The G7 Development Finance Institutions (G7 DFIs) and multilateral partners announced on Monday, June 14 that they were committed to investing $80 billion in the private sector over the next five years to support sustainable economic recovery and growth in Africa.
G7 is a grouping of seven countries including the US, UK, Canada, France, Germany, Japan and Italy.
According to a statement from the African Development Bank (AfDB), the partners are the International Finance Corporation (IFC), the private sector arm of the AfDB, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank.
The statement noted that, given that the Covid-19 pandemic has caused a severe global economic and health crisis, the announcement is a welcome boost to support the long-term development objectives of African economies that have been negatively impacted by the crisis.
It is the first time the G7 DFIs have come together to make a collective commitment to the African continent, it added.
Each DFI has its own investment criteria which are aligned to an assessment of the need to achieve development impact across a range of sectors. DFIs play an important role in helping to build markets, mitigate risk and pave the way for other investors to enter new markets, according to AfDB.
The International Monetary Fund (IMF) estimates that to recover ground lost during the crisis, sub-Saharan Africa’s low-income countries face additional external funding needs of $245 billion over 2021–25, to help strengthen the pandemic response spending, grow economies and reduce poverty in the region.
The corresponding figure for all sub-Saharan Africa is $425 billion, indicate IMF’s Regional Economic Outlook published in April 2021.
These issues will be discussed at the forthcoming High-Level international summit on financing for Africa, IMF indicated.
The region, IMF said, can cover only a portion of these financing needs on its own.
Solomon Quaynor, Vice President for the Private Sector, Infrastructure and Industrialisation at AfDB said that they welcome this global partnership and the opportunity to provide the African voice, as Africa builds back better and boldly.
"The opportunity to create jobs particularly for youth and women, from a focus on industrialising Africa underpinned by the African Continental Free Trade Area, will be our priority,” Quaynor said.
"Given the gap between the IMF estimates and what this partnership is committing to, we will seek to crowd-in African development partners, as well as African savings from SWFs [sovereign wealth funds], pensions, and insurance pools, estimated to have US$1.8 trillion AUM [Assets under management],” he indicated.
The UK Minister for Africa, James Duddridge, said that the UK is proud to back this commitment by world leaders at the G7 Summit to invest more than $80 billion in Africa’s private sector over the next 5 years.
"This investment will create jobs, boost economic growth, help tackle climate change and fight poverty. It comes at a crucial time as the continent rebuilds its economies, severely impacted by Covid-19.”
David Marchick, Chief Operating Officer of U.S. International Development Finance Corporation (DFC), said that investing more in Africa is a top priority for DFC in fulfilling their development mandate.
"DFC is proud to be doubling down on our commitment to Africa alongside our G7 and multilateral partners and will continue to prioritize investments in vaccine manufacturing, Covid-19 response, climate mitigation and adaptation, and gender equity on the African continent,” he said.