From 2021 onwards, operations will be carried out under the new EU/Africa-Caribbean-Pacific Partnership Agreement and under the EIB’s own risk lending. Financing will be provided, up to 2027, by the new Neighbourhood, Development and International Cooperation Instrument (NDICI) – Global Europe17. The EIB will also support private sector investments in Africa through the successor of the ACP Investment Facility, aiming to finance high-risk, high-impact projects, including in local currency. These investments will help African countries to continue maximising opportunities for sustainable and inclusive economic growth, which is closely aligned with EU objectives.
Although Africa’s economies are expected to begin recovering in 2021, lingering effects of the unprecedented economic shock experienced during the pandemic will make the recovery extremely challenging. GDP contracted by an average of 2.3% across Africa during 2020 (International Monetary Fund, 2021), with the vast majority of countries experiencing a contraction. African states stepped up to support their populations and private sectors, but revenues contracted dramatically as growth plummeted, and the resulting increase in debt aggravated the already high indebtedness of many countries. These circumstances limit the capacity of African governments to support the recovery18. Although private external finance flows are recovering after a sharp fall in 202019, and the international community is providing debt relief and other financial support, this will not be enough to cover all needs. As this publication has shown, Africa’s domestic financial sectors have remained relatively resilient but are likely to have limited capacity to support the recovery, most notably due to asset quality issues.
The impact of COVID-19 could also jeopardise the ability of public and private sectors to finance climate action and digitalisation. To respond to the effects of the pandemic beyond Europe, the EIB Group has further increased its healthcare financing. Specifically, it has committed to provide up to €6.54 billion (as of March 2021) for urgent healthcare investment and private sector support as part of the Team Europe response deployed by the European Commission20. A recent EIB publication21 on the adverse effects of the pandemic reports that smarter, more cost-effective investments are needed to improve technologies and digital solutions to respond to COVID-19. In another publication concerning the SME Access to Finance Initiative22, the EIB showcases how medium to long-term funding solutions and risk sharing can support hundreds of small and medium businesses and sustain thousands of jobs, including in Africa.
As the bank of the European Union, fully owned by the EU Member States, the EIB implements EU policy only.
As mentioned by President Hoyer during the European Development Day 202123, the European Union must play a stronger role in addressing the global challenges of our time. Development finance is a crucial component of strengthening EU visibility worldwide, and one key pillar is that financial institutions and development banks must invest in this transformation as Africa’s partners, seeking impact in terms of job creation, tackling climate change and combating COVID-19 — truly global problems that must be confronted together. The EIB development report 202124 overviews the tailored support the EIB is providing to different regions, from the pre-accession countries of the Balkans to Europe’s Eastern and Southern Neighbourhoods, Latin America and Asia.
The report titled A partnership with Africa25 explores the strategic and policy ideas at play in greater depth. In particular, it illustrates our enthusiastic participation in the European Commission’s Team Europe initiative.
17 Proposed by the European Commission, the NDICI is a new financing instrument that aims to combine funding for programmes in different fields of EU external action into one single instrument. The budgetary framework for programmes in the fields of development, international cooperation and neighbourhood policies will be driven by a policy-based, inclusive approach under this instrument. (Immenkamp, 2021).
18 The average fiscal deficit across sub-Saharan Africa rose from 4.1% of GDP in 2019 to 6.9% in 2020, while debt-to-GDP rose by 6 percentage points during 2020 (IMF, 2021).
19 Private external finance for developing countries collapsed by $700 billion in 2020, with remittances down an estimated 20%, foreign direct investment down 35% and net portfolio investment inflows down 80% (Organisation for Economic Co-operation and Development, 2020).
20 European Investment Bank, 2021a.
21 European Investment Bank, 2020d.
22 European Investment Bank, 2020e.
23 https://www.eib.org/en/press/speeches/president-hoyer-speech-at-edds.
