The Covid-19 crisis, which is greatly affecting most countries in the world, is jeopardising decades of private sector growth and job creation in Africa. It is already causing major setbacks, particularly in terms of unemployment, inequality and poverty across the continent. The prospects for micro, small and medium-sized enterprises (MSMEs) in particular are worrying.
These MSMEs are essential to the African continent's economy and provide essential jobs for vulnerable populations, as recalled by all participants at the high-level event of the Finance in Common summit dedicated to the sustainable recovery of the private sector in Africa.
The current crisis reinforces the obstacles these MSMEs face on the ground, which often prevent them from accessing finance, and thus from fully deploying their development potential. With the Covid-19 pandemic, MSMEs need the support of public development banks more than ever.
Supporting inclusive financial solutions for African MSMEs
It is in this context that Bruno Wenn, President of the Association of European Development Finance Institutions (EDFI) announced the launch of a support plan for African MSMEs of at least 4 billion dollars to be mobilized by the end of 2021. "SMEs generate by far the majority of jobs in Africa. This is why the creation, promotion and financing of these enterprises are essential for development" Bruno Wenn said.
In addition to the 15 European Development Finance Institutions (DFIs) of the EDFI association, the initial participants in this coalition include the African Development Bank (AfDB), the West African Development Bank (BOAD), the Islamic Corporation for the Development of the Private Sector (ICD), FinDev Canada and the US International Development Finance Corporation. Other institutions are also expected to join the initial coalition.
1.5 billion euros from the European Fund for Sustainable Development (EDF) redirected towards a response to the Covid-19 emergency for the private sector
The mobilisation in favour of the African private sector is a priority objective for the revival of African economies, as expressed by Marjeta Jager, Deputy Director General for International Cooperation and Development at the European Commission, when she announced the total commitment of €1.5 billion from the European Fund for Sustainable Development (EFSD), which has been massively redirected towards a response to the Covid-19 emergency for the private and non-sovereign sector, to mobilise a total of more than €40 billion in investments. Taking risks, guaranteeing financial intermediaries to enable them to overcome their reluctance to lend to entrepreneurs is a key issue for the European Commission, Member States and development banks. The European Union plans to extend its action in this area as early as 2021.