EU approaches and instruments to engage the private sector for sustainable development in Africa Jeske van Seters, Head of Programme Private Sector Engagement European 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

Outline EU policy framework EU instruments Looking forward Questions for discussion to engage private sector for sustainable development in Africa

1. EU policy framework

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

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 Malmström) 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) So development and non development framework COM criteria s: measurable development impact; additionality; market neutrality; shared interest & co-financing; demonstration effect; social, environmental and fiscal standards. COMs principles (but how to put them into practice): focus on employment creation and poverty reduction take a firm-level differentiated approach; create market-based opportunities; follow clear criteria for support; allow for local contexts and fragile situations; put strong emphasis on results; observe policy coherence in areas affecting the private sector in developing countries.

EU policy framework: most recent AfT strategy update Fundamental changes proposed: Reduce fragmentation & increase leverage AfT Coherence and synergies between instruments across EU external policies Stronger focus on social & environmental dimensions Better differentiation of countries & increased focus on LDCs & situations of fragility Improved monitoring and reporting One of the action points: structured dialogue and engagement with private sector to identify and prioritize investment climate constraints. in particular the new External Investment Plan, trade agreements and trade schemes.

2. EU instruments

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 MFF instruments 2014-2020: increased promience to private sector for development (ENI, EDF, DCI, partnership instruments Instruments can be developmental and commercial

Figures: a partial picture 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 AfT categories: 1 trade policy and regulations; (2) trade development; (3) trade-related infrastructure; (4) budling prodcutiev capacity (5) trade-related adjumstnet (6) other trade related needs

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”
 MFF instruments 2014-2020: increased promience to private sector for development (ENI, EDF, DCI, partnership instruments Instruments can be developmental and commercial

Zooming in on blending Blending = combining EU grants with loans or equity Grant component can take different shapes TA, 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 sector 56% & 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

3. Looking forward

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: guarantee fund technical assistance investment climate African ownership (responding to African needs and priorities; role of African institutions)? Contributions EU Member States in the long run?

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)  increased amounts for foreign affairs and development cooperaiton? absorb lion’s share of allocations The EU-AITF was predominantly funded by the EDF (€647.7m) with a further €164.3m from member states. The AfIF is being financed through the EDF and the DCI Pan-African programme.

4. Questions for discussion

Questions for discussion 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? To what extent and how do EBCAM and its members want to inform the EU financial architecture post 2020? To what extent do EBCAM and its members want to encourage EU institutions to strengthen EU economic diplomacy (versus national economic diplomacy)?  increased amounts for foreign affairs and development cooperaiton? absorb lion’s share of allocations The EU-AITF was predominantly funded by the EDF (€647.7m) with a further €164.3m from member states. The AfIF is being financed through the EDF and the DCI Pan-African programme.

Thank you! www.ecdpm.org Jeske van Seters jvs@ecdpm.org European Centre for Development Policy Management