EU’s Africa plan must put aid goals front and centre

Originally published on Public Finance International.


By: Xavier Sol

30 Nov 17

Development objectives need to come first in the EU’s new External Investment Plan and be backed by high levels of transparency, says Xavier Sol of Counter Balance

European Union leaders this week met their African counterparts in Abidjan, Cote d’Ivoire, for the fifth EU-African Union summit. The conference aims to strengthen political and economic ties between the two continents, with a particular focus on investing in youth.

In this context, the new EU External Investment Plan (EIP) for Africa and the neighbourhood regions featured high on the summit‘s agenda. Following European Commission president Jean-Claude Juncker’s focus on addressing the “root causes of migration”, the plan had been advertised as way for the EU to marry development aid with migration control and economic interests. But is this combination really a good idea?

During the shaping of the EIP, civil society has repeatedly highlighted the risk that the EIP ends up deviating from genuine development goals instead prioritising the interests of EU companies and the bloc’s border control objectives over the needs of the poorest.

Indeed, the very conceptual basis of this investment plan lies on a flawed premise: that migration is a “problem” to “solve” and that leveraging private sector investments in the migrants‘ countries of origin would automatically trigger a positive development cycle and prevent people from risking their lives to migrate to Europe.

Nevertheless, the regulation setting up the EIP, and in particular the new European Fund for Sustainable Development, contains a set of safeguards and control procedures that should allow investments to target sustainable development and poverty eradication objectives in its countries of operations. And this is certainly the key challenge for the implementers of the plan.

In our new report, Counter Balance highlights that, while the EIP is presented as a silver bullet to delivering growth and securing jobs in Africa, the innovative nature of the instrument can be questioned. After all, compared to already existing EU Blending Facilities, the instrument is mainly about providing development banks with guarantees stemming from the EU budget to step up their engagement with the private sector.

But our concerns linked to the operation of development banks and financial institutions on the ground remain. A previous study showed that there were numerous issues linked to the operations of the European Investment Bank (EIB) outside of Europe, ranging from lack of transparency and limited focus on human rights impacts to use of tax havens. Considering that the EIB will be a key player in the External Investment Plan, this is quite concerning. And the very activities that proved to be problematic – the bank benefiting from EU guarantees – are now presented as groundbreaking.

If the EIP is not to continue in this ‘business as usual’ mode, we need the European Commission to be bold and take direct responsibility for social and environmental safeguards and transparency and accountability. Too often in its previous financial instruments, when it came to ensuring proper due diligence on projects, the commission simply outsourced the process to financial institutions.

An enhanced role for the commission is a prerequisite for the EIP to really contribute to poverty eradication, reduction of inequalities and promotion of human rights, rule of law and democracy. This means leading by example on the climate front by ruling out support for fossil fuels and prioritising small-scale projects rather than large infrastructure in the transport and energy sectors. This would be essential if the EU is to stay true to its climate commitments and align the initiative with the Paris Agreement objectives, while favouring community empowerment and promoting stable and decent jobs.

Another area where the commission’s intervention is necessary will be taxation. Indeed, development banks have regularly been involved in problematic operations linked to tax havens, and stringent control will be needed to ensure that European development funds do not end up subsidising companies or projects dodging, evading or avoiding tax but rather focus on domestic resource mobilisation.

Finally, the EIP needs to reach a high level of transparency by disclosing information on the projects it is financing and its decision-making process, together with proper consultation of final beneficiaries and communities on the ground.

With genuine oversight and control from the EU institutions, the EIP stands a chance of helping the people who are most in need. We need development objectives to stand at the heart of the plan, or this initiative will be nothing but a rush for profit making by European companies and reward for migration control measures by partner countries.

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