Financing growth

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The European Investment Bank (EIB), Europe’s long-term lending institution, formally opened the bank’s first permanent representation in Ethiopia in 2016. The office leads engagement by the EIB, both to support long-term infrastructure and private sector investment in Ethiopia and to manage relations with the African Union Commission and other international organizations based in Addis Ababa. The African Micro-finance Week was held this week at the Sheraton Addis Hotel. Present for the event was Ambroise Fayolle, Vice President of European Investment Bank who spoke to Capital about the Bank’s activities in Ethiopia

Capital: What was your visit to Addis Ababa about?

Ambroise Fayolle: There are two reasons for my visit. One is to attend African Micro-finance Week that took place in Addis Ababa this week. This is a big event for micro finance institutions and lenders. This biannual event is a very good opportunity to meet with micro-finance institutions and lenders and others in our sector to see their views and their concerns in the sector.

Special focus was on Small and Medium Enterprises (SMEs). I used this opportunity to visit a number of very interesting sites here in Addis; an incubator of start-ups called Blue Moon and a local company that specializes in hand-crafts. I also met with a number of public authorities and had exchanges with players in the economy of both local, such as the business community and international representatives of the community, especially important because I am from an EU institution.ambroise-fayolle

Capital: You mentioned that you visited a startup incubator, how important would you say are these spaces and do we need to have more of them to drive growth?

Fayolle: I found that project very interesting on many grounds. First it is very selective place, where there is a real possibility for sharing experiences and learning together. It has to be part of the strategy for the development of the country.

It was also interesting to see that this project targets agriculture and start-ups related to the agri-sector. When you look at developments in Ethiopia what I find interesting is also the way companies look at import substitution in areas where it makes a lot of sense; and to me, the agro-related businesses are part of this sector where it makes sense.

Capital: Tell us a bit about EIB’s presence in this country.

Fayolle: The bank has been active in Ethiopia since 1976 so we have a long running relationship with Ethiopia. Since it is an important country for us, we have decided to speed up the process of strengthening the relationship with Ethiopia by opening an office here in Addis in 2016.

This office is led by Christophe Litt who has an excellent track record in terms of appraising projects in the operations department in Luxemburg. So we used his experience to develop and appraise new projects and the pipeline is very promising.

What we see is a sharp increase in the project that we think will end up being signed here in Ethiopia. We are now in the process of praising and in some cases close to signing projects that are in terms of number close to the projects we did in the past 20 years in the country. Our involvement in Ethiopia is on the move.

Capital: Your activities have been slow in the last few years, what was the reason for that? Can you also mention some of the projects that are in the pipeline?

Fayolle: The reasons for the change, I think, are many; the change in the way the economic strategies implemented has created more opportunity for lenders such as public institutions. The fact that we have somebody on the ground able to be in direct contact with possible partners is something that plays a key role. We have also discussed this issue with our partners with which we co-finance a lot of projects including the World Bank and the African Development Bank.

What I find interesting is that we were used to developing projects in the public sector or in areas related to the public sector, but this isn’t something we will continue.  We will now see more projects related to the private sector.

Capital: Are there sectors that the Bank prioritizes?

Fayolle: We have a number of sectors that are EU’s priorities and that means they are ours as well because members of the EU are our shareholders. What we target, especially outside of the EU, as we have committed in Paris, is to at least make 35 percent of our activities outside the EU to be in projects that are fighting climate change by 2020; so this is a key priority.

Another priority is infrastructure because it is also important to develop the private sector; we are now also targeting innovations and SMEs, everything that can help job creation in Africa. This is a strategy that is in line with our key objective – helping the various countries in Africa to meet the Sustainable Development Goals.

Capital: Are there any projects in renewable energy area in Ethiopia that you are looking to get involved in?

Fayolle: There are projects we are looking at but it is a bit early to say anything about them in public.

Capital: The government has been promoting Public Private Partnership for a while now, what is your view on that?

Fayolle: We have been quite active in promoting PPP over the years, be it inside or outside of the EU. It requires a number of elements to be successful and from our experience sometimes, technical assistance can help make sure that the conditions are in place for these PPPs to be successful. That is what we, as a Bank, are willing to develop in countries that are interested in this approach.

Capital: EIB has been operating in Ethiopia for a while now, what do you think about the overall environment of doing business in the country; what challenges are there?

Fayolle: I’m not well placed to really speak on this issue because I am here for a couple of days. But this is not my first visit to the country.  What I would say is that when you come to Addis, you see the dynamism of the economy the way you see the figures in the chart grow; this is one thing that is quite impressive.

Obviously there are challenging issues including the fact that there are significant numbers of new comers to the job market every year, and the issue related to limited foreign exchange currency available for financing a significant number of projects. But when I meet actors here that are active in the financing project and market in general, it’s clear to me that it is going in the right direction.