EUROPEAN COMMISSION

Brussels, 12.9.2018

COM(2018) 643 final

COMMUNICATION FROM THE COMMISSION

Communication on a new Africa – Europe Alliance for Sustainable Investment and Jobs:

Taking our partnership for investment and jobs to the next level

Communication on a new Africa – Europe Alliance for Sustainable Investment and Jobs: taking our partnership for investment and jobs to the next level

In a rapidly changing global landscape, Europe and Africa have much to gain from increased economic and political ties. This document sets out the key strands of action for a strong economic agenda for the EU and its African partners. It seeks to promote a substantial increase of private investment from both Africans and Europeans, boost trade, enhance job creation and contribute to sustainable and inclusive development, promoting standards of modern and sustainable technology, environmental and labour protection, and responsible business conduct. It amounts to an Alliance for Sustainable Investment and Jobs as part of the European Union – African Union Partnership.

This Alliance is more than a financial plan. It represents a radical shift in the way we work as partners towards a logic focussed on Africa’s economic potential and the mobilisation of the private sector. The Alliance is about unlocking private investment and exploring the huge opportunities that can yield benefits for African and European economies alike, with a specific focus on jobs for youth, responding also to Africa’s demographic patterns. It is an economic strategy that puts the respective strengths of Europe and Africa to work, taking the ambition of the External Investment Plan 1 to the next level. Building on concrete actions, the Alliance will support the generation of 10 million jobs in Africa in the next 5 years.

This Alliance is not a stand-alone initiative. It is part of the wider set of EU-Africa relations and strategic frameworks joining Europe and Africa, such as the United Nations 2030 Agenda and its 17 Sustainable Development Goals as a guiding vision for both continents, as well as in the relevant policy frameworks of the African Union (Agenda 2063) and the EU (Global Strategy 2 , European Consensus on Development 3 ). It is a key element to deliver on the agreed commitments of the African Union-European Union Abidjan Summit Declaration and is also part of building a strong African pillar in the Post-Cotonou framework and developing partnerships in North Africa under the European Neighbourhood Policy. The principles of partnership, dialogue and ownership will be at the heart of the Alliance. To achieve its full potential the Alliance should mobilise and coordinate EU and Member States’ actions and instruments with Africa.

This coherent economic strategy builds on the June 2018 European Council’s conclusions that call for the creation of “a new framework enabling a substantial increase of private investment from both Africans and Europeans”, as well as on the European Commission’s proposals for the next Multi-Annual Financial Framework, and the outcomes of the EU-African Union Commission – to - Commission meetings. It seizes upon the significant decisions of the 10th Extraordinary Summit of the African Union in Kigali on 21 March 2018. It also reflects the line of the Meseberg Declaration of 19 June 2018 4 and intends to contribute to the agenda of the 2019 French Presidency of the G7.

A vigorous mobilisation with African partners on investments and jobs is fundamental to address together mobility and migration, promoting a coordinated engagement of countries of origin, transit and destination, in line with the principles of solidarity, partnership, accountability and sharing of responsibility. At the same time, improved common migration and mobility management contributes to overall stability, which favours sustainable investment. The Alliance is an essential part of a strategy combining in a coherent and balanced way the different elements of our joint approach to migration: a shared responsibility for addressing the root causes of irregular migration and forced displacement, effectively managing borders, preventing and fighting migrant smuggling and trafficking of human beings, rescuing and protecting lives, offering paths for legal migration, and ensuring improved cooperation on return, readmission and reintegration of irregular migrants in line with the established principles and international law obligations, as well as agreed arrangements.

As part of this comprehensive approach, legal pathways to the EU should be enhanced in order to offer safe and viable alternatives to dangerous routes and irregular migration. To this effect, in its new Communication on enhancing legal pathways to Europe 5 , the Commission calls for the realisation of an improved EU Blue Card Scheme and for the development of pilot projects on legal migration with selected countries in Africa. 

