Select Committee on European Scrutiny Thirty-Seventh Report


34 EU-Africa Infrastructure Partnership

(27705)

11682/06

COM(06) 376

+ ADDs 1 - 2

Commission Communication: Interconnecting Africa: the EU-Africa Partnership on Infrastructure

Legal base
Document originated13 July 2006
Deposited in Parliament19 July 2006
DepartmentInternational Development
Basis of considerationEM of 25 July 2006
Previous Committee ReportNone; but see HC 34-xii (2005-06), para 9 (30 November 2005)
To be discussed in Council16 October 2006 General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionCleared, but further information requested

Background

34.1 One of conclusions of the EU's Strategy for Africa, which we cleared on 30 November 2005,[87] was that rapid, sustained and broad-based growth is essential for development and fighting poverty. As the Commission notes in the introduction to this Communication, one of the main measures underpinning the Strategy is the creation of the EU-Africa Partnership on Infrastructure.

Commission Communication

34.2 This Communication sets out the challenges to development in Africa related to inadequate infrastructure and puts forward a proposal for a EU-Africa Partnership on Infrastructure. It proposes this after having (in the Commission Staff Working Documents annexed to the Communication) examined a "no policy change" and an African Agency for Infrastructure scenarios, and concluding that "for reasons of effectiveness, efficiency and consistency" a Partnership for Infrastructure is preferable.

34.3 The Communication states that Africa has weak, though improving, transport systems, energy potential (but which is inefficiently used), uneven distribution of water resources and erratic rainfall, and limited communication technology. It argues that inadequate infrastructure has a significant impact on growth, competitive trade, regional integration, and achievement of the Millennium Development Goals, such as access to water. The paper therefore suggests that African governments and development partners should invest more in infrastructure, particularly given the sharp decline in the share of resources going to infrastructure in Africa during the 1990s.

34.4 The Communication emphasises that African leadership is paramount in any such Partnership. It sees the African Union (AU) and its socio-economic programme, the New Partnership for Africa's Development (NEPAD), as key partners. NEPAD has identified specific objectives through its Infrastructure Short Term Action Plan (i-STAP) focusing on areas including policy and regulatory frameworks, capacity building and capital investment. NEPAD also suggests that donors must work better together and that there should be stronger involvement from the private sector. The Partnership will respond to these goals at continental, regional and national levels.

34.5 At continental and regional levels, this could include support for improvements to air and maritime safety and security, environmental protection, provision of cross-border infrastructure, and support for regulatory reform to encourage private investment. At country level, support could include financing for studies in transport, energy and information and communication technology that link to trans-African networks, or capitalising on links with the EU Water and Energy Initiatives to support access to these services.

34.6 The Communication proposes the creation of a Trust Fund that combines contributions from three sources: the European Investment Bank, EIB (own resources and the Cotonou Investment Facility); the 9th European Development Fund (EDF 9 2003-07); and voluntary contributions from EU member states. The Commission hopes that the Fund will attract, and leverage, additional development and non-development loans.

34.7 The Trust Fund will provide:

—  interest rate subsidies for loans;

—  co-financing with the EIB (European Investment Bank), Development Financing Institutions and the African Development Bank;

—  risk guarantee mechanisms not already covered by other arrangements; and

—  grants for project preparation and capacity building.

34.8 The Trust Fund will have a Steering Committee of African and donor partners for policy guidance, an Executive Management Committee to assess and approve projects, and a secretariat to support the committees.

The Government View

34.9 In his characteristically helpful and informative Explanatory Memorandum of 25 July 2006, the Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) says that he is "in principle supportive of the initiative". He says it is consistent with, and complementary to, the objectives of the Infrastructure Consortium for Africa — an outcome of the G8 Summit at Gleneagles — and that the Partnership's objectives are fully compatible with the provisions of the International Development Act and the legal provisions of the African Caribbean Pacific-European Union (Cotonou) Partnership Agreement. However, there are a number of issues that he will seek to clarify during discussions with Member States, the Commission and EIB, which he describes as follows:

