Agriculture task force takes aim at EU investment plan for Africa

15 February 2019. Devex. Agriculture task force takes aim at EU investment plan for Africa 

An expert group convened by the European Union to offer advice on how to create jobs in African agriculture will point to shortcomings in the EU’s flagship initiative for the African continent, the External Investment Plan, or EIP.

Created in February 2018, the Task Force Rural Africa met five times last year, charged by the European Commission’s agriculture and development departments with accelerating “responsible EU private investment in support of African agriculture, agri-business and agroindustries.” They will publish their report on March 7. An overview of the task force’s recommendations was presented at a meeting of European and African officials in Vienna in December.

Tom Arnold, the Irish agricultural economist who chaired the group of 11 experts from Africa and Europe, explained that the “first attempt at using the EIP to get investment [in agriculture] hasn’t fully worked.” An EU official acknowledged the problem, telling Devex that agriculture is seen as too risky to attract investment, even with EIP incentives.

EIP’s guarantee mechanism — the European Fund for Sustainable Development (EFSD) — is designed to use EU taxpayers’ money to de-risk investments in Africa as well as countries neighboring the EU.

• The commission asked development banks hoping to benefit from the guarantee to present proposals in strategic areas such as digitalization, sustainable energy, SMEs, and agriculture. 
• But in July, proposals for the agriculture component were deemed insufficiently “mature.” 
• For now, agriculture has largely been folded into support for SMEs and digitalization, with an EU spokesperson saying around 15-20 percent of the guarantees in these areas are expected to support agriculture-specific investments.
• A commission official, who requested anonymity, said: “It’s true, [EFSD] definitely didn’t turn out as successful in the first go for agriculture, because apparently, the risk is quite high. The banks are afraid to go there and the incentives being put by the External Investment Plan are not fully understood or not fully used in this sector of the economy.”
• Despite concerns, including from the European Investment Bank, that the EFSD has yet to be properly evaluated and only makes sense as a niche product, the commission has proposed greatly expanding its external investment guarantee model under the EU’s 2021-2027 budget.

One agriculture investment program has been approved, the spokesperson said, referring to an €85 million guarantee for the French Development Agency’s AGREENFI initiative, designed to give affordable credit to underserved producers and small rural businesses. Money has been put aside to fund further programs, the spokesperson said, adding that these will be guided by the task force report.