As the dynamics of growth, employment and inequalities and the challenges regarding instability, resilience, health and governance vary across Africa’s regions and between countries, the Alliance will take into account the diversity across the African continent and the specificities of each country, including the specific challenges of fragile situations and the contractual relations of the Northern African countries through their Association Agreements and their experience of cooperation with the European Union through the European Neighbourhood Policy.

1. Boosting strategic investments for job creation and strengthening the role of the private sector

The private sector holds the largest potential for generating jobs and growth and it is therefore essential to boost responsible private – domestic and foreign – investments in Africa.

State of play 

Investments in Africa show an uneven picture, reflecting global uncertainty, with Foreign Direct Investment flows to Africa fluctuating and not showing the strong upward trend required. South Africa, Nigeria, Kenya, Egypt and Morocco attracted collectively 58% of total Foreign Direct Investment in 2016, while less advanced and more fragile countries face systemic challenges to attract private investment. If some African countries continue to be commodity-dependent, others have managed to diversify their economies reacting to the low commodity prices. Furthermore, since 2016 we see a further broadening of Foreign Direct Investment beyond the extractive sector 6 .

As regards EU investments in Africa, the EU is Africa’s biggest investor, with its Member States holding approximately 40% of Foreign Direct Investment stock worth EUR 291 billion in 2016 7 . Africa’s strong economic progress over the last two decades and the inherent potential for the future mean that there is substantial opportunity for doing more. Demographic projections for Africa make it clear that it is also necessary to generate millions of new jobs, especially for youth entering the labour market.

Proposed course of action

Action #1. Support to Africa to crowd in investments will be further boosted by using increasingly substantial amounts via blending and guarantees in order to leverage resources from capital markets with international, European and national financial institutions, to de-risk investments and to facilitate access to finance. The priority goes to value-adding sectors with a high potential for sustainable job creation, notably for women and youth, increasing the opportunities for them to realise their aspirations, including through start-ups. Specific attention will also be paid to situations of fragility. Between 2014 and 2017, the EU has leveraged through blending operations approximately EUR 35 billion. Since the launch of the External Investment Plan and the creation of the European Fund for Sustainable Development 8 in 2017, the EU is mobilising funds expected to leverage EUR 15 billion of investments through blending and over EUR 16 billion under the Guarantee. Between now and 2020, it is on track to deliver on the global External Investment Plan’s objective of leveraged investments in Africa and the Neighbourhood worth EUR 44 billion by 2020. Concrete results will include access to electricity for 30 million people and companies, and increased renewable energy capacity by 5 gigawatts. 24,000 people will have access to all-seasons roads through our leveraged investments in transport infrastructure. 3.2 million jobs are expected to be created in Africa just by the investment programmes focussed on small and medium enterprises alone. These are powerful examples of the scale and impact of interventions under the proposed Alliance.

Under the next long-term budget (Multiannual Financial Framework), the EU should further improve its instruments and tools by ensuring a more efficient delivery and by substantially increasing available funding for that purpose.

Action #2. For a surge in private sector investments to have the biggest possible impact, the most promising value chains at national and regional level must be identified. To this end, Jobs and Growth Compacts are currently under discussion with most of our African partners in order to steer the joint efforts around those value chains with the highest potential for job creation, seizing the opportunities for manufacturing and processing, unlocking the huge potential of the green and blue economy, supporting transition to low-carbon and climate-resilient economies, exploiting the full potential of the digital transformation of the economy, in particular e-commerce and data economy, and tackling the areas requiring reform in order to improve the business enabling environment. The work on the Jobs and Growth Compacts requires also a structured dialogue with the European and African private sector, based on the Sustainable Business for Africa platform set up in the framework of the External Investment Plan. A link with the G20 Compact with Africa will be ensured.

