The ACP Investment Facility

26 Pages·2015·0.56 MB·English

14
EN 2015 NO
Special Report The ACP Investment

Facility: does it provide
added value?
EUROPEAN
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OF AUDITORS
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Luxembourg: Publications Office of the European Union, 2015
Print ISBN 978-92-872-3158-1 ISSN 1831-0834 doi:10.2865/34061 QJ-AB-15-015-EN-C
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Printed in Luxembourg
14
EN 2015 NO
Special Report The ACP Investment
Facility: does it provide
added value?
(pursuant to Article 287(4), second subparagraph, TFEU)
02
Audit team
The ECA’s special reports set out the results of its performance and compliance audits of specific budgetary areas or
management topics. The ECA selects and designs these audit tasks to be of maximum impact by considering the risks
to performance or compliance, the level of income or spending involved, forthcoming developments and political and
public interest.
This performance audit was produced by Audit Chamber III — headed by ECA Member Karel Pinxten — which specialises
in external actions spending areas. The audit was led by ECA Member Klaus-Heiner Lehne, supported by the head of his
office, Michael Weiss; Sabine Hiernaux-Fritsch, head of unit; Lars Markström, team leader; Polina Cherneva and
Athanasios Tsamis, auditors.
From left to right: S. Hiernaux-Fritsch, M. Weiss, K.-H. Lehne, A. Tsamis,
L. Markström.
03
Contents
Paragraph
Glossary and abbreviations
I–VII Executive summary
1–10 Introduction
1–9 The establishment of the Investment Facility
10 The value added by the Investment Facility
11–13 Audit scope and approach
14–37 Observations
14–27 Overall, the Investment Facility’s operations are coherent with other EU development cooperation
measures
16–18 Project prospection and selection
19–27 Funding arrangements
28–37 The Investment Facility provides access to long‑term financing, loans in local currency and
generates a catalytic effect
29–30 Long‑term financing
31–33 Financing in local currency
34–37 Catalytic effect
38–42 Conclusions and recommendations
Annex I — Y early and cumulative operations approved, contracts signed and disbursements
made for the Investment Facility in ACP countries
Annex II — Breakdown by financial instrument
Annex III — List of projects reviewed by the Court
Replies of the European Investment Bank
04
Glossary and abbreviations
ACP: The African, Caribbean and Pacific Group of States
EDFs: European Development Funds
The EDFs are the main instrument for providing European Union aid for development cooperation to the African,
Caribbean and Pacific States and to overseas countries and territories. The partnership agreement signed in
Cotonou on 23 June 2000 for a period of 20 years (‘the Cotonou Agreement’) is the current framework for the
European Union’s relations with these countries and territories. Its focus is on reducing and eventually eradicating
poverty.
EIB: European Investment Bank
Under Article 309 of the Treaty on the Functioning of the European Union the EIB’s task is to contribute to the
development of the internal market. In addition, under the Cotonou Agreement, the Bank administers the ACP
Investment Facility.
EU delegation: The EU is represented by 139 EU delegations and offices around the world. The EU delegations are
part of the European Commission and serve the EU’s interests as a whole.
OCT: Overseas countries and territories
SMEs: Small and medium-sized enterprises
05
Executive summary
I IV
The ACP Investment Facility was set up under the We concluded that the Investment Facility indeed
Cotonou Agreement and began operation in 2003 adds value to EU development cooperation with ACP
for a period of 20 years. The Facility’s objective is to countries.
support investments by private and commercially
run public entities in all economic sectors. It provides
medium- to long-term financing through various
V
financial instruments and thereby aims at deliver-
ing sustainable economic, social and environmental The Investment Facility’s operations are overall coher-
benefits. ent with the EU’s development cooperation with ACP
countries. Projects have been launched under the
Impact Financing Envelope. The contractual obligation
to inform the end beneficiaries about EIB/Investment
II
Facility funding is not always followed and technical
The Investment Facility, which receives its capital from assistance does not always target small and medium-
the 9th, 10th and 11th European Development Funds, sized enterprises (SMEs).
is a risk-bearing revolving fund which is intended
to be financially sustainable. Its total endowment is
3 685 million euro. Capital contributions by the Mem-
VI
ber States are paid directly to the European Invest-
ment Bank (EIB), which manages the Facility. The Investment Facility provides long-term loans
and financing in local currency. It also demonstrates
a positive catalytic effect.
III
For our audit, we used operations signed between
VII
2011 and 2014 as a basis for assessing whether the
Investment Facility added value to EU development At the end of this report, we make two recommenda-
cooperation with African, Caribbean and Pacific (ACP) tions designed to increase the added value provided
countries. We assessed whether the Investment Facil- by the Investment Facility.
ity’s operations were coherent with other EU develop-
ment aid provided to ACP countries and evaluated
how successful the Facility was in providing access to
long-term financing as well as loans in local curren-
