The private sector remains a major donor in providing finance for development in Africa. Eight major development finance institutions came together on 26 May and formed the African Financing Partnership, an innovative scheme that will bring about greater co-operation and co-financing for private sector projects in Africa.
The alliance of finance institutions will look to improve the assessment and evaluation of private sector projects across Africa and try and attract more private sector investment. The overall aim is to have durable development outcomes.
All eight financial institutions have African development experience: the African Development Bank; Development Bank of South Africa; Deutsche Investitions- und Entwicklungsgesellschaft; European Investment Bank; Netherlands Development Finance Company FMO; Industrial Development Corporation of South Africa; IFC (member of the World Bank Group); and Proparco.
The Partnership aims to work towards a common goal of alleviating poverty and develop the private sector across the continent. Initially, it will target large-scale infrastructure projects that will deliver economic growth and create jobs. Later on, when it is more established, it will look into smaller and more innovative projects as well as possible investments in financial services and SME and microfinance projects.
It is envisaged that other development finance institutions or even private sector investors could link up with the Partnership at some point in the future.
The way the eight institutions foresee the work to go is that one partner will take the lead in any given project, so as to minimise the duplication of work in areas such as due diligence or appraisals of proposed projects. It is expected that this way an efficient and cheaper running of the Partnership will be achieved.
The initiative was praised by the institutions’ leaders, including the President of the African Development Bank (AfDB), Donald Kaberuka: “I applaud the Private Sector department for this initiative”, he said. Adding that the “projects are in sectors such as infrastructure, power, renewable energy and agribusiness.”
The benefits of coming together in a partnership were highlighted by the AfDB Private Sector Director Tim Turner: “There is an evident need for partnerships amongst development finance institutions, for efficient utilisation of our human and capital resources to meet vast financing needs of private sector projects in Africa”.
“Last year,” said European Investment Bank Vice President responsible for Africa Plutarchos Sakellaris, “nearly three quarters of all EIB projects in Africa were financed with other partners, whose involvement and expertise increased both the sector scope and number of investments across the continent.”
Combined, the eight financial institutions invested over USD $8.8 billion in projects across Africa last year alone.