no surprise that Germany is one of the world’s most successful exporters. Thus, if you are a German seller wishing to sell to Africa, there will most likely always be demand for your product on account of the good German reputation alone.

The market in Germany and its neighbouring countries is very saturated, making it harder for SMEs to stand out. However, in the developing markets of Africa the markets are often relatively untouched, and many lucrative opportunities lie ahead for smaller SMEs wishing to make a name for themselves. Selling into the African markets may also do wonders for your brand as many Africans do not have as much exposure to the ultra-popular brands of Europe and the United States. Thus, your brand has a better chance of reaching such a status in the African market.

How to start exporting:

Assess your export potential.

The first step of exporting is always to assess the potential of your products or services to be exported into foreign markets. There are many reasons why companies start exporting. Some of them are:

Increased Sales – Exporting can take advantage of demand across the world.
Economies of scale – Operating in a larger market, companies can produce on a bigger scale, which reduces variable costs.
Reduced vulnerability – Companies that have a presence in many markets are less vulnerable to market downturns of specific markets.
Gain knowledge and experience – Companies might learn new strategies, marketing approaches or other techniques that could be useful in the domestic market.
Increase competitiveness – A successful international market presence will strengthen foreign and domestic competitiveness.

Exporting goods and exporting services present different challenges. The former, for instance, have to deal with packaging, customs and physical delivery, while the latter face issues such as work permits, validation of certificates, language and travel to and from the market.

An export-capable company is one that has the capacity, resources and management to deliver a marketable product or service on a global scale at a competitive price.

Researching demand is a crucial point. Things that need to be researched include:

Does the company have existing customers in the foreign market?
What is the target group, that need or want the product or service?
What product modifications need to be made for a specific market?
How to transport products to foreign markets?
Is local representation needed?

Evaluating potential links to Global Value Chains

If the product is something that another company uses as an input, you may be able to plug into their global value chain by becoming a supplier. This is a very common approach and certainly the simplest. New opportunities are constantly emerging for SMEs, especially those with niche technologies or specialisations, to sell to multinationals or their suppliers.

When a company manufactures either finished products or intermediate goods, it can build your own global value chain. Purchasing inputs, such as raw materials, components, subsystems and other goods and services from foreign suppliers can help to produce own products either at lower cost or with greater responsiveness to market forces.

Planning export strategy:

Bad planning can lead to major failure abroad and could severely damage your domestic operations as well.

An export plan is a business plan that focuses on international markets. It identifies your target markets, export goals, necessary resources and anticipated results.

An export plan should generally contain the following:

Introduction - Business history, vision and mission statements, purpose of the export plan, organizational goals and objectives, international market goals, short- and medium-term objectives for exporting, location and facilities.
Organization – Ownership, management, staffing, level of commitment by senior management, relationship between exporting and domestic operations, corporate experience and expertise in exporting, strategic alliances, labour market issues abroad.
Products and services - Description of products and services, key and/or unique features that distinguish your product/services from those in the target market adaptation and redesign required for exporting, production of products and services, future products/services pipeline, comparative advantage in production.
Market overview - Political environment, economic environment, size of market, key market segments, purchasing process and buying criteria, description of industry participants, market share held by imports, tariff and non-tariff barriers, industry trends and other market factors, market outlook.
Market-entry strategy - Target market(s), description of key competitors, analysis of competitive position, product positioning, pricing strategy, terms of sale, distribution strategy, promotion strategy / development of sales leads, description of intermediaries and partners.
Regulatory and logistical issues - Intellectual property protection, other regulatory issues, modes of transportation and cargo insurance, trade documentation, use of trade service providers.
Risk factors - Market risks, credit and currency risks, political and other risks, Implementation plan, key activities, evaluation criteria and process.
Financial plan - Revenues or sources of funding, operating budget, cost of sales, marketing and promotion costs, other expenses or expenditures.

