Chapter 2: Funding patterns
4. Modalities used in EU-SSA cooperation
Overall trends during the period under study
The statistical annexes of the EU’s annual reports include information on the four ‘aid mechanisms’ the EU uses: ‘projects’, ‘sector budget support’, ‘general budget support’, and ‘other mechanisms’. The data in these annexes are however not disaggregated for the regions in which the EU is active. For this reason, the below analysis uses OECD data on the modalities of EU cooperation (in the OECD’s jargon: types of aid) (see figure 9).
Figure 9. Selected types of aid: EU development cooperation with SSA
Source: own elaboration based on OECD statistics36, gross disbursements in USD millions
The OECD figures show that all types of aid fluctuated slightly from year to year between 2013 and 2018.
Budget support remains a key modality and a specific feature of the EU’s approach to development cooperation – in particular since EU member states have all but completely phased out the use of this aid modality in their bilateral aid portfolios, yet still tacitly support its use by the EU and the World Bank. When comparing the average distribution for 2013-2018 with the three years preceding the period under review, the shift from budget support to project support becomes more visible - while all other types of aid are shown as less significant (see table 7).
36 The categories (a) administrative costs not included elsewhere, (b) debt relief, (c) scholarships and (d) other in-donor expenditures were not included in this diagram as they represented negligible amounts.
Table 7. Types of aid compared: 2010-2012 vs 2013-2018
Average 2010-2012 Average 2013-2018
Budget support 25.52% 22.57%
Core contributions and pooled programmes and funds 5.42% 4.24%
Project-type interventions 63.14% 69.25%
Experts and other technical assistance 4.84% 3.86%
Scholarships and student costs in donor countries 0.08% 0.08%
Debt relief 1.00% n.a.
Source: own elaboration based on OECD CRS data (gross disbursements)
More specifically, data shows that EU general budget support has increasingly been replaced by sector budget support. This was also the case in SSA where general budget support fell from $694.3 million in 2013 to $403.7 million in 2017, while sector budget support increased from $235.8 million in 2013 to $559.4 million.37
Overall, Sub-Saharan Africa received 41% of the total budget support provided by the EU institutions to developing countries in 2018 making it the biggest recipient of this type of aid (European Commission 2019c).The size of the average budget support contract provided in Sub-Saharan Africa (some €70 million) was higher than in any other region.
Trust Funds
The Treaty on the European Union, which entered into force in December 2009, created the legal possibility for the EU to manage multi-donor funds, which thus far were exclusively managed by the World Bank and UN bodies. In 2013, the EU’s Financial Regulation created the legal basis that permitted the Commission to create European Union Trust Funds.38 EU Trust Funds are composed of funds pooled from one or more financing instruments of the EU budget or the European Development Fund, together with contributions from one or more other donors, including member states and non-EU donor countries. The legal justification for resourcing these funds using existing EU instruments mainly lies in the Trust Funds’ assumed ability to attract additional funding.39 EU Trust Funds for emergency or post-emergency action can be implemented either by the Commission or by entrusting budget implementation tasks to specific other bodies, such as NGOs or aid implementing agencies in EU member states.40
The Bêkou Trust Fund. The Bêkou trust fund was established in July 2014 to address the political and security crisis of 2013 in the Central African Republic. The main financial contribution is provided from the EDF and additional bilateral contributions are provided by France, Germany, the Netherlands, and, since
37 OECD. Creditor Reporting System (CRS). https://stats.oecd.org/Index.aspx?DataSetCode=CRS1#
38 Reports for 2016-2018 can be found here: https://ec.europa.eu/trustfundforafrica/content/about_en
39 It should be noted that the largest EUTF for Africa was predominantly resourced through reserves of the European Development Fund. Due to the specific nature of this inter-governmental fund, unspent resources do not flow back to the EU member states’ national budget, but are instead accumulated in reserves until they are used up. Contrary to the regular programming of the EDF, which on paper requires to be co-decided by the EU and its counterparts based in African, Caribbean and Pacific states or, in the case of the intra-ACP budget, their Brussels-based representatives, the use of the EDF reserves can be decided solely by the EU and its member states.
40
2015,41 Italy and Switzerland.42 The Bêkou TF supports the Central African Republic in the transition from emergency response recipient to long-term development cooperation (reconstruction, state building, re-establishing economic activity and security of supplies). It also provides relief to affected neighbouring countries.