Action #3. Europe and Africa have an interest in working together more seriously on strategic developments and interests. The European Commission will bring together African and European public, private and financial operators and academia on a sectoral basis before the end of this year to examine and support strategic developments in critical economic areas such as digital solutions, energy, transport and agriculture. The objective is to look at the long-term challenges and strategic interests, by examining how to accelerate impact, boost public and private investments, and best share knowledge and know-how. This would serve to define strategies to promote and prioritise sectoral policy and regulatory reform in African countries and facilitate related EU public and private investments. In May 2018, the EU and the African Union already set up a Task Force for Rural Africa, comprised of African and European experts, to provide advice and recommendations on priorities and the next steps in our cooperation in the field of agriculture, looking inter alia at how to boost public and private investments in African sustainable agriculture, how to facilitate EU responsible private investments, boosting intra-African trade as well as exports from African countries, and identifying the best policies to support African youth working in agriculture, agribusiness and agroindustry. Following the European Union-African Union Commission to-Commission meeting in May 2018, an European Union-African Union digital economy taskforce is being established. Moreover, joint sectoral ministerial meetings between Africa and the EU are being organised and being pursued. The Commission will also lend its support to similar initiatives from Member States contributing to the realisation of this Alliance such the Africa-Europe High-Level Forum organised by Austria in the context of their Presidency of the Council before the end of the year.

2. Investing in people by investing in education and skills

An economic partnership seeking to boost investments and create jobs must look at matching skills with the demands of the labour market. More investment is needed to provide people, in particular girls and women, with access to education, notably Technical and Vocational Education and Training, as well as digital skills and competences, and to address the mismatch between the skills that young people receive at secondary and tertiary level and those needed for their working life. This will help equipping youth with relevant skills to build their future, whilst consolidating as well pathways to legal migration.

State of play

Africa has the youngest population of any region of the world and continues to experience strong demographic growth, but its workforce is the least skilled in the world 10 . Enrolment in Technical and Vocational Education and Training across Africa stands today at only 6% of total enrolment in secondary education 11 . Although some degree of skills mismatch is natural and unavoidable in any growing and restructuring economy, many graduates from technical, vocational, and general education in Africa pursue fields for which there is weak labour demand 12 .

The EU is Africa’s longstanding partner in the area of education, from early childhood and primary to higher education, including Vocational Education and Training and entrepreneurial learning as well as in research and innovation. Between 2014 and 2020, the EU is supporting bilateral education programmes in Africa with approximately EUR 1.34 billion. Nearly EUR 230 million (17%) of this amount is for Vocational Education and Training. By 2020, 35,000 students and researchers from Africa will have benefitted from Erasmus+, leading to a total number of 105,000 by 2027. By 2020, 750,000 people will also have received Technical and Vocational Education and Training for Skills Development. In addition, through the Emergency Trust Fund for Africa, the EU is massively supporting economic development programmes aimed at addressing skills gaps, at improving employability through vocational training, and at supporting job creation and self-employment opportunities. In the Sahel and the Horn of Africa, these programmes have reached a total of EUR 1.1 billion since 2015. In 2014-2020, the EU is also supporting education in Africa through global initiatives such as the Global Partnership for Education with EUR 475 million.

More investment in education is needed, both from the EU, its Member States and from our African partners in line with the African Union’s Continental Education Strategy for Africa (2016-2025).

Proposed course of action

Action #4. The EU will support an important African Union skills initiative 13 , aimed at developing an African continental qualification framework, a facility to enhance private sector involvement in Technical and Vocational Education and Training, supporting labour market and Technical and Vocational Education and Training system diagnostics and piloting mobility of students and staff. Access of higher education and research institutions to adequate e-infrastructures will be supported 14 . The mobility of students, staff and academics across the African continent will be further facilitated (African “Erasmus”) 15 . The contents of tertiary education programmes and skills acquired by university students will be made more relevant to labour market needs and the harmonisation of higher education across the continent will be supported aiming to ensure the recognition of qualifications within Africa and the EU 16 . The EU will continue to support scholarships and exchange programmes between tertiary education institutions and support knowledge creation in universities to become full actors in the complex processes of innovation on which future economic development and job creation depends through Erasmus+. In total, EU support under the Pan-African programme will increase from EUR 45 million in 2014-2017 to EUR 63 million in 2018-2020, reaching EUR 108 million.

