The EU launches fund for sustainable investment in Africa and Neighbourhood countries
On 28 September 2017 the European Commission announced the “kick-start” of the new EU External Investment Plan (the “EIP”) to promote sustainable development in Africa1 and EU Neighbourhood countries.2
The EIP builds upon the same structure as the EU’s Investment Plan for Europe, the so-called “Juncker Plan”, which is based on three “pillars” that combine to crowd-in (the new term for “attract”) private investment. The Commission expects the EIP to attract €44 billion of private investment by 2020,3 which is a substantial figure notwithstanding its modesty in comparison with the Juncker Plan’s recently revised target of at least half a trillion euros in investments by 2020, and it hopes to achieve this through the following three pillars:
- The newly created European Fund for Sustainable Development (the “Fund”) which has been endowed with €4.1 billion by the Commission. The Fund will offer a new generation of financial instruments, encompassing guarantees, risk-sharing instruments, and the blending of grants and loans (building upon the financing being offered under the Juncker Plan).
- A greater level of technical assistance to help partner countries develop financially viable projects and business ready for investment.
- Increased dialogue between the EU and partner countries, and structured private sector dialogue, to improve the investment climate and business environment in partner countries.
Key aims of the plan
The EIP is underpinned by the EU’s commitment to the UN’s 2016 Sustainable Development Goals, such as sustainable economic growth, empowerment of women and ending poverty, the Paris Agreement on Climate Change, as well as the perceived migration crisis of 2016. Consequently projects seeking to obtain funding or guarantees under the EIP will need to contribute to these commitments and migration issues.
This means that whereas more traditional large-scale investments in infrastructure and renewable energy projects are still part of the plan, the EIP will also promote small and medium-sized enterprises, both in terms of investors within the EU and enterprises in partner countries, and it will target specific socio-economic sectors and fragile regions of Africa and the Neighbourhood where foreign investment is currently difficult and overlooked.
The nuts and bolts
Implementation of the EIP will be overseen by the Commission and a “Strategic Board”, which met for the first time on 28 September 2017, and which will set specific areas for investment called “investment windows”. The Commission will then allocate funds and a portfolio of projects to partner financial institutions, such as the European Investment Bank and European Bank for Reconstruction and Development,4 to be administered towards particular policy objectives/investment windows.
"The EIP will also promote small and medium-sized enterprises, both in terms of investors within the EU and enterprises in partner countries, and it will target specific socio-economic sectors and fragile regions of Africa and the Neighbourhood where foreign investment is currently difficult and overlooked."
EU businesses will be able to apply for funding from a partner financial institution for projects that fit within an allocated investment window, and which also meet the criteria of promoting sustainable development. The primary thrust of the EIP is to allow more direct access for private investment in development infrastructure, and the Commission has stated that it will consider direct partnerships with businesses in the EU and Africa, both project-based5 and with private financial institutions.
The first investment windows are expected to be released at the EU–Africa Summit which will take place on 29–30 November 2017, with the aim that the first guarantee agreements with financial institutions will be entered into in the first quarter of 2018.
Given the success of the Juncker Plan to date there is room for optimism about the EU’s ambitious EIP. We will continue to monitor its progress as its policy objectives and financial instruments start to take shape in the coming months.
- 1. Signatories of the ACP-EU Cotonou Agreement.
- 2. Included in the European Neighbourhood Policy.
- 3. European Commission press release, EU kick-starts its new EU External Investment Plan, 28 September 2017.
- 4. There are currently 13 approved partner financial institutions.
- 5. European Commission Fact Sheet, Questions and answers about the European External Investment Plan, 28 September 2017.