EU approaches and instruments to engage the private sector for sustainable development in Africa

Jeske van Seters, Head of Programme Private Sector EngagementEuropean Centre for Development Policy Management (ECDPM)

Brussels, 23 November 2017 – EBCAM General Assembly

Introduction ECDPM

• Independent ‘think and do’ tank

• EU-Africa relations

• Policy to practice

• Three roles: • Generate politically informed, evidence-based & practical knowledge • Facilitate uptake of knowledge through dialogue & support• Acting as non-partisan broker

• Processes, institutions, actors, interests, incentives

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Outline

1. EU policy framework

2. EU instruments

3. Looking forward

4. Questions for discussion

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1. EU policy framework

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EU policy framework: key trends

• Greater emphasis on role private sector for sustainable development, with particular attention for Africa

• Win-win philosophy gaining ground: SDGs & European commercial interests

• Increased emphasis on responsible business conduct

In response to need to mobilise additional resources for SDGs & increased economic opportunities and competition in Africa

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EU policy framework: key examples

• EC Communication 'A Stronger Role of the Private Sector in Achieving Inclusive and Sustainable Growth in Developing Countries' (May 2014)

• Trade for all: towards a more responsible trade and investment policy (Oct 2015)trade policy will become more responsible… will not only project our interests, but also our values. (foreword Malmstrom)

• Global Strategy for the European Union’s Foreign And Security Policy (June 2016)“A quantum leap in European investment in Africa is also needed to support sustainable development “

• European Consensus on Development (May 2017)

• Review EU Strategy on Aid for Trade (Nov 2017)6

EU policy framework: most recent AfT strategy update

Fundamental changes proposed:

1. Reduce fragmentation & increase leverage AfT

2. Coherence and synergies between instruments across EU external policies

3. Stronger focus on social & environmental dimensions

4. Better differentiation of countries & increased focus on LDCs & situations of fragility

5. Improved monitoring and reporting

One of the action points: structured dialogue and engagement with private sector to identify and prioritize investment climate constraints.

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2. EU instruments

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EU external instruments 2014-2020 feature PSD more prominently

Types of instruments

Investment climate:

• Policy dialogue

• Government support programmes

• Trade measures: trade agreements, EBAs, GSP, GSP+

Direct private sector support (through ODA & commercial instruments):

• Matchmaking/business facilitation

• Financial support/cost sharing

• Technical assistance/advisory services

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Exact figures on private sector development support lacking

Some snapshots on EU Aid for Trade:

• Globally EU & Member States largest AfT provider EUR 13.2bn in commitments in 2015

• EU-level represents almost one fifth EUR 2.42b in commitments in 2015 (18%)

• Africa represents 46% of EU AfT grants

• Africa represents 24% of EU loans and equity

Figures: a partial picture

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Space for improvement

DCI External Evaluation (June 2017):

“There has not been much progress in strengthening ties with the

private sector, despite interesting innovative approaches and projects in

some countries.

EDF External Evaluation (June 2017):

“The evaluation also did not find evidence that presence in sectors such

…, private sector development, … supported the building up of a

significant value added compared to other donors and development

partners.”

ENI External Evaluation (June 2017):

“Some of the NIF funding has been used to support PPPs, notably the large

funds for the solar plant in Morocco….Blending could be increased to allow

for further financial leverage of EU support as a key contribution for achieving

long-term development goals, notably private sector development”

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Zooming in on blending

• Blending = combining EU grants with loans or equity

• Grant component can take different shapesTA, investment grant, interest rate subsidy, loan guarantee, equity participation

• Examples: EU-Africa Infrastructure Trust Fund & Africa Investment Facility

• Volume: 160 projects, total grant value EUR1.1bn (EU blending facilities, 2007-2016)

• Dominated by energy and transport sector56% & 36% respectively

• Some generation of private finance, but limited

• Primarily dedicated to middle income countries (over 70%)

• Monitoring strong on physical & financial progress, weak on dev. impact

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3. Looking forward

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External Investment Plan: some issues to pay attention to

• Leverage private sector resources?

• Geographical spread (LDCs versus MICs)?

• Reporting on results and impact?

• Synergies between the three pillars:

1. guarantee fund

2. technical assistance

3. investment climate

• African ownership (responding to African needs and priorities; role of African institutions)?

• Contributions EU Member States in the long run?

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Multi-annual financial framework 2021-2027

• European Commission proposal out in May 2018, starting point negotiations

• Brexit expected to leave 12% to 15% gap in next budget & overall negotiation dynamics will change without UK

• Spending inside EU will continue to dominate, but foreign affairs important due to security & migration concerns

• Flexibility likely to be a key concern, for different reasons (incl. concern private sector to access funds more easily)

• Informally, ideas for financial architecture floating around (new SDG instrument, merging DCI & EDF, new partnership with Middle Income Countries)

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4. Questions for discussion

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Questions for discussion

1. What opportunities and challenges for EBCAM companies to effectively benefit from EU instruments and how can this be better reflected in EBCAM’s advocacy agenda?

2. To what extent and how do EBCAM and its members want to inform the EU financial architecture post 2020?

3. To what extent do EBCAM and its members want to encourage EU institutions to strengthen EU economic diplomacy (versus national economic diplomacy)?

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Thank you!

www.ecdpm.org

Jeske van Seters jvs@ecdpm.org

European Centre for Development Policy Management

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