Action #5. Improved support at national level will match skills to strategic development choices for each country 17 , taking inspiration from successful initiatives in North Africa such as the Med4jobs programme 18 . Support will be linked as much as possible to the sectors with strong potential for investment and job creation. It will therefore be on the agenda of the discussions regarding the Jobs and Growth Compacts as well as addressed in the sectoral strategic meetings with private sector, academia and financial operators (as proposed in Action 3). Under the next Multiannual Financial Framework, a significant effort should be made to further strengthen the EU’s engagement in this area, in full coherence with the foreseen boost to leverage private investments for job creation. The EU will ensure that such increased investment is also more strategically targeted, with a focus on the sectors with the highest potential for job creation, taking into account the sizeable importance of the informal sector in the African economy with a view to improving its typically low productivity rates.

3. Strengthening business environment and investment climate

Boosting private sector investment requires peace, security and stability, and an enabling investment climate and business environment, including macro-economic stability and open financial systems for increased private sector credit. It encompasses also adequate actions to address broader critical governance issues, such as strength of government institutions, rule of law, transparency and accountability, as well as corruption and illicit financial flows.

State of play

The investment climate in Africa has been generally improving, with significant national differences, but investor surveys 19 also clearly indicate that much more is needed in this area to improve Africa’s capacity to compete worldwide in attracting investment capital. Since 2009, Foreign Direct Investment inflows to Africa have systematically accounted for less than 5% of total foreign direct investment inflows worldwide. Rule of law, an independent judiciary, and predictability of taxation, as well as peace and stability are all key factors influencing both domestic and foreign investors’ decisions. The cost of setting up a business is thought to be around three times higher in fragile states, significantly discouraging private investment 20 .

Proposed course of action

Action #6. Under the Alliance for Sustainable Investment and Jobs, the Commission proposes to develop a strengthened dialogue and cooperation with African partners on the investment climate, including investment protection where appropriate. This will be backed up by continued support to policy reforms that improve the business environment and to the institutional and technical capacities of African institutions, including through digital solutions, to ensure strong public finance management, including transparency of public procurement and expenditure and the fight against corruption and fraud, improved accountability as well as respect for the Rule of Law and access to Justice. The enhanced use of EU instruments of Twinning and Technical Assistance and Information Exchange will support efficient, transparent and accountable public administrations. Efforts will also be stepped up to support partners on domestic resource mobilisation, including the fight against Illicit Financial Flows 21 , which are responsible for at least USD 50 billion 22 leaving the continent annually, largely surpassing the total amount of annual Official Development Assistance. These issues are raised in EU dialogues with the partner countries, notably in the context of budget support and of political dialogue; they will also be addressed in the private sector dialogues under the External Investment Plan as well as in EU Business Fora and the strategic sectoral discussions with private sector, academia and financial operators. The link with the G20 Compact with Africa will be ensured. In 2016, the EU and EU Member States’ support to improving the business climate in Africa amounted to EUR 200 million 23 , of which EU support represented EUR 50 million. For the period 2018 to 2020, a significant increase of EU support to business and investment climate reforms in Africa is envisaged under Pillar 3 of the External Investment Plan, moving to EUR 300-350 million on average per year, in addition to dedicated actions geared at improving governance and ensuring peace and stability. This should further increase in the period 2021 to 2027 under the next Multi-Annual Financial Framework.

4. Tapping the full potential of economic integration and trade

Investments in value-adding and labour intensive sectors also requires markets for the products and services. Advancing the economic integration process at regional and continental level in Africa and boosting trade relations with the EU are therefore essential components of a coherent economic strategy.

