‘Gains of External Investment Plan for Africa, EU’

The External Investment Plan aims to encourage investment into partner countries in Africa and the EU, in a bid to leverage over 44 billion Euros of investments by 2020. CNBC Africa’s Head of Programming, Chris Bishop caught up with Robert Ridolfi, the Director-General, Sustainable Growth and Development at the European Commission to get an update on the External Investment Plan.

In July we came up with the agreement, in September we got the approval for the deal and on the following day, we had the first strategic meeting which approved the mixed strategic direction of the plan and we must get that from the people that put the money in the fund, and after the 28th of September we added the operational board and on the 7th of September they approved the investment windows. We are now set and next week we will lunch the call to the financial institutions to receive the proposal of the financial programs that will be the essence of the plan.

So when do you think the first guaranteed investment will be signed?
We will ask next week. We will give them some time to make the proposal and give us a month or two to look at the projects, so that should take a total of 4 months. I would say around April or May we’ll have the first guarantees signed and operational.

And when will Africa see this in brick and mortar?
Immediately after. In fact I know that many of the financial institutions have a pipeline of investments that would like to come in with our guarantee. Therefore the sooner we sign the guarantee with them, let’s say in May. The following day they will have already 4-6 real investments – brick and mortar as you call it- that would benefit from this.

What kind of sectors will they be in do you think?
The five windows are, renewable energy and climate change, micro small and medium sized enterprises which create a lot of the jobs especially in fragile areas, agriculture – it’s the number priority in this business forum, I would say it’s the business forum of agriculture, sustainable cities – it’s an innovative window, and last but not least digital. These are the five areas where we will expect to come with proposals. I can make a couple of examples if you like.

Yes. Give us an idea.
We provide the basement, so let’s say €50 million guarantee, the comes the developer and he says on your guarantee I can put €200 million of my money, and then we go to pension funds and they say I put €1 billion of my money. The risk that the pension fund bears is lower than the risk of the bank and lower than the risk we take. Our risk bearing capacity will enable us to leverage a lot of money and this is typical with an equities fund. They provided subordinated equity to a company, a start up, an agribusiness etc for that business to prosper.

So far it does sound fairly clear cut and simple but what challenges do you think you will face to see this project through?
We are paid to keep these things plain and simple. We are also paid to solve problems. The plan is not only made with this component which is the financial aspect. The plan is also made with our two pillars. You remember the second pillar is technical assistance, feeding into the first pillar which is finance with project preparation. So grants with project preparation become bankable. The other side, technical assistance is deployed to make policies for investment conducive. I am not saying fighting corruption, because that’s big, but certainly removing bureaucratic red tape, simplification in business registration, increasing capacity in the administration and giving loans if necessary. The coordination of these pillars makes this plan so interesting.