European bank pledges massive funding for Africa.

Author:Misser, Francois
Position:European Investment Bank

South Africa's economy comprises a heady mixture of industrialised and developing sectors - the perfect environment for a lending institution like the European Investment bank (EIB). But South Africa is only the beginning.

FAR in advance of the October signing of the groundbreaking Interim Trade Agreement between the European Union and South Africa, experts from the EIB were on a mission to identify projects suitable for the Bank's support. And according to sources in Luxemburg, a whole plethora of sectors has been targeted.

Reports suggest that a total package of loans destined for South Africa, to the tune of ECU200m, is under serious consideration.

These range from electrification projects in the townships and new telecommunications networks, through to loans for emerging black small-to-medium scale businesses. And indeed there is no reason why the mining sector, even Anglo-American, should not benefit from EIB loans since in Europe, both public and private firms of the weight of France's railway company SNCF and the massive chemical company Rhone Polenc have obtained loans from the Bank.

Moreover, Anglo-American is already a partner with the EIB in the Sadiola gold mining project in Mali, which is set to receive an ECU35m loan.

EIB more flexible

Since sanctions were lifted, South African companies have been able to compete for EIB tenders, and in this area the EIB boasts greater flexibility than its counterpart, the European Development Fund (EDF). "We finance projects on market terms. The interest of the projects come first," says one Bank Officer.

However throughout the apartheid years, the European Union has disbursed some ECU100m for the so-called "social programmes" for the victims of apartheid. Over a five year period, that corresponds to a larger budget than the Lome Indicative Programme for Nigeria and Ethiopia combined. Therefore, despite the need to correct imbalances left behind by apartheid, now that discrimination has at least been legally eradicated, both EIB and EDF officials maintain that it will be harder to continue such levels of grants.

This, however, is where the EIB in particular can step in. Given the opportunities presented by a South African economy which already benefits from the European General System of Preference (GSP), and an industrial base that can sustain large commercial loans, the Bank has the space for a sizeable involvement.

New Copper projects

But the EIB is not focusing on South Africa alone. It...

To continue reading