A total of €64 million was disbursed in 2014 on top of the EU’s humanitarian assistance through the EU budget in 2012 (€84.5 million) (European Commission 2014c).Following this careful start, resources nearly quadrupled in five years to €243 million in 2019. The same year also saw a decision to extend the trust fund until the end of 2020, with the EU, France, Germany and Switzerland pledging a total of around €55 million for this period.
According to a 2019 press release, the Bêkou Trust Fund “has launched 17 programmes, which have already provided tangible results for half of the population of the Central African Republic” (European Commission 2019d). The health sector represents the largest share of payments (42%), followed by rural development and peacebuilding and conflict prevention projects.
Emergency Trust Fund (EUTF) for Africa43. The EUTF was launched in 2015 at the Valletta Summit on Migration to address the root causes of irregular migration and displaced persons on the African continent (European Commission 2015e). In 2015, 25 member states and Norway and Switzerland contributed €81.3 million to the fund; total contributions amounted to €1.8 billion (including those from EU financing instruments, predominantly the EDF reserves) (European Commission 2015e). In 2018, the EUTF stood at
€4.5 billion with the main share (89%) provided by the EU institutions and 11% provided by member states and other donors (EUTF 2020).
The EUTF focuses on the most fragile states and popular migration routes in Africa: Sahel & Lake Chad region (40% of contributions), Horn of Africa (40% of contributions), North Africa (20 % of contributions). In 2019 it benefitted 26 African states.44
Since 2018, programmes are defined according to six priority areas:45 1. return and reintegration;
2. refugee management (Comprehensive Refugee Response Framework);
3. completing progress on the securitisation of documents and civil registry;
4. anti-trafficking measures;
5. essential stabilisation efforts in the Horn of Africa (in particular in Sudan, South Sudan and Somalia) and in the Sahel/Lake Chad region;
6. supporting migration dialogues (EU 2020).
The EUTF has its own governance structure, which includes a Board structure where recipients may observe but do not take part in decision-making, and where EU member states have greater control over funding decisions. This choice was merited by the focus on quick results and the ‘emergency’ setting of the EUTF. While the dominant modality used remains project support, the EUTF shows an increased use of
41 Annual Reports 2014-2017 available in French only https://ec.europa.eu/europeaid/countries/central-african-republic/eu-bekou-trust-fund_en
42 European Commission. International Cooperation and Development, Where we work.
https://ec.europa.eu/europeaid/countries/central-african-republic/eu-bekou-trust-fund_en
43 Monitoring reports on different regions: https://ec.europa.eu/trustfundforafrica/content/results-monitoring-and-evaluation_en
44 EU Commission Press Release 2015; EUTF Annual Reports 2016-2018; EUTF for Africa Fact Sheet 2019
45 Initially it was four areas as defined in the Annex to the founding document - https://ec.europa.eu/trustfundforafrica/sites/euetfa/files/original_constitutive_agreement_en_with_signatures.pdf
budget support. Overall, budget support increased from €12 million in 2016 to €71 million in 2018, representing an increase from 7% of disbursements in 2016, to 13% in 2018.46
Blended finance
Another key change in the EU’s cooperation with Sub-Saharan Africa during the period under review was the increased focus on and use of so-called ‘blended finance’. The reason for the move towards the use of this type of finance was elaborated in the 2011 Agenda for Change: “In order to leverage further resources and increase the EU's impact on poverty reduction, new financial tools will be promoted, including blending grants and loans and other risk-sharing instruments. The issues of debt sustainability and proliferation of funds and facilities will be taken into account.” (Council of the European Union 2012).
In the EU’s development policy, blended finance is understood as a combination of EU grants with loans or equity from public and private financiers. The grant aspect can be provided in various ways, be it in the form of direct investment grants, interest-rate subsidies or loan-guarantee schemes (Lundsgaarde 2017). The EU’s blended finance operations were first organised in the form of regional ‘investment facilities’ that provide blended finance in different regions, eight in total with one specifically catering to Sub-Saharan Africa. The EU Africa Investment Facility (AfIF) is the second largest regional facility after the Neighbourhood Investment Facility that is twice the financial size of the AfIF (European Commission 2016c).
To give an indication of the support provided, the 2015-2016 annual budget of the AfIF47 largely focused on the transport sector (63.5% of total engagement), followed by the energy sector (29.5%). 77% of the budget was used to finance investment grants and 23% for technical assistance. The facility’s annual report for 2015-2016 claims that €288.5 million in AfIF grants helped to leverage €2.3 billion (Lundsgaarde 2017).