tralac Daily News
Cyclone Batsirai: Exports to Madagascar on the line (Food for Mzansi)
As a strategic trade partner to South Africa, Madagascar’s dealing with Cyclone Batsirai could have an impact on local exports to the island country. But although it is unclear at this stage what the extent of potential value chain disruptions will be, experts are far more concerned about food security in a neighbouring country significantly reliant on South African imports.
Madagascar is currently dealing with the aftermath of Cyclone Batsirai, which moved through the southeastern parts of the island on Friday, 4 February 2022. This was less than a month after Tropical Storm Ana slammed into the country in January. The latest figures around the human toll stand at 55 000 people displaced and at least 50 people dead. It is reported that Madagascar’s agricultural sector has been badly affected by the two weather events, particularly in the rice industry as Madagascar’s biggest export commodity. Concerns are also growing over food shortages and food security
South Africa must turn to renewables, Scatec GM emphasises (Engineering News)
South Africa’s problem is one of a “fossil fuel dependency crisis”, rather than an “energy crisis”, renewable power producer Scatec sub-Saharan Africa GM Jan Fourie posits. He says the country’s energy shortfalls, primarily driven by poor performance at an ageing fleet of coal-fired stations, are addressed in South Africa’s Integrated Resource Plan of 2019, which commits to a shift away from coal, with a proposed 25% of South Africa’s total power to come from renewables by 2030. “The country’s abundant sunlight and wind resources make renewables the obvious panacea. Renewables-based projects are now quick to establish and fully cost-competitive with fossil-fuel-based ones. “And with programmes like the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) well under way, there is no shortage of investor backing or State support,” says Fourie.
Sugar organisation calls on government to honour local commitments (Engineering News)
It is vital that, in this year’s State of the Nation Address, President Cyril Ramaphosa announces action on government’s commitments under the South African Sugarcane Value Chain Masterplan, including that government departments and State entities only procure locally produced sugar, industry organisation SA Canegrowers chairperson Andrew Russell says.
He says last year’s address saw the President encourage the South African government, business and organised labour to buy local. While this was actioned upon by the private sector, which has been supporting the local sugar industry, government seemed to be lagging behind.
Kenya protests South Sudan new entry, exit vehicle fees (Business Daily)
Kenya has protested a move by the South Sudan government requiring all the vehicles entering the country to pay $100 annual fee and further $30 for every entry and exit per vehicle. Through the Ministry of Trade and the Kenya Transporters Association (KTA), Kenya said the fee will increase the cost of transport and hamper the free movement of goods along the Northern Corridor.
According to a letter by the Kenyan government to South Sudan, the introduction of the new entry digital border security control tag meant to enhance data collection of traffic movement in and out of its territory will make logistics business in Juba unviable.
Sh1.8bn yard to help ease truck congestion at Malaba border (Business Daily)
The traffic congestion at the Malaba border is expected to ease considerably once construction of the Sh1.8 billion marshaling yard is completed. The yard, whose construction has started, will remove the trucks on the road where they currently park, improve efficiency at the border point while improving the welfare of the drivers. The facility is being constructed by the Kenya Ports Authority (KPA).
Currently, the trucks have to park on the roadside as they await clearance from the border officials, creating huge traffic that inconveniences other motorists.
Kenya closer to unlocking Djibouti miraa market (Business Daily)
Djibouti’s Trade minister will lead a delegation to Nairobi this month to discuss the khat (miraa) market that Kenya has been eyeing after Somalia closed access of the stimulant to Mogadishu.
Kenya is targeting to export at least 20 tonnes of miraa to Djibouti daily, which is nearly half of what was being sold to the Somali market every day.
The planned visit by the delegation will come as a boost to Kenya after the Djibouti officials who were expected in the country last year in August failed to show up.
Djibouti is getting most of its khat supply from Ethiopia, but there is a huge deficit for the stimulant as Addis Ababa is unable to meet the country’s total demand. The Djibouti market is an initiative of the County Government of Meru, which through the ministry of trade is pushing for access.
