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Europe readies its ‘Marshall Plan’ for Africa


Europe readies its ‘Marshall Plan’ for Africa

Europe readies its ‘Marshall Plan’ for Africa
Photo credit: Eduardo Soteras | AFP via Getty

The head of the European Investment Bank wants the EU to treat African countries as closer economic partners.

If Europe wants to tackle the root causes of the migration crisis, the head of the European Investment Bank says it must do more business in Africa.

“We are talking nowadays about Africa in terms of economic perspectives and strategies, while in the past we talked about Africa as a recipient of donations,” Werner Hoyer, president of the EIB, said in an interview with POLITICO at the World Economic Forum in Davos.

“What is needed is not global social policy but down-to-earth investment. [Africa] has fantastic potential, but we need to mobilize the private sector. The idea of doing everything with grants is over.”

Such an approach, seeing Africa as a trade partner and an investment opportunity, is part of a European policy shift designed to strike agreements with African countries that create economic opportunities there and so help stem the tide of migrants north.

Europe needed the migration crisis as a wake-up call to remind itself that “we’ll soon have 2 billion Africans, and we better prepare for that,” Hoyer said.

Hoyer’s call hints at a shift in European budget policies from grants to loans. It also reflects a growing sense that Europe will need a lot of money to set up what German Finance Minister Wolfgang Schäuble last year called a “Marshall Plan” for the EU’s neighbors on the southern shore of the Mediterranean.

Through the Marshall Plan, the U.S. extended generous financial support for the rebuilding of Western European countries after the end of World War II.

In the same spirit, the EIB – the EU’s policy bank – will soon “extend activity beyond Europe,” Hoyer said. “That will get traction in 2017.” The EU has an external investment plan in the making, the details of which will be hammered out by May.

The scheme for Africa, put forward in September by European Commission President Jean-Claude Juncker, foresees a rerouting of around €2.5 billion from the EU budget to the new external investment plan, plus an additional €1.5 billion in fresh money. With the private sector pitching in, that would allow the EIB to provide up to €5 billion in direct lending, according to the EIB.

The fund for Africa is modeled after the so-called Juncker fund, which invests within the EU. A €315 billion public-private investment scheme, it leverages public seed money to enlist private capital participation by guaranteeing investors’ first losses.

Hoyer is a former secretary of state in the German foreign ministry and sat in the Bundestag for 24 years for the liberal Free Democratic Party. He wrote a standard textbook on microeconomics and ever since coming into office at the EIB in 2012 has spearheaded the effort to leverage public money to spur private investments.

The EIB is to present its 2016 results in Brussels next week. “Last year was very good,” Hoyer said, especially when it comes to financing small- and medium-sized enterprises, which he described as “Europe’s biggest weakness.” The bank handed out more than one-third of its lending to SMEs in 2016.

But the EIB is supposed to intervene only if there’s a market failure. “If a public bank like ours has to intervene so heavily in SME financing, some things with SME financing in Europe are not okay,” he said, adding that the EU’s “cleaning up of the landscape” in banking had led to a shortage of access to capital for the real economy.

In Europe, “we have done our job,” Hoyer said. In Africa, the EIB’s job is about to begin.

» Download: Migration, sustainability and a Marshall Plan with Africa: A memorandum for the federal government (German) (PDF, 2.8 MB)


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