State of play

Intra-African trade remains very low despite significant growth potential; in 2000, it was at 10%, in 2014 at 16% according to data 24 from the United Nations Conference on Trade and Development, African trade with the EU is significant: the EU is Africa’s biggest trading partner, accounting for 37% of African exports in goods worth EUR 110 billion and 35% of African imports in 2017 worth EUR 133 billion and the EU remains the most open market and the main destination of African manufactured goods. Africa is also the largest recipient of EU Aid for Trade in the world, amounting to EUR 4.8 billion commitments in 2015. Yet, overall EU trade figures with Africa are comparable to EU trade with Switzerland, which amply demonstrates that there should be significant growth potential for EU – Africa trade 25 in both directions.

Proposed course of action

Action #7. With the launch of the African Continental Free Trade Area in March 2018, the launch of the Single African Air Transport Market and the signing of the Protocol on the Free Movement of Persons, African aspirations for further economic integration are clearly spelled out. The EU will lend its full support to the African Continental Free Trade Area. Support to the African Continental Free Trade Area negotiations should increase from EUR 7 million (2014-2017) to EUR 50 million (2018-2020), funding institutional support as well as technical support to the various phases of the negotiations (on issues such as Technical Barriers to Trade, Sanitary and Phytosanitary measures, Intellectual Property Rights including Geographic Indications, investment, competition, e-commerce), including support for data gathering and data analysis.

Action #8. Strengthening trade between the EU and Africa. Building on the African Continental Free Trade Area implementation, the long-term perspective is to create a comprehensive continent-to-continent free trade agreement between the EU and Africa. To prepare this, Economic Partnership Agreements, Free Trade Agreements including the Deep and Comprehensive Free Trade Areas on offer to the countries of North Africa, and other trade regimes with the EU should be exploited to the greatest extent, as building blocks to the benefit of the African Continental Free Trade Area. The ambition is to further increase African exports and to attract investment, including into manufacturing and processing sectors, and to encourage the creation of regional value chains through flexible rules of origin. In support of this, the Alliance will further strengthen and better target Aid for Trade measures in support of trade facilitation and approximation of technical and quality product standards and other regulatory measures.

Action #9. Economic integration and the development of value chains that are linked to the regional, continental and global set-up also require connectivity, both intra-African as well as strategic linkages between the EU and Africa. Infrastructure investments underpin the ability of African countries to fully capitalise on job and growth creation opportunities 26 . The Alliance will look at supporting the policy frameworks and the core enabling infrastructure, including broadband and e-infrastructures. Particular attention will go to sectors including sustainable energy, transport, data economy, information and communications technologies, circular economy, sustainable use of natural resources, waste and water management and blue growth; this could include offering partnerships with EU industry, in particular where it is world leader. This will be linked up with the support provided to investments through blending and the guarantee.

5. Ways and means 

Action #10. For the Alliance to be successful, constant dialogue between European and African partners, increased involvement with the private sector and close consultation with civil society are needed. The Alliance also needs to be backed up with an important package of financial resources. The EU and its Member States already are Africa’s first partner representing, in 2016, 55% of all Official Development Assistance to Africa, amounting to EUR 23 billion.

The Commission’s proposal for the future Multi-Annual Financial Framework of the EU foresees an ambitious Neighbourhood, Development and International Cooperation Instrument 27 worth EUR 89.2 billion for 2021-2027, with Africa and the Neighbourhood as its priorities. At least EUR 32 billion of grants for Sub-Sahara Africa and an expected EUR 7.7 billion for North Africa will be further complemented by additional funding from the thematic pillar, the rapid response and the “cushion” of the Instrument. Building on the External Investment Plan and its European Fund for Sustainable Development, the instrument also foresees a substantial increase in the use of blending and guarantees, to leverage sizable amount of funds from the public and the private sector. Under the proposed new external investment architecture 28 , with an increased firepower of the External Action Guarantee of EUR 60 billion globally, Africa will be a priority region. The High Representative with support of the Commission has also proposed to set up the European Peace Facility 29 worth EUR 10.5 billion for 2021-2027, which will further enhance our work with Africa in ensuring peace, security and stability across the African continent, which are crucial for economic development.