South Sudanese Oil to Unlock Development in Northern Kenya (Energy & Capital Power)
Landlocked South Sudan is bordered to the north by Sudan, to the east by Ethiopia, to the south by Uganda and Kenya, and to the west by the Democratic Republic of the Congo and Central African Republic. As the only major oil producer in East Africa, its 3.5 billion barrels of proven oil reserves remain of strategic importance to a region in short supply of both energy and infrastructure. However, domestic oil production has largely been viewed in isolation, with the vast majority exported as crude petroleum to China. As the country unlocks a new chapter in its history, South Sudan is repositioning itself as a gateway to East African energy development, specifically through the creation of regional, integrated supply chains and export-driven growth. In neighboring Kenya, for example, the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor project aims to foster connectivity among East African countries through the establishment of large-scale transport and logistics infrastructure.
While the South Sudanese Government has been lukewarm on the project to date, citing concerns over cost and viability in light of COVID-19 and fluctuating oil prices, its participation is set to play a vital role in the growth of the wider region. In addition to boosting South Sudan’s own oil exports, the new pipeline will drive socioeconomic development within marginalized northern Kenya by spurring local job creation and integrating rural and isolated communities into regional supply chains through key export and trade infrastructure. In addition to the crude oil pipeline, the LAPSSET Corridor project comprises a railway line, road network connecting Lamu, Garissa, Isiolo, Moyale and Turkana, a dam along Tana River, airports and associated industrial areas. The newly-constructed Lamu Port, which was launched last May, is intended to connect landlocked East African economies with global trade routes and complement Kenya’s existing industrial hub in Mombasa, with a view to establishing a special economic zone.
Rwanda: Top locally made products that became popular in 2021 (The New Times)
Over the past years, the Made in Rwanda initiative has contributed both to Rwanda’s economic growth and the trade balance in particular. The development has seen a number of products increasingly become popular in the local market. Apart from the traditional items such as agaseke baskets, imigongo, themed outfits, beads, wall baskets and banana leaf bags, the five-year campaign has reduced the number of imports in the country. In 2021, these are some of the items that rose to popularity in the local market.
Zim exports hit record high (The Herald)
Zimbabwe recorded its highest ever foreign currency receipts in 2021, boosted by strong commodity prices and increase in international remittances, official figures show. Foreign receipts amounted to US$9,7 billion from US$6,3 billion in 2020, according to the Reserve Bank of Zimbabwe (RBZ)’s 2022 Monetary Policy Statement released on Monday. Exports increased by 66,6 percent to US$6,2 billion while diaspora remittances grew by 42,7 percent to US$1,4 billion. Imports amounted to US$4,9 billion.
The Egyptian economy continues to show the resilience it has displayed throughout the COVID-19 pandemic, due to the macroeconomic and energy sector reforms it has implemented in recent years, along with measures taken to ease monetary conditions, provide selected sectoral support, and mobilize external financing. Real GDP growth and foreign income activities started recovering in Q4-FY2020/21. However, global COVID-related challenges and an uneven recovery across the world continue to restrain the rebound.
Egypt is expected to resume pre-pandemic growth in FY2021/22 under the baseline scenario that the COVID-situation gradually improves. Further advancement of structural reforms is critical to sustain recovery, drive productivity growth, and generate high-earning job opportunities. The Focus Chapter of this monitor is dedicated to the topic of government digitalization. Egypt has reached a relatively elevated level of government digital transformation, according to international indices, such as the United Nations E-Government Development Index, as well as the newly constructed World Bank GovTech Maturity Index.
Egypt, Courted By China & Russia, Sees Exports Rise (Silk Road Briefing)
Egypt is being wooed by both Beijing and Moscow as a desirable trade partner and access point to the African continental market. The Egyptian President Abdel Fattah el-Sisi was one of the 40 World Leaders who attended the opening of the Beijing Winter Olympics, after which he held meetings with Xi Jinping. Xi commented afterwards that “China and Egypt “Share similar visions and strategies in defending their own interests.” Their comprehensive strategic partnership is a model of “China-Arab, China-Africa, and China-developing world solidarity.” Xi said, with the meeting coming as el-Sisi’s government is seeking closer ties with China as it distances itself from the United States and other Western nations critical of its human rights record. Egypt is a member of the Belt and Road Initiative and is a key partner – as the Suez Canal is the only maritime connection between Africa and Asia on one side and Europe on the other.
Egypt is also a member of the African Continental Free Trade Agreement (AfCFTA) which commenced from January 1st 2021 and which has largely abolished intra-African trade tariffs. This means it is now possible to source products from across Africa, process them and mix them with duty free imported products from elsewhere, and then either resell the completed item back onto the African domestic market or reexport them. That requires an Export Processing Zone with Bonded warehousing facilities. Both China and Russia are developing these at Port Said, near the Suez Canal. Bilateral trade between China and Egypt is currently running at about US$2 billion per month and rose about 18% in 2021.
