EIB, Afreximbank earmark EUR 300m support for African COVID-19 response

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The European Investment Bank (EIB) and Afreximbank are into accelerated financing under Team Europe initiative with over 25 percent of funds dedicated to women in business and climate action and Pan-African rapid response to alleviate COVID-19 impact even as the scheme is to support trade and ensure medical supplies continue. DAVID AGBA reports.

Opportunities of a green recovery

The European Investment Bank (EIB), the lending arm of the European Union, and the African Export-Import Bank (Afreximbank), Africa’s foremost multilateral trade finance institution, are directing EUR 300 mllion of financing to support the resilience and recovery of African nations in response to the COVID-19 pandemic. The funds will ensure businesses across the continent have the working capital to sustain jobs and maintain vital imports. It also earmarks at least a quarter of the capital for climate change mitigation and adaptation, helping Africa maximize the opportunities of a green recovery.

The support package is the first accelerated COVID-19 response for the entire sub-Saharan region under the EIB’s Team Europe initiative—a EUR 6.7 billion package to help the most vulnerable and exposed countries respond to the immediate health crisis, mitigate social and economic impacts, and build resilience for the future.

 A degree of agility

The support for sub-Saharan Africa delivered with Afreximbank is structured in two parts. The package redeploys EUR 200 million of funds previously allocated to trade-related investments, directing them specifically to sectors most impacted by the pandemic. Recognising the pressing need for support, Afreximbank and the EIB are also injecting a further EUR 100 million to the package. This combination of existing and new funds, in addition to Afreximbank’s position on the ground, means support can be activated immediately – a degree of agility that would not have been possible under a new agreement. Furthermore, Afreximbank’s deep knowledge and broad presence across African markets will ensure capital reaches businesses and communities in all areas of the continent.

 Unprecedented negative impact

The COVID-19 pandemic is inflicting an unprecedented negative impact on African economies, just as it has on nations around the globe. Manufacturing has been impacted by disruptions in global supply chains. Meanwhile, migrant remittances to some of the poorest economies in the world have dwindled, exposing the most vulnerable in those markets to exacerbated difficulties. As a result, many African economies are suffering serious vulnerabilities including liquidity pressure, trade payment defaults risk and fiscal challenges, alongside cuts to FDI, long term financing and portfolio flows.

Enabling cross-border trade 

A portion of the Afreximbank and EIB support package will be targeted at enabling cross-border trade in medical supplies and equipment essential for slowing the spread of COVID-19. In addition, the support package will provide financing to long-term investments in trade expansion, helping both the availability of goods and growth in economic prosperity. The package will support participating Member States of Afreximbank, 46 of which a part of the Contonou Agreement in Sub-Saharan Africa.

Women in business and the Green Revolution 

Two key focus areas in Africa are on women in business and the Green Revolution. As a result, a portion of the package will target businesses owned or managed by women. In addition, at least 25% of the funds allocated under the partnership will be earmarked for green projects, such as renewable power, energy efficiency and climate change adaptation measures. Afreximbank is currently appraising renewable energy projects in excess of circa EUR 100 million for which the EBI facility will support. In addition, part of the funds will support the re-purposing of factories to manufacture PPE and other COVID-19 materials, through the African Medical Supplies Platform, a digital platform promoted by Africa CDC, Afreximbank, UNECA and Au Envoy, Mr. Strive Masiyiwa.

Europe and Africa must stand together 

President of Afreximbank, Prof. Benedict Oramah, said: “As continental neighbours, Europe and Africa must stand together against the global pandemic. The funding announced today is welcome not only because it answers an urgent need, but because it is deployed with urgency.

Effect on the post-pandemic recovery 

“With the joint experience of Afreximbank and the EIB, the support will rapidly reach those most affected and be carefully designed to have the greatest effect on the post-pandemic recovery. What’s more, the package’s support for green projects will help propel Africa towards the sustainable economy of the future and all the opportunities that entails.

“I am confident that our work together will not only have a positive impact on African nations but will help us on the path to a closer relationship, based on shared prosperity, values and a commitment to a sustainable future.”

The European Investment Bank Vice President, Ambroise Fayolle, said: “Once again the European Investment Bank is strengthening our close cooperation with Afreximbank to unlock high-impact investment by companies across Africa. A total amount of EUR 300m has been made available as a direct result of the EIB’s fast-track support and global response as part of Team Europe. 

“Reflecting the scale of the global impact of COVID-19, the EIB Board has agreed to scale up financing with existing partners to rapidly deliver an immediate response. Together with Afreximbank this new financing will both unlock medical investment and ensure that climate action investment to cut energy use and emissions is not delayed.”

Under a 2018 agreement, the EIB and Afreximbank have already deployed some of the previously allocated EUR 200 million to projects now supporting the resilience of African nations during the pandemic. These have included programmes to expand intra-African trade and export manufacturing in sectors with high employment rates. The two organisations will continue to focus on this proven approach to provide both short-term relief and long-term resilience.

EIB 

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.

 Afreximbank

The African Export-Import Bank (Afreximbank) is a Pan-African multilateral financial institution with the mandate of financing and promoting intra-and extra-African trade. Afreximbank was established in October 1993 and owned by African governments, the African Development Bank and other African multilateral financial institutions as well as African and non-African public and private investors.

The Bank was established under two constitutive documents, an Agreement signed by member states, which confers on the Bank the status of an international organisation, and a Charter signed by all Shareholders, which governs its corporate structure and operations. Afreximbank deploys innovative structures to deliver financing solutions that are supporting the transformation of the structure of Africa’s trade, accelerating industrialization and intra-regional trade, thereby sustaining economic expansion in Africa.

At the end of 2019, the Bank’s total assets and guarantees stood at $15.5 billion and its shareholders funds amounted to $2.8 billion. Voted “African Bank of the Year” in 2019, the Bank disbursed more than $31billion between 2016 and 2019. Afreximbank has ratings assigned by GCR (international scale) (A-), Moody’s (Baa1) and Fitch (BBB-). The Bank is headquartered in Cairo, Egypt.

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