The G7 DFIs, the International Finance Corporation (IFC), the private sector arm of the African Development Bank, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB) announced on Monday their commitment to invest $80 billion in the private sector over the next five years to support sustainable economic recovery and growth in Africa.
The G7 DFI group consists of CDC, Proparco (France), JICA and JBIC (Japan), DFC (US), FinDev Canada, DEG (Germany), and CDP (Italy).
The new investment comes amid the ongoing COVID-19 crisis that has caused a severe global economic and health crisis, aiming at boosting the long-term development objectives of African economies that have been negatively impacted by the crisis.
It is the first time the G7 DFIs have come together to make a collective partnership commitment to the African continent.
Recently, the International Monetary Fund (IMF) has estimated that sub-Saharan Africa needs additional financing of about $425 billion through 2025 to help strengthen the pandemic response spending and reduce poverty in the continent.
“This investment will create jobs, boost economic growth, help tackle climate change and fight poverty. It comes at a crucial time as the continent rebuilds its economies, [which were] severely impacted by COVID-19,” said UK Minister for Africa James Duddridge.
Nick O’Donohoe, the CEO of CDC Group, noted that the high-quality capital that DFIs provide is urgently needed if African economies are to start to rebuild quickly from the impact of the pandemic.
“CDC is committed to building long term investment partnerships in Africa that fuel sustainable private sector growth in support of the UN’s sustainable development goals (SDGs),” he added.
Solomon Quaynor — the vice president of the AfDB for private sector, infrastructure, and industrialisation — said that the bank’s priority is to create jobs particularly for youth and women, with a focus on industrialising Africa, underpinned by the African Continental Free Trade Area.
“Given the gap between the IMF estimates and what this partnership is committing to, we will seek to crowd-in African development partners, as well as African savings from SWFs, pensions, and insurance pools, estimated to have US$1.8 trillion as assets under management (AUM),” Quaynor explained.
The EBRD’s Managing Director for Southern and Eastern Mediterranean, Heike Harmgart, expounded that the bank has invested over €11.5 billion in only 9 years in Egypt, Morocco, and Tunisia in order to boost the private sector, developing green sustainable infrastructure and promoting youth and women participation in the economy.
“We will pursue efforts to expand private sector investment opportunities in the region in close cooperation with other development actors,” she added.
Each DFI has its own investment criteria, which is aligned to an assessment of need to achieve development impact across a range of sectors.
DFIs play an important role in helping to build markets, mitigate risk, and pave the way for other investors to enter new markets.