The Economic Commission for Africa (ECA), in collaboration with Google Africa and Africa 24, held the fifth Africa Business Forum on the margins of the thirty-fifth ordinary session of the African Union Assembly of Heads of State and Government. Delegates from the public and private sectors met in person and virtually to discuss how best to tap into that vast potential and meet the growing demand unleashed by the African Continental Free Trade Agreement. What are the roadblocks and how can they be removed, were critical questions for the session, themed: Investing in Multimodal Transport Infrastructure to Optimize the Benefits of the African Continental Free Trade Area: A Focus on Air Transport and Tourism.
The Executive Secretary of the ECA, Vera Songwe in welcoming delegates, outlined how critical transport was to make the most of AfCFTA. Pointing to ECA research, she stated, “the continent would require close to 2 million additional trucks, over 100,000 rail wagons, 250 aircraft, and more than 100 vessels by 2030, if the Free Trade Area is fully implemented.” Essentially, Africa’s immense potential for trade, travel and tourism is languishing virtually untapped. The potential for improving transport infrastructure and services across Africa depends on “economic policies had to be recentered to include transportation. That included ships, boats, trains, planes and automobiles,” said President of Sierra Leone H.E. Julius Maada Bio.
Supporting the development of transport infrastructure and services for the full realization of the benefits of the AfCFTA requires a lot more, according to delegates. It requires reducing nationalistic sentiments to make way for an open market, promoting intra-African tourism through the Single African Air transport Market (SAATM) and recentering economic policies. The President of Sierra Leone, H.E. Julius Maada Bio, said “economic policies had to be recentered to include transportation. That included ships, boats, trains, planes and automobiles.” More emphasis on financing growth and embracing digital transformation was also called for. Google’s CEO, Sundar Pichai, said, “Africa was on the brink of a digital transformation - one which would be crucial to the transport and tourism sectors.”
Organizations that rely on supply chains in Africa are looking at ways to strengthen pandemic-impacted chains. Many effective treatments aimed at boosting the health of ailing chains are being implemented, including those that rely on digitization, sustainability standards, and improving infrastructure and manufacturing capacity.
The pandemic caused massive damage to global supply chains, with challenges including route congestion and blockages, manufacturing shutdowns, a deficit of skilled labor, a global shortage of key logistics components including shipping containers, lack of space in warehouses, a spike in transportation costs and substantially increased demand for goods around the world, post-lockdown. The World Trade Organization recently noted that these global supply chain challenges would last longer than originally thought, possibly into next year, and that developing economies would be persistently marginalized by weak links in global supply chains. As a result, businesses have been looking at ways to best protect their supply chains from future disruption. Measures to heal and strengthen ailing chains include digitizing parts of the supply chain, increasing manufacturing capacity in low-cost markets, reducing reliance on single-source suppliers, improving supply chain infrastructure through public and private funding, integrating sustainable practices into supply chain management and carefully monitoring changes in government policy across multiple jurisdictions.
Why Lapsset is stuck on the starting blocks (The East African)
Three years after Kenya and its landlocked neighbours Ethiopia and South Sudan committed to raise funds to build infrastructure linking their economies on the Lamu Port-South Sudan-Ethiopia-Transport (Lapsset) Corridor, not much has happened. Kenya Lapsset Corridor Development Authority Chair Titus Ibui said there was a need to mobilise funds and improve on security to ensure the projects are completed. Speaking at a Lamu stakeholders and leadership consultative meeting in Mombasa on February 3, Mr Ibui said a number of projects have stalled as a result of insecurity after suspected al-Shabaab militants attacked residents and even contractors forcing the project implementers to flee. “We are concerned about the insecurity in Lamu that is crippling progress of Lapsset projects. We have seen contractors suspend works due to insecurity but we are addressing that,” said Mr Ibui.
On funding, Mr Ibui said Kenya has so far used up $1.39 billion in the construction of roads and other infrastructure from its coffers.
Lapsset is meant to link the three states via rail, airports, roads and oil pipelines. If successful, Lamu would become eastern Africa’s largest seaport with 23 berths.
The SADC Executive Secretary Elias Magosi has called on Member States to pass national laws to support regional integration as all legal instruments are critical in deepening integration and promoting sustainable development in the region.