cies. Lastly, we assessed whether the Facility’s opera-
tions had a catalytic effect.
06
Introduction
The establishment of the 02
Investment Facility The European Investment Bank (EIB) 1 ACP–EC Partnership (Cotonou)
Agreement (OJ L 317,
complements the Facility’s funding 15.12.2000, p. 3).
with its own resources. An overview of
01 2 Council Decision 2001/822/EC
the main components of funding pro- of 27 November 2001 on the
Created under the Cotonou Agree- vided by the Investment Facility and association of the overseas
countries and territories with
ment1 and the Overseas Association the EIB from its own resources in the
the European Community (OJ
Decision2 the Investment Facility African, Caribbean and Pacific Group L 314, 30.11.2001, p. 1).
was launched in 2003 for a period of of States (ACP) and Overseas Coun-
20 years. Its objective is to support in- tries and Territories (OCTs) is shown in
vestments by private and commercial- Figure 1 below.
ly run public entities in all economic
sectors (services, energy, telecommu-
nications, transport, etc.). It provides
medium- to long-term financing
through various financial instruments
and thereby aims at delivering sustain-
able economic, social and environmen-
tal benefits.
1 Overview of funding provided by the Investment Facility and EIB from own
e resources in ACP countries and OCTs
r
u
g
i
F
EU cooperation Funds managed Source Budget
agreements by the EIB of funding (million euro)
ACP Investment Facility EDF (9,10 and 11) 3 637
ACP Cotonou Agreement
EIB own resources EIB 3 750
OCT Investment Facility EDF (9,10 and 11) 48.5
Overseas Association
OCTs
Decision
EIB own resources EIB 100
Source: ECA with data from EIB.
07
Introduction
03 05
3 Article 51 of Council
Contributions to the Investment Facil- Under the 11th EDF, a replenishment of
Regulation (EU) 2015/323 of
ity are paid by the Member States 500 million euro was allocated to the 2 March 2015 on the financial
directly to the EIB. These funds are Investment Facility endowment to be regulation applicable to the
11th European Development
allocated under the 9th, 10th and 11th used as dedicated funding, the ‘Impact Fund (Financial Regulation)
European Development Fund (EDF). Financing Envelope’ (IFE) for funding (OJ L 58, 3.3.2015, p. 17).
The Investment Facility is managed by operations with higher development
4 Nevertheless, the Parliament
the EIB, acting on behalf and at the risk impact. formulated several
of the EU3 and, in the same way as the recommendations concerning
the Investment Facility in its
EDFs, outside the framework of the EU resolution of 29 April 2015 on
general budget. The Investment Facil- Discharge 2013: EU general
06 budget - 8th, 9th and 10th
ity does not fall within the scope of the
EDFs, P8_TA-PROV(2015)0120,
Court’s annual Statement of Assurance The Investment Facility is an off-bal- paragraphs 53 to 63.
audit, and is not subject to discharge ance sheet item in the EIB’s accounts.
5 See for details Article 3(1)(a)
by the European Parliament4. The Investment Facility portfolio grew and (b) of Annex II to the
from 2.8 billion euro at the end of 2010 Cotonou Agreement.
to 4.5 billion euro by the end of 2014.
The income for this period is presented
04
in Box 1.
The Investment Facility is a revolving
fund, i.e. its income and repayments
are used to finance its continuing op-
07
erations in order to make it financially
sustainable. Under the 9th, 10th and The Cotonou Agreement states that
11th EDF, the Facility was provided the Investment Facility must oper-
with total budget of 3 685.5 mil- ate on market-related terms without
lion euro. By the end of 2014, 2 057 mil- creating distortions in local markets or
lion euro had been paid in by Member displacing private sources of finance.
States. Further details on the Invest- The Facility must also seek to have
ment Facility’s portfolio in ACP coun- a catalytic effect by encouraging
tries are provided in Annex I. the mobilisation of long-term local
resources and attracting private inves-
tors and lenders5.
1 Investment Facility portfolio and income over the years 2011–2014 (million euro)
x
o
B 2011 2012 2013 2014
Signed contracts (cumulative) 3 009.1 3 364.1 3 835.6 4 488.2
Total income for the year 78.4 45.7 10.3 31.2
Source: EIB.
08
Introduction
08 The value added by the
Regarding the terms and conditions of Investment Facility 6 2014 Annual report on EIB
activity in Africa, the
financing, the essential difference be- Caribbean and Pacific, and the
tween financing from the Investment overseas territories, p. 17
10 (http://www.eib.org/
Facility and loans from EIB’s own re- infocentre/publications/all/
sources is the level of credit risk. While The EIB highlights three particular investment-facility-annual-re-
port-2014.htm?lang=en).
the EIB’s own resources are limited to ways in which the Investment Facility
loans secured by solid guarantees and can add value6:
other security arrangements, funding
provided from the Investment Facility (a) by providing beneficiaries in
can accept a higher risk level. Loans the ACP countries with access to
from EIB own resources are mainly long-term financing;
used for public sector projects.
(b) by providing financing in local cur-
rency; and
09
(c) by increasing the credibility of
The Investment Facility mainly pro- beneficiaries and by mobilising
vides credit lines to financial inter- other financial resources, to gener-
mediaries, risk capital via equity in- ate a catalytic effect.
vestments and financing of infrastruc-
ture projects (see Annex II).