Senegal: COVID-19 – Team Europe supports private sector
23 July 2020
Amadou Hott, Senegalese Minister of the Economy, Planning and Cooperation, and Ambroise Fayolle, European Investment Bank (EIB) Vice-President responsible for Africa, today formally agreed a CFAF 49 billion concessional loan to the Republic of Senegal. It comes on top of a CFAF 200 billion financing mechanism established by Macky Sall, President of the Republic of Senegal, as part of the country’s Economic and Social Resilience Programme.
This support will help banks grant loans to businesses that have been hardest hit by COVID-19. It will also serve to crowd in more investment from the private sector. The financing will benefit from an interest rate subsidy provided by the European Union.
This EIB initiative targets businesses that are most exposed to the pandemic, in particular in sectors such as fishing, agriculture, tourism, manufacturing and retail, contributing to the efforts of the Government of Senegal to respond to the uncertainty and shocks resulting from COVID-19 with its private sector support strategy.
Senegal is the first country in Africa to benefit from the EIB’s accelerated COVID-19 economic resilience response package.
“The long-standing partnership between Senegal and the EIB spanning more than 54 years has secured long-term investment that has helped improve lives and increase economic opportunities across our country. Four months after the President of the EIB, Vice-President Fayolle and I discussed the unprecedented threat posed to jobs and companies in Senegal by the COVID-19 pandemic, the EIB has delivered. Today’s agreement will make it easier for businesses to access credit,” said Amadou Hott, Senegalese Minister of the Economy, Planning and Cooperation.
“Since the start of the pandemic, the EIB has worked closely with several private sector partners and with governments across Africa to ensure that together we can tackle the health, economic and social impact of COVID-19. Together with experts from the Senegalese government and the EU Delegation we have designed a targeted financing programme that forms a key component of Senegal’s comprehensive response to the pandemic. This fast-tracked EIB intervention will help preserve the economic and social fabric of the country and save jobs. This represents the first COVID-19 response to be signed in Africa and will be followed in the coming weeks by new EIB support across the continent to strengthen public health, enhance the response of public sector partners, and ensure that private sector companies can better face unprecedented challenges. As the EU bank and as part of Team Europe, the EIB stands side by side with Africa at this time of need,” said Ambroise Fayolle, EIB Vice-President.
“Senegal and the European Union are facing the same economic and social challenges following the COVID-19 pandemic. The EU-EIB financing package, a €75 million EIB loan to be blended with a €6 million EU grant, is fully aligned with Team Europe’s increased engagement to reduce the impact of COVID-19 in Africa. This will address the immediate social and economic consequences of the pandemic and target support for the private sector. The fact that Senegal is the first African country to benefit from the EIB’s accelerated response reflects our close partnership during these challenging times,” said Irène Mingasson, Ambassador of the European Union to Senegal.
New healthcare investment projects, including the supply chain and private sector support, are expected to be approved across Africa in the coming weeks and months. The EIB has committed over €6.7 billion to back COVID-19 investments outside the EU. This includes accelerated support to help public and private partners immediately respond to the health, social and economic impact of COVID-19.
A long-standing partnership with the EIB
This is not the first EIB initiative in Senegal – it has supported long-term investment there since 1966, including recent support for water, clean energy, health, digital and microfinance projects across the country.
In addition, millions of people have benefited from EIB-backed investment to expand the supply of clean water nationwide by SONES, connect new areas, especially rural areas, to electricity networks with SENELEC, and ensure access to finance by smallholders and entrepreneurs with Baobab Senegal.
The EIB now plans to provide financial backing to microfinance, water and waste investment, which will further aid efforts to reduce the impact of the pandemic and to strengthen economic resilience.
EIB Vice-President Lilyana Pavlova, responsible for operations in the Western Balkans, met with Serbian Prime Minister Ana Brnabić today in an online meeting to discuss the EIB’s investment plans for Serbia. The EIB reaffirmed its commitment to help the region in its COVID-19 recovery and to support private sector development and the region’s transformation into a greener and more digitalised economy.
The EIB has advanced a new €100 million loan to Pekao Leasing for the financing of small and medium-sized enterprises (SMEs). Further to the EIB mandate and the loan agreement, a considerable part of the funds will be used for financing energy efficiency measures and developing sustainable energy initiatives as well as preparing a competitive leasing offer for enterprises owned or managed by women.
The EIB Group, consisting of the EIF and the EIF, has provided a guarantee for a mezzanine tranche of a synthetic securitisation transaction of around €130 million to the ´Bank für Tirol and Vorarlberg AG´ (BTV). The transaction was arranged by Erste Bank and is expected to provide capital relief under the EU Capital Requirements Regulation framework. It employs the use of a synthetic excess spread equivalent to the one-year expected loss of the reference portfolio. The capital relief provided by the transaction will enhance BTV’s risk-taking capacity and create additional lending headroom. As a result, BTV will create a new portfolio of eligible loans to SMEs and mid-caps of up to €435 million, mainly in Tirol, Vorarlberg, Vienna and southern Germany. The EIB Group operation is a direct response to the COVID-19 pandemic as the current crisis puts a particular strain on SMEs and mid-caps, which are experiencing shortages in liquidity and funding lines.