The slow pace by some SADC Member States to advance these regional laws from being stated intentions to actual application has affected integration, resulting in most people failing to achieve maximum benefits of belonging to a share community in southern Africa.
In pursuit of strengthening regional co-operation, the Southern African Customs Union (SACU) continued its work towards greater coordination of policies and activities in the area of the Harmonized System (HS) and tariffs. On 24 January 2022, the SACU Technical Working Group on HS, Tariff, Origin and Valuation held a virtual meeting to discuss the progress in the implementation of the new edition of the HS. The meeting brought together 30 experts representing the five Member States of the SACU and the SACU Secretariat.
In its presentation, the SACU Secretariat focused on the Roadmap for Migration from HS 2017 to HS 2022. The Roadmap lays out all the main steps, phases and action required to ensure a timely and well-coordinated implementation of HS amendments by the Customs Union and its Member States. It had been developed in cooperation with the WCO, in the framework of the EU-WCO Programme for HS in Africa (HS-Africa Programme), funded by the European Union, and validated at previous meetings of the Working Group.
The Working Group expressed satisfaction at having achieved most of the milestones set by the Roadmap. It was stressed that the Roadmap rendered simultaneous implementation of HS amendments by all SACU Member States achievable, ensured meaningful participation in the process of business representatives, and made the collaboration between all the stakeholders involved in the migration process more transparent and efficient. As a result, all the Member States successfully migrated to the HS 2022 version of the SACU Common External Tariff.
Private companies are to blame for constant trade wars between the East African Community (EAC), a top government official has said. In an interview with The Standard, the EAC and Regional Development Principal Secretary Kevit Desai said although there have been tremendous efforts to harmonise non-tariff barriers (NTBs) to ease the tensions, some private companies have wanted to play monopoly at the expense of others. “We have had instances where individual interests and unfair market play have provoked individual member States to impose bans on some exports or imports. This has solely been to protect the local markets,” said Mr Desai. The PS said although such tensions will always prop up, the EAC member States must ensure the challenges are dealt with in cooperation with the private sector.
EAC needs to do more on non-tariff barriers (The Citizen)
A recent dialogue between major business stakeholders from both the public and private sectors of the economy established that trade barriers are still a major challenge within the East African Community (EAC). The event, which was conducted at the Mutukula border crossing between Tanzania and Uganda, was jointly organised by the East African Business Council (EABC) and Trade Mark East Africa (TMEA), and brought together some 50 participants.
What with one thing leading to another, the dialogue definitively concluded that both tariff and non-tariff trade barriers (TTBs and NTBs) continue to be a real barrier not only to cross-border trade, but also to intra-regional investment flows within the six EAC member countries of Tanzania, Kenya, Uganda, Rwanda, Burundi and South Sudan.
Enhance local govts capacities, EAC urged (Dailynews)
THE East African Community (EAC) partner states have been urged to enhance the capacity of local government authorities in realising the envisaged African Union (AU) Agenda 2063. The Chairperson of the Commonwealth Local Government Forum (CLGF) Reverend Mpho MW Moruakgomo said on Monday that the six EAC members had a noble duty of capacitating regional local government authorities, arguing that they were the anchors of development. Rev Moruakgomo, who was speaking at the beginning of the 7th East African Local Governments Association (EALGA) conference noted that most African countries were still lagging behind in achieving Agenda 2063 as a result of the ever declining pace of local government authorities.
The CLGF Chairperson further warned that it will be difficult to realize the envisioned EAC integration agenda if governments turn a blind eye on local government authorities.
A four-day East African Community Sectoral Council on Energy is currently underway via hybrid format. The overall objective of the Sectoral Council on Energy is to review the progress made in the sector in implementing Council decisions and to consider other issues of regional importance in the areas of New and Renewable Energy, Energy Conservation and Efficiency, Fossil Fuels and Power Sub-sectors.
