15 Oct 2021 / Interview

“African economies stand to reap the rewards of the post-Covid recovery” Ambroise Fayolle, Vice-President of the European Investment Bank

 

In response to the economic impact of the Covid-19 pandemic, the European Investment Bank (EIB) threw its financial support behind the African continent, where in 2020 it backed a record €5 billion of new investment, including €2.4 billion for the private sector. After the EIB’s 27 EU member state shareholders unanimously approved in mid-September plans for further global development engagement, it will launch a new development finance branch in early 2022, while also deepening its local presence across Africa by creating regional hubs. The EIB’s current representations in Africa include 900 development professionals working in cooperation with nine local teams.

Serving as vice-president of the EIB since 2015, Ambroise Fayolle – a pure product of the elite French universities Sciences Po and ENA – has a résumé that includes roles at the World Bank, the IMF and the French Treasury, where he was chief executive from 2013 to 2015. In the interview that follows, he discusses his outlook for Africa’s economic recovery and the action the EIB is taking to support the post-pandemic rebound.

 

What did the EIB do for Africa when the pandemic was at its worst?   

Ambroise Fayolle: In the early weeks of the continent’s Covid-19 pandemic, our regional teams reached out to hundreds of partners throughout Africa to get a sense of how we could step up our engagement, provide greater support to the private sector, and assist governments and public sector partners. After that, we increased our existing credit lines to ensure (i) African businesses could continue to access financing through local banks and microfinance institutions; (ii) water sanitation projects could move forward in various African cities; (iii) there would be adequate funding for the public health response to Covid-19; and, (iv) steps would be taken to lower coronavirus infection risk in urban and rural areas.

 

Could you tell us about the EIB’s major pandemic-era investments? 

In April 2021, we agreed to increase our support from €400 million to €600 million for the COVAX vaccine supply initiative in order to accelerate the pace of the vaccine roll-out. This represents the largest ever EIB support for public health outside Europe, and we made a commitment early on to show how important we feel it is to support Africa’s vaccine drive.

We’re also working with continental partners to ramp up local vaccine production. One of our most interesting projects involves the Pasteur Institute of Dakar.

In the months following the coronavirus outbreak, the EIB helped Benin, Kenya, Morocco and Niger fund their public health response. In addition, we agreed to back Senegal’s national economic resilience initiative and partnered with financial institutions – including Exim Bank of China and Kenya’s Equity Bank – to accelerate private sector financing targeting the sectors most impacted by the pandemic. It’s also worth noting that in 2020, around 70% of EIB financing in sub-Saharan Africa supported investments in fragile states and least developed countries.

 

What kind of economic recovery scenario could play out on the continent? 

African economies did their level best to withstand the shock of the pandemic. They’re highly dependent on trade, of course, which was brought to a standstill. To make matters worse, their financial and budgetary leeway was more limited than that of large western powers. In this environment, governments and, more broadly, the private sector did what they could to adapt as quickly as possible.

African economies – especially those that took steps to improve their public health response during the pandemic – stand to reap the rewards of the post-Covid recovery. I also think rising commodity prices will benefit some of the continent’s economies, regardless of how they handled the pandemic. Non-resource-dependent countries are expected to see robust growth, while tourism should slowly return to pre-pandemic levels now that travel between Europe and Africa has resumed.

Our general view is that African economies will benefit from the recovery if governments successfully implement vaccine campaigns. To date, only 3% of Africans are fully vaccinated, so this low jab rate poses a barrier to growth.

 

The coronavirus-induced crisis has spurred countries to reassess how global value chains are organised. Do you think this re-examination might bring about policies that could reshore production in a manner beneficial to Africa? 

It’s definitely going to take time for the status quo to change, but we’re financing projects like our initiative with the Pasteur Institute of Dakar to expand Africa’s local vaccine production capabilities. So, that’s a rare silver lining, and we have similar projects under way in Mauritius and Rwanda. We’re contributing as much as our resources allow, but this must be a multilateral effort.

 

Combating climate change is another priority. Can you tell us more?

We’ve remained very active on climate change issues, and Africa is key to our efforts. Though this region contributes the least to climate change, it suffers the most from its impacts. We continue to develop conventional renewable energy projects, such as Africa’s largest wind farm at Lake Turkana in Kenya, while also investing in new solar power plants in Burkina Faso, Senegal and South Africa. On top of those endeavours, we’re financing off-grid solar solutions in Mozambique, Togo and Uganda.

In major Sahelian cities, chief among them Bamako and Ouagadougou, we’ve carried out a great deal of work in the area of sanitation and wastewater treatment. Last but not least, in Cotonou, we developed a large stormwater management project to protect residents from the cyclical floods it faces every year.

 

Do you have any other priorities? 

Yes, digitalisation. In Guinea, for instance, we teamed up with the French company Orange to finance a visionary project involving the installation of a series of mobile towers to expand the country’s digital and telecommunications networks. The towers harness both solar and wind power. This equipment has a positive impact on energy independence and reduces dependence on fossil fuels by 90% compared to the previous installations. We anticipate seeing many more projects like this over the next few years.

Through our SheInvest initiative, we lend to local African banks which in turn support projects promoting women’s entrepreneurship. Many businesses in Africa are female-led. So far, we’ve launched other comparable projects in Rwanda and South Africa. We had €1 billion to invest over five years, but the programme took off so fast that we met our target in two years, which is why we recently set aside an additional €1 billion.

 

Arnaud Bébien

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