- IMF says Sub-Saharan Africa needs $425bn additional financing
Nigerian small and medium-scale enterprises (SMEs) and other businesses in the private sector stand to benefit immensely from an $80 billion post-Covid-19 African private sector investment program by the Group of Seven’s (G7) development finance institutions (DFIs), International Finance Corporation (IFC), the private sector arm of the African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB).
The G7 DFI group consists of the CDC and Proparco of France, JICA and JBIC of Japan, DFC of the US, FinDev of Canada, DEG of Germany, and CDP of Italy. This commitment is also supported by the IFC, African Development Bank, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB).
Each DFI has its own investment criteria which are 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.
Announcement of the investment was made on the sidelines of the G7 meeting in England, in which the world’s most industrialized nations’ Group said that they were committed to investing $80 billion in Africa’s private sector over the next five years to support sustainable economic recovery and growth on the continent.
The Covid-19 pandemic has caused severe global economic and health crisis. Many see the investment commitment as a welcome boost to support the long-term development objectives of African economies that have been negatively impacted by the crisis.
For Nigeria, with over 37 million SMEs, which are faced with huge challenges, major of which is access to funds, the G7 DFIs-multilateral partners’ $80bn post-Covid-19 African private sector investment would be a key factor to their growth, thereby enable them play their supposed role as major economic drivers. A joint survey by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and National Bureau of Statistics (NBS) shows that Nigeria has over 37.067 million micro, small and medium enterprises (MSMEs) as of 2013. Of this figure over 36.994 million are micro, while 68,168 are small, while 4,670 are medium enterprises.
Meanwhile, the International Monetary Fund (IMF), the private sector specific arm of the World Bank estimates that sub-Saharan Africa needs additional financing of around $425 billion between now and 2025 to help strengthen the pandemic response spending, and reduce poverty in the region.
According to the UK Minister for Africa, James Duddridge, “the UK is proud to back this commitment by world leaders at the G7 Summit to invest more than $80 billion in Africa’s private sector over the next 5 years.” Duddridge said the investment will create jobs, boost economic growth, help tackle climate change and fight poverty. He said the initiative comes at a crucial time, as the continent rebuilds its economies, severely impacted by Covid-19.
Nick O’Donohoe, the CEO of CDC Group, said: “The patient, 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.” Werner Hoyer, president of the European Investment Bank, said: “The EIB welcomes G7 leadership to enhance support for high-impact investment across Africa during and after the pandemic. Last year the EU Bank’s engagement in Africa, as part of Team Europe, represented the largest ever support for climate action and investment in fragile states in 55 years of EIB operations on the continent. We stand ready to cooperate further with African and multilateral partners to tackle both COVID-19 and accelerate the green transition in Africa.”
AfDB’s IFC Managing Director, Makhtar Diop, said, ensuring an inclusive and sustainable recovery for people, businesses and economies across Africa in coordination with its development partners, is at the core of IFC’s development mandate today. “We know that the private sector will play a major role in financing Africa’s future by creating millions of jobs that are essential to ensuring sustained economic growth and poverty reduction. We therefore, welcome this important partnership and are proud to provide financing and to work with partners to help create the right conditions to bring more private investment to Africa,” Diop said.
On his part, David Marchick, the Chief Operating Officer of U.S. International Development Finance Corporation (DFC), said: “under President Joe Biden’s leadership, investing more in Africa is a top priority for DFC in fulfilling its development mandate. “DFC is proud to be doubling down on our commitment to Africa alongside our G7 and multilateral partners and will continue to prioritize investments in vaccine manufacturing, COVID-19 response, climate mitigation and adaptation, and gender equity on the African continent,” NMarchick said.
Meanwhile, Solomon Quaynor, AfDB’s Vice-President, Private Sector, Infrastructure & Industrialization said, the pan-African financial institution welcomes the global partnership and the opportunity to provide the African voice, as Africa builds back better and boldly. “The opportunity to create jobs particularly for youth and women, from a focus on industrializing Africa underpinned by the African Continental Free Trade Area (AfCFTA), will be our priority. 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 AUM.”
Heike Harmgart, EBRD Managing Director, Southern & Eastern Mediterranean, said: “Harnessing the potential of the private sector is essential to supporting prosperity in Africa and meeting the continent’s development needs. In the North African countries where we work – Egypt, Morocco and Tunisia – we have invested over €11.5 billion in only 9 years, focused on boosting the private sector, developing green sustainable infrastructure and promoting youth and women participation in the economy. We will pursue our efforts to expand private sector investment opportunities at scale in the region in close cooperation with other development actors.”
Monika Beck, member of the DEG-Management Board, said, many of their African partner countries have been hit hard by the pandemic. “We quickly developed new services to support private sector SME and to help protecting jobs and livelihoods
Frontpage October 14, 2019
Frontpage August 20, 2021