Summary of actions

(1)

Strengthening European Investments for jobs and growth: Towards a second phase of the European Fund for Strategic Investments and a new European External Investment Plan, COM(2016)581.

(2)

  A Global Strategy on Foreign and Security Policy for the European Union , 2017.

(3)

New European Consensus on Development ‘our world, our dignity, our future’, OJ C 210 of 30.6.2017.

(4)

  Meseberg Declaration , 2018.

(5)

Enhancing legal pathways to Europe: an indispensable part of a balanced and comprehensive migration policy COM (2018) 635

(6)

 A case in point is Ethiopia, now the second largest recipient of Foreign Direct Investment in Africa with 3.6 billion USD in 2017, mainly in sectors such as light manufacturing, textile and automotive (UNCTAD, 2018).

(7)

EUROSTAT, 2018.

(8)

Regulation (EU) 2017/1601 of the European Parliament and of the Council of 26 September 2017 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD

(9)

Proparco is a subsidiary of Agence Française de Développement (AFD) focused on private sector development.

(10)

Africa Pulse (2017), World Bank.

(11)

African Union Continental Education Strategy 2016-2025.

(12)

Africa Pulse (2017), World Bank.

(13)

EUR 27 million from the Pan-African Programme in support of i) the “Skills Initiative for Africa” Financing Facility in cooperation with Kreditanstalt für Wiederaufbau for a total of EUR 14 Million, ii) the “Skills Initiative for Africa” Technical Cooperation in cooperation with Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH for a total of EUR 8 million and iii) pilot “EU-African Union Vocational Education and Training mobility project” for a total of EUR 5 million.

(14)

EUR 30 million in 2018-2020 from the Pan African Programme, in addition to EUR 20 million allocated during 2014-2017.

(15)

EUR 20 million in 2018-2020 from the Pan African Programme, in addition to EUR 20 million allocated during 2014-2017

(16)

EUR 13 million in 2018-2020 from the Pan African Programme, in addition to EUR 5 million allocated during 2014-2017.

(17)

EUR 40 million in 2018-2020 foreseen for Botswana, Gabon, Ghana, Guinea-Bissau and Mauritius.

(18)

The programme addresses the mismatch between skills and labour market needs, by fostering entrepreneurship, intermediating between labour supply and demand, and by enabling Micro, Small and Medium-sized Enterprises through the promotion of incubators and coaching programmes.

(19)

Inter alia World Bank Doing Business Report 2017.

(20)

 European Political Strategy Centre strategic note, The Makings of an African Century (2017).

(21)

Unrecorded capital flows derived from corruption, criminal activity, tax evasion and laundered commercial transactions.

(22)

  Report of the High Level Panel on Illicit Financial Flows from Africa , 2014.

(23)

Organisation for Economic Co-operation and Development, 2018.

(24)

UNCTAD, Africa Economic Outlook 2017.

(25)

 Total EU trade with Africa only represents 7.5% of overall extra-EU trade, roughly the size of EU trade with Switzerland. South Africa and Northern African countries account for almost two thirds of this (European Commission, Eurostat, Comext, Client and Supplier Countries of the EU28 in Merchandise Trade (value %), 2016, excluding intra-EU trade: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122530.04.2018.pdf.

(26)

Africa Economic Outlook 2018, African Development Bank.

(27)

COM(2018) 460 final, 14 June 2018.

(28)

The Commission has adopted today a Communication Towards a more efficient financial architecture for investments outside the European Union (COM (2018) 644) setting-out ideas on rendering the current system even more effective.

(29)

 See factsheet on the European Peace Facility.