Leveraging Private Sector Investment
Europe is playing an increasingly prominent role in leveraging and facilitating private sector finance for purposes that will help Africa to achieve SDG7. According to the International Finance Corporation some EUR 4.3 billion of private capital was mobilised either directly or indirectly by the EIB and EDFI for projects in Africa in 2019.
Comprehensive project-level data on private financing for SDG7 projects in Africa is not available, and therefore the data contained within the 2020 edition of the European Financial Flows on SDG7 to Africa report does not provide an exhaustive picture of private investment. The World Bank and other sources including industry associations show that between 2014 and 2019, the European Union and its Member States have provided financial support to co-finance a number of privately-backed projects throughout Africa, which attracted a total of EUR 1.9 billion in commercial debt and private equity commitments at financial close.
The proportion of total identified private finance for SDG7-compliant projects in Africa which has been supported by financing extended by EU Institutions and Member States reached 61% in 2019. Large amounts of this finance (EUR 582 million, 30%) has been directed at renewable generation projects in South Africa. Lower Middle Income Countries benefitted from the majority (64%) of private capital investment in SDG7-compliant projects part-financed by European DFIs, namely Morocco, Egypt, Kenya and Senegal.
Only EUR 73 million of private debt and equity has found its way into SDG7 projects in Least Developed Countries (LDCs – 4%). This low level of support is taken to reflect poorer countries’ often less favourable investment climate, which is unattractive to private capital. This reinforces the argument that more must be done to improve the enabling environments of LDCs to unlock private capital flows into those countries which need it most. The EU Institutions’ and Member States’ continued commitment to LDCs – including through ODA grants and support to capacity building and reforms – works to help meet this need.