Thursday

7th Jul 2022

Opinion

The EU’s new offer to Africa

  • (Photo: Andrew Willis)

The European Commission’s plan for a multi-billion African investment vehicle was one of few highlights in Jean-Claude Juncker’s often turgid state of the Union speech earlier this month.

As with the original European Fund for Strategic Investments (EFSI), the main plank of the Juncker commission’s economic policy, there’s not much hard cash behind the initiative.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The investment vehicle will be based on a €1.5 billion guarantee from the EU budget, and a further €1.85 billion from the European Development Fund and EU budget. It will subsume the existing EU-Africa Infrastructure Trust Fund, which has paid out more than 90 grants to infrastructure projects since 2007.

EU officials hope that the seed capital and new guarantees, which will allow the European Investment Bank (EIB) to cover €750 million of potential losses, will persuade private firms to fund riskier projects in sub-Saharan Africa.

African investment based on blending small amounts of public money with private capital is not new. The EIB has been steadily expanding its operations in sub-Saharan Africa over the past decade.

Sweetening the pill

The EIB is not the only player in an expanding market. In Europe alone, the consolidated portfolio of European Development Finance Institutions (EDFI) members jumped from €10 billion to €28 billion between 2003 and 2014. The big international players are the World Bank’s International Finance Corporation, the African Development Bank, along with the French, German and Japanese development agencies.

So what’s the big deal?

Unlike other development finance vehicles, the EFSD is overtly political. The commission says the fund will "address the factors that constitute the root causes of migration and to support partners to manage its consequences".

At a time when European governments are seeking to increase their deportation rates, the fund is a bid to sweeten the pill on tackling migration to their African counterparts.

The fund will also be formally directed by the commission, rather than the EIB, and the hope of the EU executive is that MEPs and ministers will have passed the legislation needed to make the fund operational by the next EU-Africa summit planned for autumn 2017.

'Lifelines'

The rationale behind the fund and, indeed, the individual "country compacts" launched earlier this year, under which the EU will offer financial support to countries who work to stem economic migration, and that the EU is seeking to broker with a group of African governments, is that economic incentives will persuade African governments to do more to control their borders.

As Juncker put it, the fund “will offer lifelines for those who would otherwise be pushed to take dangerous journeys in search of a better life”.

What is new are the incentives that the Fund offers to European companies, governments and their African counterparts.

In a bid to persuade European treasuries to cough up some money, the commission proposes that national contributions to the fund be classified as "off balance sheet" to avoid being classified as public spending, and allow governments to earmark their contributions to a specific region or sector.

The commission hopes that its €3.35 billion will lead to projects worth €44 billion, and potentially more if national governments boost the coffers.

However, EU governments have so far been reluctant to back up their rhetoric with cash, stumping up a €80 million to the EU-Africa Emergency Trust Fund set up last December to pay for migration-control related projects.

The commission also sees the fund as a way to encourage European firms to invest in African countries, potentially making them a competitor to Chinese firms who dominate the infrastructure investment sector in the region.

Yet it is also part of the move away from conventional development aid in favour combining public guarantees with private investment,

A carrot among the sticks

The EU has been pushing blended finance for many years. “Official Development Assistance does not have the capacity alone to eradicate extreme poverty… it should be used to mobilise domestic and private finance,” said one EU development minister at last year’s Financing for Development conference in Addis Ababa, and this sentiment reflects a consensus view amongst European governments.

"Humanitarian aid is not the solution for dealing with long-term migration," a senior commission official told EUobserver in August.

The Fund may be intended as a complement to the EU-African "compacts", but linking the investment fund to migration tool is a risky political move.

Amnesty EU director Iverna McGowan described the proposed "compacts" as amounting to “little more than ‘let’s throw money at keeping them out’”.

An investment fund based on €3 billion isn’t going to suddenly turn around the boats making the treacherous journey from North Africa across the Mediterranean. Improving the long-term economic prospects across sub-Saharan Africa will take years, and much more investment. At best, it is another incentive for African leaders to give higher priority to border management.

But it is, if nothing else, a carrot among the sticks.

Benjamin Fox, a former reporter for EUobserver, is a consultant with Sovereign Strategy, a London-based PR firm, and a freelance writer

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

EU development aid to finance armies in Africa

The EU commission proposes to start financing militaries to help "partner countries in their development" as part of a larger policiy to stop migration to Europe.

EU needs new approach on Ethiopia

The EU has recently shown willingness to criticise rights abuses in Ethiopia. It should go further and call for an international inquiry in the current crackdown on protests.

Keeping gas as 'green' in taxonomy vote only helps Russia

Two days before Vladimir Putin launched his illegal war on my home country Ukraine, Russian energy minister Nikolai Shulginov gave an interview addressing the European Commission's taxonomy on sustainable activities — saying he was pleased it kept gas as 'green'.

Column

'War on Women' needs forceful response, not glib statements

Some modest headway in recognising the unrelenting tide of discrimination and violence facing women worldwide was made at last week's largely self-congratulatory and mostly irrelevant G7 talk-fest. But no one mentioned abortion, just days after the Roe vs Wade decision.

The Digital Services Act — a case-study in keeping public in dark

Companies and lobby groups like Spotify, Google and International Federation of the Phonographic Industry (IFPI) were able to lobby member states using live knowledge of the trilogue discussions on content-ranking systems, advertising and liability for search engines.

Council must act on core of EU migration package

By only screening, fingerprinting or relocating (some) refugees, or by outsourcing our border control to Turkey and giving Erdogan our keys, we will not solve the current problems.

News in Brief

  1. France to nationalise nuclear operator amid energy crisis
  2. Instant legal challenge after ok for 'green' gas and nuclear
  3. Alleged Copenhagen shooter tried calling helpline
  4. Socialist leader urges Czech PM to ratify Istanbul convention
  5. Scottish law chief casts doubt on referendum
  6. British PM faces mounting rebellion
  7. Russian military base near Finnish border emptied
  8. Euro slides to lowest level in two decades

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. Legal action looms after MEPs back 'green' nuclear and gas
  2. EU readies for 'complete Russian gas cut-off', von der Leyen says
  3. Rising prices expose lack of coherent EU response
  4. Keeping gas as 'green' in taxonomy vote only helps Russia
  5. 'War on Women' needs forceful response, not glib statements
  6. Greece defends disputed media and migration track record
  7. MEPs adopt new digital 'rule book', amid surveillance doubts
  8. 'World is watching', as MEPs vote on green finance rules

Join EUobserver

Support quality EU news

Join us