  • "Decision Making. The Steering and Management Committees need to work in a responsive and efficient manner that ensures swift approval of projects and timely disbursement of funds. The Commission has now decided against an earlier proposal to only allow 'contributing donors' a seat at the Executive Management Committee. While making for a more inclusive process, this risks creating an unwieldy process if a large number of Member States choose to participate.
  • "Sustainability of finances. There is currently no funding guaranteed for the Trust Fund beyond 2007. The Trust Fund is being established using money from EDF 9 (2003-2007) and a lending envelope from the EIB. The willingness of Member States to make contributions to the Fund is likely to depend on its performance over the next two years. But provided that the Fund performs well, Member States are likely to approve use of some of the €23,966m (£16,637.2m) that will be available to support the ACP countries from the 10th EDF (2008-2013) thereby guaranteeing the Fund's medium-term sustainability.
  • "Financial management, accountability and evaluation. The EIB will be responsible for administering the revenue and the expenditure of the Trust Fund, although the details of this arrangement are not clear. The Commission proposes a dual process of monitoring and evaluation. This will consist of assessments of progress in each infrastructure sector (on the one hand); and, sectoral and global evaluations of the outcomes and impact of the Partnership's operations (on the other hand). This will be carried out in close collaboration with AU-NEPAD and the Regional Economic Communities. The effectiveness of this approach will depend upon the detail of the monitoring and evaluation procedures.
  • "Social and Environmental Impact Monitoring. The EIB has particular expertise in infrastructure. Through the Cotonou Investment Facility it has developed experience in financing projects in Africa so this is an area where it can add value. We have pushed both the Commission and the Bank to improve coordination, such as by making joint offerings by blending loans and grants. Subsidising loans with grant money also allows large sums to be lent whilst respecting the Highly Indebted Poor Country Initiative criteria for country debt sustainability. The Trust Fund will therefore provide a useful way to leverage EIB loans. However, the Bank has less expertise in skills such as social and environmental impacts and is sometimes accused of neglecting this side of projects. It will be necessary to monitor the working of the Trust Fund to ensure that commitments to these concerns are met."

34.10 He goes on to outline the Financial Implications:

  • "In establishing the EU Infrastructure Trust Fund for Africa, the European Commission has proposed to provide €60 million (£41.5 million) from the Intra-ACP allocation (potentially benefiting all African countries) from EDF 9. These funds have to be committed by the end of 2007 and disbursed by the end of 2010. Member States have given political endorsement to this funding decision.
  • "The European Investment Bank will provide loans of between €220 (£152.0) [million]and €260 (£179.7) million for the period 2006-2007. Under EDF 10, the EC envisages an increasing absolute level of support for infrastructure both from regional and national allocations and also intra-ACP resources. This is to be expected given the much larger size of the EDF 10 compared to the EDF 9. It remains to be seen whether the share of EDF funds going to infrastructure increases. The Commission is also requesting additional contributions from Member States. We understand that some Member States (e.g. Belgium and Italy) have indicated in principle interest in funding, but none have as yet made firm commitments.
  • "EU Member States have committed to raise their overseas development assistance to an average 0.56% of GNI by 2010. The Commission expects this to generate an additional €20 billion (£13.8 billion) a year, half of which Member States have said should go to Africa. Within the 'EU and Africa: Towards a Strategic Partnership' strategy (13293/05 add1) agreed by the December 2005 European Council, infrastructure is a key area of support. Funding for infrastructure projects should therefore increase. We already provide support to infrastructure development through the Infrastructure Consortium for Africa agreed under our G8 Presidency. We have not yet agreed to provide any bilateral funds to the EU-Africa Partnership, but we will review the situation over the next 18 months as we seek clarification on the issues mentioned in the Policy Implications section above.
  • "Loans made by the EIB in the Africa, Caribbean and Pacific countries are guaranteed by EU Member States. To the extent that funding will come from the Investment Facility they will be 100% covered. Loans from the Bank's own resources in ACP states are 75% covered by the Member States. Our contribution to these guarantees is 16.3%."

34.11 Finally, he says that the EU Development Commissioner is due to make a formal presentation of the Communication at the September General Affairs and External Relations Council (GAERC) and that the Presidency expects Development Ministers attending the October GAERC to adopt Conclusions on the document. "The Conclusions will be prepared by the ACP Working Group. It is unclear at this stage whether the October GAERC will discuss the Communication or simply adopt the Conclusions."

Conclusion

34.12 The importance to sustainable African development of progress in the area in question is probably impossible to overestimate. We are therefore likewise supportive of the initiative.

34.13 Although the Minister's observations on yet-to-be-settled management issues and monitoring and evaluation mechanisms seem well-founded, the most important concern relates to the sustainability of the proposed Trust Fund, where he notes that there is no guaranteed funding beyond 2007. At present, it would appear that Member States — including the UK — are unwilling to commit themselves to their part in the proposed tri-partite funding arrangements, and would agree to use EDF 10 funding only "provided that the Fund has performed well" — presumably in the use of the €540 million to be provided by the 9th EDF and the EIB. Although understandable, this inevitably means that there will be little time in which the Trust Fund can demonstrate its effectiveness before, on present plans, it runs out of funding.

34.14 It may well be that, in the intervening period since the Minister deposited his Explanatory Memorandum, it has been possible to make progress in these areas in the discussions to which he refers, though we note that he seems uncertain as to whether it will be possible to adopt Conclusions at this month's "development" GAERC. We accordingly ask the Minister to inform us of the outcome and to provide his assessment thereafter of the Trust Fund's management and evaluation arrangements and its prospects for sustainability.

34.15 We now clear the document.




87   See head note. Back


 
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