Global Gateway: EIB and European Commission sign agreement to boost private sector investments in African, Caribbean and Pacific countries

This article is brought to you in association with the European Commission.

Today, the European Investment Bank (EIB) and the European Commission signed agreements for a total volume of €4 billion; consisting of a Guarantee Agreement that will mobilise up to €3.5 billion in lending and a €500 million Trust Fund contribution, to support businesses in African, Caribbean and Pacific (ACP) countries until 2027. The agreement marks an important step in rolling out the EU’s Global Gateway strategy and achieving development impact by enabling the EIB to enhance not only public but also private investments in key areas like digitalisation, climate and energy, transport, health in partner countries.

Today’s agreement consists of two parts. First, the Guarantee Agreement under European Fund for Sustainable Development Plus (EFSD+), established by the NDICI – Global Europe. It will enable the EIB to provide up to €3.5 billion loans on favourable terms to create jobs and opportunities, particularly for women and youth, and support green and digital transitions in EU partner countries, in line with Global Gateway. A pertinent example of how the resources will be used is the agreement signed by the EIB and the local banks CRDB, NMB and KCB-Tanzania last week at the EU-Tanzania Business Forum. Credit lines backed by the guarantee will unlock €270 million for the three Tanzanian local banks who will finance projects benefitting especially women and advancing the blue economy.

Another example is The Green African Agricultural Value Chain Facility. It provides financing to intermediaries across sub-Saharan Africa for on-lending to eligible small and medium-sized enterprises (SMEs) active in agri-food value chains. Average size of credit lines extended to local banks range from approximately €10-25 million.

Second, an EU contribution of €500 million to the ACP Trust Fund, established and managed by the EIB, to enable high impact operations, which would otherwise not be possible. It will support, for example, small renewable energy power plants in areas with no grid connection. These will enable autonomous electricity supply, improve people’s livelihoods, and decrease dependency from fossil fuels and rising energy prices.

The agreement adds to the €26.7 billion Guarantee Agreement for public lending that the EU and the EIB signed in May 2022. New public investments rolling out Global Gateway are already underway. This includes for example an EU-covered EIB loan on urban mobility for Senegal, signed separately at the EIB Forum as part of the Team Europe Initiative on Green Economy in Senegal, which seeks to support sustainable and digital cities, as well as strengthen and modernise public transport in Dakar. This action illustrates European investments in the Dakar-Abidjan strategic corridor with the aim of consolidating economic exchanges in the region, strengthen regional integration and boosting sustainable growth.

Background

Today’s Guarantee Agreement is signed in the framework of the European Fund for Sustainable Development Plus (EFSD+). It is part of the EU’s investment framework for external action and ensures worldwide coverage for blending, guarantees and other financial operations. It is included in the EU’s long-term budget programme for external action – the NDICI-Global Europe. The EFSD+ Operational Board has been established under this budget programme.

EFSD+ is raising financial resources for sustainable and inclusive economic development from the private sector. It supports investment in partner countries to promote decent job creation, strengthen public and private infrastructure, foster renewable energy and sustainable agriculture, and support the digital economy.

The guarantees the instrument provides are used for de-risking activities and leveraging private investment, working together with the European Investment Bank (EIB) and other European financial institutions.

The EFSD+ guarantees are offered on favourable, highly competitive terms. They allow investors to finance projects in more challenging markets, by assuming the risks of more unstable environments while avoiding market distortions. Because the EFSD+ covers a share of the risks, the EU’s development finance partners can match the EFSD+ guarantees with their own resources, which in turn will attract additional investors. The instrument has €40 billion in guarantee capacity.

The investment programmes are implemented through two main paths:

1. In a partnership with the EIB, the EU is providing a €26.7 billion guarantee for financing to support investments in sectors such as clean energy, green infrastructure and health. The guarantee will have a maximum impact on Global Gateway investments in partner countries where sovereign and other public sector risks are still a major bottleneck. Today’s agreement on a dedicated EU guarantee and Trust Fund contribution for private sector operations in ACP countries is an addition to make a bigger overall impact.
2. Under the EFSD+ open architecture, the EU is providing an up to €13 billion guarantee cover until 2027. This will be deployed by a range of implementing partners, i.e. International Financial Institutions (including the EIB) and European development finance institutions aiming to mobilise private investments in support of our partner countries achieving the SDGs. In December 2022, the Operational Board of the EFSD+ gave a positive opinion to €6.05 billion in financial guarantees to support 40 investment programmes in Sub-Saharan Africa, Latin American and Asia Pacific, which is the first allocation under EFSD+ Open Architecture programme.

About the European Investment Bank

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.

EIB Global is the EIB Group’s specialised arm dedicated to increasing the impact of international partnerships and development finance.  EIB Global is designed to foster strong, focused partnership within Team Europe, alongside fellow development finance institutions, and civil society. EIB Global brings the Group closer to local people, companies and institutions through our offices across the world.