The European Business Council for Africa

EBCAM POSITION PAPER

AU-EU 2022 Summit: Ensuring Effective EU Support for Private Sector Investments as Contributors to Development


Strengthening the private sector's contribution to development by using public funds to de-risk impactful investments and
Creating a dedicated, more flexible financial instrument to support private investments that promote development

 Brussels, 19 January 2022

In 2017 the European External Investment Plan (EIP) was adopted, and it has, to some extent, recognised the role of the European private sector in economic development. However, the European Business Council for Africa (EBCAM) considers that the European private sector is still neither sufficiently represented nor supported when it comes to the development of African economies. A strong mobilization of private investment is essential in order to revive these economies after the pandemic.

Africa can become one of the most important partners for Europe politically and economically. EU-Africa policy should be geared to this. The African continent requires much greater attention, beyond traditional development cooperation, and in close cooperation with the private sector.

EBCAM believes there are significant weaknesses in the European Official Development Assistance (ODA) with regard to the private sector and that the existing financial instruments used by Development Finance Institutions (DFIs) for private enterprises are ill-suited due to the purpose:

    • Their intervention thresholds are high and are usually limited to projects of at least €10 million.
    • DFIs tend to be risk-averse and represent an overly conservative approach to risk.

 

Therefore, EBCAM proposes rethinking support for private enterprises in Africa by:


    1) Increasing resources to support private enterprises in Africa. We strongly believe in the urgent necessity to carry out a “seismic shift” in the approach to the support of private enterprises by substantially increasing the number of projects dedicated to these private entrepreneurs.


    2) Using European ODA to de-risk impactful private investments. This involves targeting the high-impact/high-growth firms instrumental in wealth and job creation as well as in innovation.


   3) Creating a dedicated, innovative, fast and more flexible financial instrument to support private investments that promote development. This would have a real leveraging effect of high-impact private investments in Africa and could mobilise public resources in the framework of a public-private partnership.

In addition to these proposals, we strongly advise taking into account the following important points:


    • Private sector investments create wealth, generate jobs and contribute to improving the living conditions of African populations while increasingly ensuring the preservation of natural resources, biodiversity and the protection of the climate. Furthermore, enterprises contribute just as much, if not more, to the achievement of SDGs in Africa as ODA and NGOs.


    • The EU should exhaust all avenues to mitigate the economic consequences of the pandemic by strengthening trade and investment in and with African countries, incentivising private sector investment and de-risking private projects.


    • There is a pressing need to lift the taboo on the use of public funds for the European private sector. Auditing and traceability tools exist to guarantee the proper use of public subsidies.

 

You can find the paper here.