Brussels, 09/02/2006 (Agence Europe) - In the context of the new Union strategy for Africa approved by the Council last December, Development Commissioner Louis Michel and Philippe Maystadt, President of the European Investment Bank (EIB), signed a Memorandum of Understanding on Thursday for the creation of a Trust Fund in support of infrastructure in Africa. Mr Michel explained to the press on 9 February that the Union's strategy for Africa above all aims to develop infrastructures that are an essential element of sustainable development, economic growth, the fight against poverty and regional integration. He said stable growth is not possible without a sound infrastructure for transport, energy, water supply and information and communication technology. He added that this is the “backbone of a whole continent of networks”. With this new tool, the Trust Fund, which could finance public and private or mixed projects and be open to African partners, “the Union, which is far from being the leading world donor, will be in a better position to fulfil its development aid mission”.
Mr Maystadt felt that various concerns lie at the origin of this initiative. It is first of all a matter of giving greater visibility to European aid by pooling European resources, in this case those of the Commission and of the EIB. It is also a matter of placing more EIB expertise to the service of Africa, especially in the field of infrastructure - expertise that the EIB found it difficult to use hitherto in Africa under the Cotonou Agreement, which provides for the Bank's financial support to be essentially geared to the private sector at market interest rates and not at concessional (i.e. lower) rates, whereas, in most of the poorest countries of Africa, the public sector is highly indebted and can only borrow at “ultra reduced” concessional lending rates. During the initial phase of the Trust Fund, thanks to the EUR 60 million made available by the Commission for the period 2006-2007 (corresponding to the 9th European Development Fund, EDF), the EIB may grant loans and finance projects up to EUR 250-300 million at concessional rates, mainly for the public sector. “We wish to show that this combination of EIB loans and Commission loans will make effective action possible in favour of development and to fight against poverty by setting up good infrastructures”, Mr Maystadt concluded.
The Trust Fund covers projects of a transnational kind, mainly African transport networks (rail, road, air, river), energy, water and ICT, as well as national projects contributing significantly to interconnection of the African continent. Eligibility rules will be fixed in a legal text, the Trust Fund Agreement (currently being discussed), and the selection of projects will be made in agreement with the priorities set out by the African Union and the New Partnership for Africa's Development (NEPAD). The Fund's resources will be in addition to the resources regularly used for operations financed by the EDF at the level of countries or regions. Consistency will be guaranteed between actions financed by the Trust Fund and interventions carried out under the aegis of the national and regional programmes. All ACP African countries are in principle likely to be candidates and to benefit from the actions financed by the Trust Fund.
One of the aims of the Fund is to attract additional resources from Member States further to their commitment in May last to step up official development aid (ODA) within the framework of the Millennium Development Goals, up to 0.56% of GDP in 2010 and 0.7% of GDP in 2015. The Fund is presented to Member States as a viable complement to the funds managed by multilateral organisations (World Bank and United Nations agencies) which, moreover, remain privileged Union partners. The Commission and the EIB will act as promoters and active members of the Trust Fund, which will be open to Member States and to their financial development institutions. In order to ensure that beneficiaries feel involvement and commitment, African partners will be associated to the Fund. While the Commission suggests making a contribution to the Trust Fund of EUR 60 million from 9th EDF resources, Messrs Michel and Maystadt have pledged larger amounts from the 10th EDF after 2007.
In coming months, signing of the Memorandum of Understanding will be followed by a political dialogue with African partners and technical consultation with future contributors and the other financial partners. The ACP Council and then the Commission should decide on the first allocation in June this year.