Research potential customers

Once you have a product range ready, you should consider what type of customers you are targeting. You should look for the following aspects in your buyers:

What language do they speak?
Are they interested in bulk or single items?
Is there a minimum order requirement?
Are they using a laptop/computer, smartphone, or tablet?
What are their interest and values?
Are they end to end consumers or another business?
Will you offer discounts to repeat customers?
Will you be providing a sample?
Is price or quality a bigger concern to them?

Assess expenses of exporting:

Before a company decides to export their products, it is important that they evaluate their financial situation and determine that they are capable of managing the additional work that comes with exporting.

These costs may include:

Transportation costs (Road, Rail, Sea, Air)
Warehousing
Port and inspection fees
Import Duties
Agent fees
Setting up local offices
Distributor fees
Packaging and labelling
Insurance
Taxes

Entering the target market

Developing a market entry strategy means finding the best methods for delivering and distributing your goods. Or, if you export services, it means finding ways to obtain and manage contracts abroad.

There are different methods of market entry, including:

Direct exports - market and sell directly to the client.
Indirect exports - market and sell to an intermediary such as a foreign distributor or retaining a foreign agent or representative who does not directly purchase the goods.
Partnerships - partner with a local company whose strategic position complements or enhances your own.
Licencing - granting of rights to another business so that it can legally use your proprietary technology and/or intellectual property.
Franchising - the franchisee is given the right to use a set of manufacturing or service delivery processes, along with established business systems or trademarks.
Cross-licencing - each firm licenses products or services to the other for sales purposes.
Cross-manufacturing - a type of cross-licensing in which companies agree to manufacture each other's products.
Co-marketing - carried out on the basis of a fee or a percentage of sales to take advantage of existing distribution networks and domestic markets.
Co-production - the joint production of goods, enabling your business to use its skills and resources to provide cheaper manufacturing.
Joint Venture - each business contributes capital to a newly created corporation that they operate together.

Delivering the goods

To export goods, you need to familiarise yourself with the import regulations, product standards and licensing requirements of your target market.

There are several ways to get your product to the customer: by truck, train, plane or ship. Choose the right shipping method or combination of methods for you product and target market.

When shipping products abroad, you have to deal with a multitude of documents. Use freight forwarders and customs brokers to reduce the workload abroad.

Freight forwarders help you improve your delivery times and customer service. These agencies negotiate rates for you with shipping lines, airlines, freight forwarders, customs brokers and insurance companies. They can handle all your logistical requirements or just negotiate your shipping rate.

Assume that your products will have a bumpy ride, especially if you are shipping overseas.

Pack them to withstand rough freight handlers and bad roads.

During transport, handling and storage, your goods may be exposed to bad weather and extreme temperatures. If they require special temperature controls or other protective measures, make sure they get them.

Products must be labelled correctly. Products may not be cleared through customs if the labels do not comply with local requirements, for instance product weight or electrical standards.

The markings on the shipping container must match those on the bill of lading or other shipping documents and may include some or all of the following:

Name of the buyer or other form of agreed identification.
Place/port of entry into the importing country
Gross and net weight of the product in kilograms and pounds
Country of origin marking, for instance "Made in Germany".
Number of packages
Appropriate warnings or precautionary markings
Provision of a packing list that identifies and breaks down the contents of each container. Each container must also include a packing list that lists the contents.

International forwarders assume only limited liability and hold the seller responsible for the goods until they are delivered to the foreign buyer. For this reason, you need to obtain international transport insurance.

You will also need shipping documents as well as collection documents.

Shipping Documents allow the shipment to pass through customs, be loaded onto a carrier and be transported to the destination. Key shipping documents include:

Commercial invoice
Special packing or marking list
Certificate of origin
Certificate of insurance
Bill of lading/air waybill

The most important collection document is the commercial invoice, which describes the goods in detail and lists the amount owing by the foreign buyer. This form is also used for customs records and must include:

The date of issue
The names and addresses of the buyer and seller
The contract or invoice number
A description of the goods and the unit price including the total weight and number of packages
Shipping marks and numbers
The terms of delivery and payment

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Export from Germany to Africa: A guide for German SME Exporters