In this paper for the European Think Tanks Group, ECDPM’s San Bilal and Pamella Eunice Ahairwe and DIE’s Niels Keijzer argue that the partnership between the EU and the AU and their respective member states can provide a strategic and institutional framework for collectively stimulating sustainable investment.
Key Messages
The COVID-19 crisis has created a dire need for the active facilitation of sustainable investment to promote an inclusive, gender-sensitive and green recovery. The partnership between the European Union (EU) and the African Union (AU), and their respective member states, can provide a strategic and institutional framework for stimulating sustainable investment in a collective manner.
Such investment is needed to fuel the recovery process, to help countries build back better and greener, while providing decent jobs, particularly for young people and women. The AU-EU Africa Summit, set for February 2022, provides an important opportunity for the two continents to strengthen their partnership, and ensure that sustainable and inclusive investment priorities are at its core. To this end, the Summit should recognise priority investment areas and processes through which these can be promoted, as well as present several concrete flagship initiatives.
Four investment priorities are certain to be key: (1) infrastructure development, (2) green and resilient investment, (3) digitalisation and connectivity, and (4) sustainable agriculture and industrialisation. To address these adequately and effectively, the AU-EU partnership should put special focus on building up local production capacity (particularly in healthcare and pharmaceutical manufacturing), on value chain development and on access to finance for micro, small- and medium-sized enterprises (MSMEs), including those in the informal sector.
All of these investment priorities entail a regional dimension, which the partnership should help to foster, in particular by actively supporting the transformative agenda of the African Continental Free Trade Area (AfCFTA), which provides the political and economic momentum to stimulate productive investment and facilitate trade.
The AU-EU partnership should also seek to improve the enabling context, to make it conducive to investment promotion. This includes improving national investment climates and regulatory frameworks, while finding ways to reach out to the informal economy that is so predominant in many African countries, accounting for 80.8% of urban jobs. The very limited fiscal space in many African countries seriously constrains public action to stimulate investment support. It also means that the AU-EU partnership needs to give specific attention to the issue of rising debt.
The AU-EU partnership should identify processes and mechanisms to help promote and facilitate sustainable investment, including public and private investment as well as domestic and international investment, while stimulating partnership endeavours. Though numerous processes and initiatives are already in place on which the partnership can build, it is crucial that open and effective joint processes and mechanisms be established. These should reflect full ownership by Africa and move beyond the donor- recipient approach which is so often perceived as Eurocentric. A way to do this is by ensuring sufficient representation and inclusivity in AU-EU investment consultations and decision-making processes.
Shared ownership should be promoted through joint branding that explicitly refers to the Africa-Europe partnership on sustainable investment, instead of the current dominant focus on “Team Europe”. Beyond branding, specific types of joint AU-EU investment initiatives could be established, including the following:
• An Africa-Europe joint investment platform, for strategic steering, as well as to bring together catalytic financiers for development of transformative pipelines of sustainable projects
• Joint platforms with a targeted focus around specific themes or sectors, to assemble more specialised groups of actors focused on concrete deliverables
• Joint mechanisms to connect and pool institutional financiers, for knowledge sharing and institutional development and to activate diasporas and other private investors
• collaboration towards investment facilitation, including through investment promotion agencies
Meeting Africa’s investment challenge requires both strong political leadership and pragmatic operational agility from the AU-EU partnership. Transparent and effective joint processes and mechanisms are needed to promote vital sustainable and inclusive investment at scale in the context of the COVID-19 recovery.
Please read the full report here.