Today, the European Commission took a major step forward in boosting investment in Africa and the EU Neighbourhood, helping to stimulate global recovery from the pandemic, by concluding ten financial guarantee agreements worth €990 million with partner financial institutions that complete the European Fund for Sustainable Development (EFSD), the financing arm of the External Investment Plan (EIP). Together, these guarantees are expected to generate up to €10 billion in overall investment.
Jutta Urpilainen, Commissioner for International Partnerships, said: “By signing these agreements today, the EU has concluded the implementation of the External Investment Plan’s overall guarantee almost two months early. Now our partner financial institutions can make use of all of the Plan’s individual guarantees to generate billions of euros in much-needed investment, in particular across Africa. These agreements will directly support people who face some of the biggest challenges because of COVID-19: small business owners, the self-employed, women entrepreneurs and businesses led by young people. They will also help to fund a major expansion of renewable energy generation, ensuring that the recovery from the pandemic is green, digital, just and resilient.”
Commissioner for Neighbourhood and Enlargement, Olivér Várhelyi, said: “The guarantee agreements that we sign today clearly show the effective partnership established between the European Commission and the International Financial Institutions in support of our partner countries. Investments have become even more necessary in light of the pandemic. With today’s signature, the European Commission is securing more than €500 million to support EU Neighbourhood countries. These guarantee agreements will stimulate their economic recovery and make them more resilient to future crises.”
Guarantees agreements include the earlier announced €400 million guarantee — that complements the additional €100 million EU grant announced today — for the COVAX Facility, to develop COVID-19 vaccines and ensure fair access once they are available. Other agreements for guarantees amounting to €370 million will help small businesses stay afloat and continue to grow in the face of the COVID-19 pandemic.
All these guarantees are part of the Team Europe response to COVID-19 — a package of combined support for our partner countries from the EU, its Member States, and European financial institutions. They also mark the successful completion of the EFSD and will bring much-needed investment to partner countries in Africa and the EU Neighbourhood.
These guarantees are part of the EU External Investment Plan, which is mobilising more than €50 billion in public and private investment for sustainable development in countries neighbouring the EU and in Africa using €5 billion in EU funds under the EFSD.
The guarantee agreements concluded today are the following:
This €438 million guarantee with the European Investment Bank (EIB) will reduce and remove financing constraints for accessing COVID-19 vaccines and health related diagnostic services in Sub-Saharan Africa. It has two components: the first amounts to €400 million and focuses on widening access to future COVID-19 vaccines in Africa and the EU Neighbourhood. The second comes to €38 million and will improve access to high-quality, health-related diagnostic services for low-income communities in Sub-Saharan Africa, particularly in rural areas. It will enable partnerships between governments and private sector laboratory and diagnostic companies.
This €60 million guarantee with CDP, the Italian Development Finance Institution, will support local businesswomen and businessmen in Sub-Saharan Africa and the EU Neighbourhood, who have trouble accessing loans and capital to start or expand their business. The guarantee will help to increase access to finance for small businesses (MSMEs) led by women, young people and migrants, and will encourage local banks to increase their lending to them. In doing so, it will create jobs and reduce inequality. InclusiFi will also help local banks and other local financial institutions to address the challenges caused by the COVID-19 pandemic. Part of the guarantee will make it possible for diaspora communities in Europe to invest in small businesses in their countries of origin.
This €160 million guarantee programme is signed with AFD, the French development cooperation agency, and Proparco, the French Development finance institution. It targets small businesses in Sub-Saharan Africa and the EU Neighbourhood, with a particular focus on MSMEs in the agricultural sector, in rural areas and those particularly impacted by the COVID-19 pandemic. The guarantee will make it more affordable for them to borrow, helping to sustain their businesses.
- Renewable Energy Support Programme for mainly rural parts of Sub-Saharan Africa
This €20 million guarantee with COFIDES, the Spanish development finance institution, will help to develop and finance renewable energy projects, which are not connected to the electricity distribution networks, so-called off-grid and mini-grid projects. It targets rural and peri-urban areas in Sub-Saharan Africa and areas without access to energy. The guarantee will help to generate a total investment of up over €800 million and is expected to provide electricity to at least 180,000 new people in rural areas.
- European Guarantee for Renewable Energy
These guarantee agreements worth €62 million aim to promote renewable energy solutions by reducing the off-take risk of energy projects – the risk of not getting paid for the energy sold. By providing a partial risk coverage, these guarantees will give investors more certainty and thus a bigger incentive to invest in or to finance a renewable energy project. These guarantees are expected to give over one million people access to electricity.
- EU Market Creation Facility
This €150 million guarantee with KfW, the German development bank, and the Currency Exchange Fund (TCX) aims to increase the use of local currency in development finance. It increases the risk capacity for TCX and enables the fund to grow even in challenging circumstances like the COVID-19 pandemic. The increased capacity of TCX will allow financial institutions to lend more to people and businesses in Sub-Saharan Africa and the European Neighbourhood, whilst not exposing borrowers to unprecedented currency risk. The programme makes financial institutions more stable and creates lending capacity in local currency.
- Municipal, Infrastructure and Industrial Resilience Programme
This €100 million guarantee programme with the European Bank for Reconstruction and Development (EBRD) will support municipal, industrial and infrastructure investments in the EU Southern and Eastern Neighbourhood, which have been affected by the COVID-19 pandemic. The programme also supports the transitioning to green, low-carbon and climate-resilient economies. It does so by supporting investments in green city infrastructure, green logistic chains, energy efficiency and green technology transfers in industrial processes, commercial operations and buildings. The guarantee will help improve infrastructure and municipal services, increase energy and water efficiency and create jobs in the EU Neighbourhood.
For more information
Video statements from Commissioners Urpilainen and Várhelyi, and from the leaders of our partner financial institutions, to mark the conclusion of these agreements can be viewed here.
Factsheet on the External Investment Plan
Source:- ReliefWeb
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