Among the items on the agenda are consideration of reports on: the Status of implementation of the previous directives/decisions of the Sectoral Council; Centre of Excellence for the East African Centre for Renewable Energy and Energy efficiency (EACREEE); New and Renewable Energy, Energy Conservation and Energy Efficiency, and; Establishment of the East African Centre for Renewable Energy and Energy Efficiency
EA Crude Oil Pipeline enters fundraiser phase (The East African)
After announcing the final investment decision, the shareholders of the East African Crude Oil Pipeline (Eacop) now turn to looking for money to conclude the deal for financing of the project, which is expected mid this year. The Eacop is a key infrastructure project that will transport Uganda’s oil to export markets, hence a major component in the commercialisation of the Lake Albert oil resources. The 1,443km pipeline from Hoima in Uganda to the Indian Ocean port of Tanga in Tanzania, will cost $5 billion – a jump from the original cost of $3.5 billion due to the increase in prices of key inputs such as steel, cost of shipping as well as the cost of loans. “Fully loaded, we are looking at a cost of $5 billion,” says John Bosco Habumugisha, the General Manager, National Pipeline Company.
Almost two years into the pandemic, Covid-19 has rapidly accelerated the digital transformation of economies globally. For businesses in some parts of the world, such as Pacific Asia, Covid-19 has fast-forwarded digitalisation by more than 10 years. However, not all countries have seen a boost to their digitisation efforts during the pandemic. Many countries in the developing world, including Africa, continue to be challenged by the severe digital divide largely due to infrastructure and cost barriers. Thankfully, it is not all grim. While the digital divide persists, African countries have an opportunity to scale the innovations in the agriculture and e-commerce sectors from the past two years. Scaling these innovations, which are often driven by private sector initiatives, will require policy efforts that focus on regional integration and targeted support towards digital adoption. These silver linings have the potential to boost economies, transform the respective sectors beyond the pandemic, and power new possibilities for the continent in terms of wealth creation and employment.
Over the years, local and multinational retail chains from Shoprite to Prince Ebeano have emerged in Nigeria. However, they cater to only a small sliver of the population. In Lagos, Shoprite is more of a destination where people explore merchandise and snap pictures than shop.
Rather, 98% of Nigerians shop in the informal retail sector, just like our fictional woman retailer who sold you your bread. Informal retail encompasses a host of outlets that range in size: tabletops, kiosks (managed by mallams), retail stores, mini-marts, and supermarkets. This doesn’t even account for the direct-to-consumer (DTC) channels of hawkers who are, in reality, an extension of informal shops. They often buy goods on credit from retailers and ply a brisk trade of certain items that do well in Lagos traffic
Informal retail is dominant across sub-Saharan Africa. Its size and scale are immense: it contributes $2.6 trillion to the region’s nominal GDP, drives $1 trillion in annual sales, and provides 80% of jobs. Informal retailers sell 80% of fast-moving consumer goods (FMCGs) to African households. According to the United Nations Economic Commission for Africa (UNECA), 90% of retail transactions in Africa happen through informal channels. These informal transactions account for 70% of retail transactions in Kenya, 96% in Ghana, and 98% in Nigeria and Cameroon.
Despite informal retail’s importance in driving commerce and economic activity, it is uncoordinated, fragmented, and unstructured. Multiple players exist in retail supply chains – manufacturers, distributors, sub-distributors, logistics providers, and retailers – but they operate in silos. Supply is disconnected from demand. The breakdown in supply chains results from the difficulty in reaching retailers, and ultimately, customers. Distribution networks – making sure your product is within easy reach of customers – are costly to build. They require warehouses, logistics fleets, and staff.
In Nigeria, proximity to the customer is everything. With their deep pockets, large manufacturers have built their own distribution channels to reach retailers. Multinational FMCG companies, like Coca-Cola, Seven-Up, Unilever, and Nestle, have invested heavily in their own distributor networks. They supply inventory on credit and lease fleets. Yet, given the great expense of direct distribution, even the FMCG giants only sell 30% of their goods via their own networks; the remaining 70% is sold via sub-distributors. This is where informal retail enters a black box.
Africa’s internet economy has the potential to leapfrog the continent’s trade and logistics capabilities and become a key global player in food security. Vera Songwe, the executive secretary of the United Nations Economic Commission for Africa (Uneca), estimates that the internet economy in Africa can be easily worth US$180 billion by 2025. “Following its full implementation, the African Continental Free Trade Area is expected to boost inter-Africa trade in agri-foods by 42%. Essentially, we can feed ourselves and others accordingly. “In infrastructure, Africa’s internet economy has the potential to reach US$180 billion by 2025, accounting for 5.2% of Africa’s GDP (gross domestic product). This internet economy would be powered by trade,” she said.
