In the aftermath of the severe global economic and health crisis arising from the Covid-19 pandemic, the G7 Development Finance Institutions, the International Finance Corporation, the private sector arm of the African Development Bank (AfDB), European Bank for Reconstruction and Development (ERDB), and the European Investment Bank, on Monday, agreed to invest $80bn in Africa’s private sector in support of her sustainable economic recovery and growth.
The injection, which would be over the next five years, the first time the G7 DFIs are collaborating to make a collective partnership commitment to the African continent, according to a statement, will support the long-term development objectives of African economies which have been negatively impacted by the crisis.
The International Monetary Fund estimates that sub-Saharan Africa needs additional financing of around $425bn between now and 2025 to strengthen the pandemic response spending and reduce poverty in the region.
Each DFI however has its own investment criteria which are aligned to an assessment of need to achieve development impact across a range of sectors.
The statement quoted UK’s Minister for Africa, James Duddridge, as expressing his country’s readiness “to back this commitment by world leaders at the G7 Summit to invest more than $80 billion in Africa’s private sector over the next five years.
“This investment will create jobs, boost economic growth, help tackle climate change and fight poverty. It comes at a crucial time as the continent rebuilds its economies, severely impacted by Covid-19,” he stressed.
For Nick O’Donohoe, the CEO of CDC Group, “the patient, high-quality capital that DFIs provide is urgently needed if African economies are to start to rebuild quickly from the impact of the pandemic. CDC is committed to building long-term investment partnerships in Africa that fuel sustainable private sector growth in support of the UN’s Sustainable Development Goals.”
Werner Hoyer, President of the EIB, welcomed the move “to enhance support for high-impact investment across Africa during and after the pandemic. Last year the EU Bank’s engagement in Africa, as part of Team Europe, represented the largest ever support for climate action and investment in fragile states in 55 years of EIB operations on the continent. We stand ready to cooperate further with African and multilateral partners to tackle both COVID-19 and accelerate the green transition in Africa.”
Makhtar Diop, IFC’s Managing Director, said: “Ensuring an inclusive and sustainable recovery for people, businesses, and economies across Africa in coordination with our development partners, is at the core of IFC’s development mandate today. We know that the private sector will play a major role in financing Africa’s future by creating millions of jobs that are essential to ensuring sustained economic growth and poverty reduction. We, therefore, welcome this important partnership and are proud to provide financing and to work with partners to help create the right conditions to bring more private investment to Africa.”
David Marchick, Chief Operating Officer of U.S. International Development Finance Corporation (DFC), said: “Under President Biden’s leadership, investing more in Africa is a top priority for DFC in fulfilling our development mandate. DFC is proud to be doubling down on our commitment to Africa alongside our G7 and multilateral partners and will continue to prioritize investments in vaccine manufacturing, COVID-19 response, climate mitigation, and adaptation, and gender equity on the African continent.”
Dario Scannapieco, Chief Executive Officer of Cassa Depositi e Prestiti (CDP), said: “Closer collaboration among Development Finance Institutions and multilateral partners is an essential factor in fostering sustainable economic recovery and growth in Africa. CDP looks forward to contributing to this strategic partnership, supporting the African continent in developing its entrepreneurial and financial private sector, to unlock its vast, untapped potential.”
Solomon Quaynor, AfDB VP, Private Sector, Infrastructure & Industrialization said: “We welcome this global partnership and the opportunity to provide the African voice, as Africa builds back better and boldly. The opportunity to create jobs particularly for youth and women, from a focus on industrializing Africa underpinned by the African Continental Free Trade Area, will be our priority.
“Given the gap between the IMF estimates and what this partnership is committing to, we will seek to crowd-in African development partners, as well as African savings from SWFs, pensions, and insurance pools, estimated to have US$1.8tr AUM,” he stressed.
On his part, Heike Harmgart, EBRD Managing Director, Southern & Eastern Mediterranean, said: “Harnessing the potential of the private sector is essential to supporting prosperity in Africa and meeting the continent’s development needs. In the North African countries where we work – Egypt, Morocco and Tunisia – we have invested over €11.5bn in only 9 years, focused on boosting the private sector, developing green sustainable infrastructure and promoting youth and women participation in the economy. We will pursue our efforts to expand private sector investment opportunities at scale in the region in close cooperation with other development actors.”
Monika Beck, member of the DEG-Management Board, said: “Many of our African partner countries have been hit hard by the pandemic. We quickly developed new services to support private sector SMEs and to help protecting jobs and livelihoods. In Africa, DEG has always been specifically committed to creating prospects for the young, growing population. In addition to the continuing massive impact of Covid-19, we expect a further acceleration of the challenges connected to developments such as digitization and climate change. Therefore DEG welcomes and is proud to be part of the G7 DFI Africa initiative”.
DFIs play an important role in helping to build markets, mitigate risk and pave the way for other investors to enter new markets.