24 European investment Bank, 2021d.
25 European Investment Bank, 2021b.
The EIB is reorganizing its activities beyond the European Union to improve the way we deliver our development financing, in close cooperation with the European Commission and the European External Action Service. On 15th September 2021, the EIB’s Board of Directors endorsed a proposal to create a branch of the EIB focused on development finance26. The aim is to strengthen the Bank’s development engagement outside the European Union. A key objective of this branch is to intensify the Bank’s local presence in EU delegations, placing more bankers and engineers at the disposal of Team Europe on the ground. This will increase the EIB’s development impact, responding to the growing need for stronger bonds between Europe and Africa, enhancing economic and trade ties between the two continents, and putting the European Union’s climate action and development goals into operation on the ground. This reorganisation will also enhance our role in fulfilling the ambitious aspirations expressed in the strategies of our African partners.
The EIB will continue to develop knowledge and understanding of African markets. This publication will be updated in 2022 to include thematic analyses of the constraints on African private sector firms accessing the finance they need to flourish and to create and sustain jobs. It will also provide information about ongoing studies and results from surveys and data gathering.
26 https://www.eib.org/en/press/all/2021-304-eib-strengthens-global-development-focus-and-backs-eur-4-8-billion-new-financing-for-energy-transport-covid-vaccines-and-business-investment.
References
European Investment Bank (2020a). “Africa, Caribbean, Pacific and the Overseas Countries and Territories.”
Available at https://www.eib.org/en/publications/africa-caribbean-pacific-annual-report-2019.
European Investment Bank (2020b). “EIB Sustainability Report.” Available at
https://www.eib.org/attachments/general/reports/sustainability_report_2020_en.pdf.
European Investment Bank (2020c). “Cotonou Technical Assistance 2020 Annual Report.” Available at https://www.eib.org/en/projects/regions/acp/applying-for-loan/technical-assistance.htm.
European Investment Bank (2020d). “Africa’s digital solutions to tackle COVID-19.” Available at https://www.eib.org/attachments/country/africa_s_digital_solutions_to_tackle_covid_19_en.pdf.
European Investment Bank (2020e). “SME Access to Finance Initiative.” Available at https://www.eib.org/attachments/thematic/sme_access_to_finance_initiative_en.pdf.
European investment Bank (2021a). “EIB support for development Overview”. Available at
https://www.eib.org/attachments/thematic/eib_support_for_development_overview_2021_en.pdf.
European Investment Bank (2021b). “A partnership with Africa – How the European Investment Bank delivers on EU policies in Africa and our future plans for development and partnership across the continent.” Available athttps://www.eib.org/en/projects/regions/acp/partnership-with-africa/index.
European Investment Bank (2021c). “EIB President sees climate action, digital transformation and gender equality as levers to boost the African economy.” Available at https://www.eib.org/en/press/news/eib- president-sees-climate-action-digital-transformation-and-gender-equality-as-levers-to-boost-the-african-economy.
European Investment Bank (2021d). “The EIB Development Report 2021.” Available at https://www.eib.org/en/publications/online/development-report-2021.
Immenkamp, B. (2021). “European Parliament Briefing – A new neighbourhood, development and international cooperation instrument – Global Europe.”. Available at
https://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2018)628251.
International Monetary Fund (2021). “World Economic Outlook: Managing Divergent Recoveries.” Available at https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april-2021.
Organisation for Economic Co-operation and Development (2020). “Global Outlook on Financing for
Sustainable Development 2021: A New Way to Invest for People and Planet.” OECD Publishing, Paris. Available at https://doi.org/10.1787/e3c30a9a-en.
SME Finance Forum (2021, forthcoming). “MSME Digital Finance: Resilience and Innovation during COVID-19.”
UNDP (2020). “Gender Responsive Indicators: Gender and NDC Planning for Implementation.” Available at https://www.ndcs.undp.org/content/ndc-support-programme/en/home/impact-and-learning/library/gender-responsive-indicators-gender-and-ndc-planning-for-implementation.html.