COVID vaccines: African countries need to fix their distribution chains (The Conversation)
Sub-Saharan Africa still has too few vaccines for too few people. Delivering more inoculations to the region deserves top priority. But there is another hurdle to overcome to successfully deploy vaccines: the region’s poor trade and logistics quality. Logistics are a network of services that support the physical movement of goods both within and across a country’s borders.
Africa’s score trails all major regions of the world in six key categories of logistics performance, including timeliness and tracking. For more than a decade, its negative impact on the region’s trade has been well documented. For instance, delays at customs are estimated to add 10% to the cost of imported goods, which is higher than the average impact of tariffs in some cases.
After addressing the issue of vaccine supply, closing gaps in logistics performance is critical to changing the course of the pandemic in Africa.
IFC Managing Director Makhtar Diop has concluded a four-day visit to Kenya and Tanzania, where he confirmed to senior public and private sector partners that IFC will expand its commitments in East Africa—and across all of Africa—to support a stronger private sector, help build regional value chains, and speed economic recovery from COVID-19.
A major, crosscutting theme of his visit was how IFC can support African economies to build regional value chains and strengthen inter-African trade across all sectors. In 2021, IFC announced a $2 billion investment in small business and trade to galvanize Africa’s recovery from COVID-19 and support jobs and business activity.
Kenya and Tanzania’s growth both rebounded in 2021 from the COVID19-induced health and economic crisis of 2020. Kenya is expected to grow its GDP by 5 percent in 2022, though strong headwinds are affecting business and social development across East Africa, including low vaccination rates and reduced trade.
In addressing the role of economic multilateralism, DDG Ellard underlined the role of international organizations in delivering global public goods, addressing challenges of the global commons, and providing a more enduring, equitable and cooperative basis for democratic global governance than unilateral action. DDG Ellard elaborated on the challenges the system faces today, emphasizing the need for engagement by all WTO members to improve the organization and make it more relevant. “While the WTO isn’t perfect, there is no alternative to it,” she said, stressing that it is worth reforming the WTO to make it better fit to meet the challenges of the times.
The Commonwealth Secretariat and the International Trade Centre (ITC) today signed a Memorandum of Understanding (MoU) to strengthen, promote and support private sector development in Commonwealth countries. At the signing ceremony, Commonwealth Secretary-General, the Rt Hon Patricia Scotland QC, and ITC Executive Director, Pamela Coke-Hamilton, stressed the importance of this MoU.
Executive Director, Coke-Hamilton said: “The pandemic has created a greater divide for vulnerable groups forcing us to creatively consider how we work together for the greater good of humanity. As sustainable development continues to be threatened, greater cooperation is needed to safeguard the gains made while pushing for progress. I am delighted that with the signing of the MOU, both the ITC and the Commonwealth Secretariat will be joining forces around strategic areas.” The MoU highlights four pressing issues for the two organisations to collaborate on, including resilience building in Small Island Developing States (SIDS), women’s economic empowerment, supporting Commonwealth States’ engagement with the African Continental Free Trade Area (AfCFTA) and advancing blue and green economy recovery.
Supply chain winners and losers in 2022 (Investment Monitor)
Global supply chains have been in a state of disruption for the past few years due to a combination of rising trade tensions and the impacts of Covid-19.
Of this double whammy, Damien Bruckard, deputy director of trade and investment at the International Chamber of Commerce in Paris, says: “The collapse and subsequent surge in consumer demand during the pandemic has led to significant shortages of manufacturing components, order backlogs, delivery delays and a spike in transportation costs and consumer prices.”
As the dust continues to settle on the Covid crisis and companies and countries action ever-evolving strategies, Investment Monitor investigates who the winners and losers will be within the world of supply chains in 2022.
OECD: Plugging the SDG Financing Gap (Capital Finance International)
Ensuring Blended Finance can mobilise private finance, particularly in the Least Developed Countries and towards Social Sectors, will require a systemic and transformational approach.
Even before the arrival of COVID-19, the SDG financing gap was significant. The private sector is an important contributor to SDG delivery and has increasingly been mobilised with the support of blended finance approaches. Blended finance has been defined as the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries. In 2018-19, official development finance mobilised nearly $50bn of private sector finance for development. However, this amount is not enough. In particular, in countries where development finance flows, especially ODA, become a critical source to finance social services, the current share falls short from commitments. The impacts of the COVID-19 pandemic on developing countries are increasing financing needs while reducing available resources.