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27/09/2016

Development financing schemes a success, find EU auditors

Development Policy

Development financing schemes a success, find EU auditors

Lake Turkana wind power project in Kenya, one of the recipients of the ACP Investment Facility.

[GeorgeGarang/Flickr]

A range of EU-financing schemes worth more than €5 billion to help Africa, the Caribbean and Pacific states have largely been a success, the Court of Auditors found Tuesday (17 November).

In a 24-page report, four months in the research, the panel of high-level accountants found the schemes had helped deliver economic, social and environmental benefits.

Some of the major beneficiaries has been Kenya, Tanzania, Uganda, Nigeria, Cameroon, Malawi, Mauritius and Haiti.

In its report, the Luxembourg-based Court of Auditors – often critical of EU spending – found that the scheme “indeed adds value to EU development cooperation with ACP countries”.

They specifically mention the €600 million Lake Turkana Wind Power Plant project – the largest wind farm in sub-Saharan Africa, and which benefitted from a €150 million loan, a project the auditors say would “most probably not have taken place” without the scheme.

The scheme – known as the ACP Investment Facility – typically supports infrastructure projects such as electricity supply and generation, telecommunications, water and sewerage, as well as more generally in transport, health and education.

It was set up in 2003, and obtains its capital from the European Development Fund, while being managed by the European Investment Bank.

It offers loans at market-rates, so as not to crowd out local lenders, but in the local currency. By increasing the credibility of beneficiaries the scheme aims to mobilise other lenders and create a “catalytic” effect – something the auditors found had been met.

However, the five-strong team of auditors did make two pointed criticisms. Namely, that the end benificiaries of the loans were not always being made aware of the origins of the funding, and secondly that technical assistance to small and medium-sized businesses (SMEs) was not always correctly targeted.

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The auditors looked at some 20 funding projects between 2011 and 2014. It found the EIB selected its intermediaries “after careful due diligence checks on past performance, future strategy and their focus on lending to a wide range of SMEs”.

It continued, “Our opinion, for the 20 operations reviewed, is that they were coherent with the EU’s development policy as broadly described in the Cotonou Agreement.”

The Cotonou Agreement was signed in 2000 in the eponymous Benin capital between the EU and the 78 African, Caribbean and Pacific group of states, aimed at reducing and ultimately eradicating poverty.

It came into force in 2003 – the same year that the EU put into operation the ACP Investment Facility, which is due to run for 20 years, until 2023.

In total between 2011 and 2014, the period of research, the main recipient country for loans was Nigeria, at €270 million, with the smallest amount, €5 million, going to Seychelles and Mozambique.

Another use of the fund was helping micro-financing in post-earthquake Haiti, which received €8 million in 2011, aimed at individual entrepreneurs and small business in urban areas.

Background

The Cotonou Agreement - named after the Benin capital in West Africa where it was signed in 2000, is aimed at integrating weak economies in 78 African, Caribbean and Pacific (ACP) states by helping sustainable development, to reduce and eventually eradicate poverty by integrating those states into the world economy.

It replaced the previous Lome Convention.