A prospering Africa is essential to achieve the goal of worldwide sustainable growth and stability. The Compact with Africa stands for a genuine form of partnership which transforms development cooperation into joint economic development. Benin, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia have already joined the Compact. Burkina Faso has recently joined as the twelfth country. Germany has mobilised substantial resources to support the Compact and the reform partnerships. We promote startups, provide guarantees for business transactions and help set up institutions. Olaf Scholz, German Federal Minister of Finance
In an interconnected world, the G20 must look beyond its membership to achieve its objectives of fostering sustainable economic growth and stability worldwide. To this end, G20 support for developing countries, particularly in Africa, is crucial. This is why the G20 launched its Partnership with Africa. The central pillar of the Partnership is the Compact with Africa (CwA), which was established within the G20 finance track and aims to promote private sector-led development and improve the investment environment. Since its launch in 2017, the CwA has sparked great interest. So far, twelve African countries have joined the initiative: Benin, Burkina Faso, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia.
With the establishment of the Africa Advisory Group (AAG) as a regular G20 working group, the initiative has been firmly anchored in the G20 finance track. It is currently co-chaired by Germany and South Africa.
The Compact with Africa at a glance
Comprehensive – Aims to increase the attractiveness of private investment by improving the macro, business and financing frameworks in Compact Countries.
Coordinated – Brings together reform-minded African countries, international organisations and bilateral partners from the G20 and beyond to coordinate reform agendas and support measures and to raise private investors’ awareness of the CwA.
Country-specific - No one-size-fits-all approach, but demand-driven and tailor-made reform agendas and support measures jointly developed by Compact Countries, international organizations and bilateral partners.
How does the initiative work?
The CwA is demand-driven and open to all African countries. Participation in the initiative is based on self-selection. Success or failure depends on the implementation of reform measures. The driving force behind the CwA is African ownership, not Western prescriptions. The initiative serves as a commitment device not only for African countries but also for the G20 and international organisations, as it makes the shared responsibilities of all stakeholders transparent.
When reform-minded African countries join the CwA, they team up with international organisations (World Bank, International Monetary Fund, African Development Bank) and bilateral partners from the G20 and beyond to prepare comprehensive, coordinated, and country-specific reform agendas and support measures to promote private investment. These plans are called Investment Compacts. Representatives from all stakeholders meet regularly in Compact Teams that are established in each Compact Country. These teams are the central players in implementing the Investment Compacts. They help coordinate measures on the ground and serve as the main point of contact for investors.
As African countries implement their reform agendas, the G20 is making a special effort to bring international investors together with African countries. Its main role is to give visibility to the initiative by providing it with a political platform, coordinating support measures and publicising reform progress.
All relevant information on the Investment Compacts is publicly available on the Compact with Africa’s website, including reform commitments, support measures, monitoring reports and investor events.
Germany is contributing bilaterally through reform partnership agreements with Côte d’Ivoire, Ghana and Tunisia.
Guest contribution by Finance Minister Olaf Scholz
The Compact with Africa opens up new development opportunities for African partner countries, making support available to those driving their own reform.
The 21st century, Nelson Mandela once said, would be an African century. His words were a plea to the nations of the world to take more notice of Africa. He was right: Africa holds enormous potential. Comprising over 50 countries and a large number of megacities, this vast continent is home to great cultures, more than a billion inhabitants and a youth that is full of energy and drive. Economic success, which would provide prospects for the local populations, is both a humanitarian imperative and in the interest of all Europeans.
The Compact with Africa is a new way of lending economic development in Africa a lasting impetus. While conventional forms of development aid have achieved important results in terms of health care, education and food security, self-sustaining economic development is still a long way off for many African economies. Achieving sustainable growth and a high standard of living requires a private sector which has the capacity to invest and provide a sufficient number of new jobs, especially jobs for young people.
Launched under Germany’s G20 presidency in 2017, the Compact with Africa aims to improve the environment for local start-ups and private investments in African partner countries. The Compact stands for a new quality of partnership and cooperation. Now it is the African partner countries deciding, from a local perspective, which reforms should be deployed in order to improve their macroeconomic environments and business climates. For example, the Compact countries can decide how to best go about establishing a functioning revenue administration, managing public debt and combating corruption. The members of the G20 and international organisations then offer specific support to help with implementation.
Thus the Compact with Africa overturns the approach whereby it is mainly the donor countries making decisions on public aid projects – an approach which, so far, has unfortunately often prevailed. The Compact provides incentives to encourage initiative-taking in the countries themselves. It puts the African partner countries in a position where they can establish reliable policies that boost confidence in their countries and attract investors. The Compact, as Akinwumi Adesina, President of the African Development Bank, has rightly stated, brings welcome “winds of change”.
Robust economic cycles and value chains translate into jobs. This is why one of the aims of the Compact with Africa is specifically to strengthen small and medium-sized businesses in Africa. But if all this is to genuinely create confidence, we must ensure that investments offer a real future and come with decent working conditions. For this reason, Germany has successfully advocated for training programmes for young people in rural areas to be established alongside the G20 initiative. The Compact also helps improve education and training opportunities for girls and young women.
The Compact with Africa stands for a genuine form of partnership which transforms development cooperation into joint economic development. Benin, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia have already joined the Compact. Burkina Faso has recently joined as the twelfth country. Germany has mobilised substantial resources to support the Compact and the reform partnerships. We promote startups, provide guarantees for business transactions and help set up institutions. The German government will be releasing additional funds this legislative term to support investments and companies in Germany’s Compact partner countries.
The Compact with Africa is being coordinated by the G20 finance ministers in consultation with the African Development Bank, the World Bank and the International Monetary Fund. As I could see at the G20 meeting of finance ministers three weeks ago, cooperation between partner countries and international institutions sends out an important signal of reliability.
Germany will continue to work to ensure that Africa and the Compact remain a priority for the G20. Creating new opportunities at home – that is the core idea of the Compact with Africa.
Olaf Scholz is Germany’s Finance Minister and deputy chair of the SPD.
On 30 October 2018, the heads of state and government of the African countries participating in the Compact with Africa attended a high-level conference hosted in Berlin by German Chancellor Angela Merkel. Olaf Scholz, who is advancing the initiative in cooperation with the other G20 finance ministers, welcomed the fact that German businesses are making a stronger commitment to Africa.
The German government wants to boost the private sector in Compact countries by putting €1 billion towards targeted measures benefiting German and African companies.
The Compact with Africa (CwA) is a central pillar of the G20-Africa partnership launched under Germany’s G20 presidency. Reform-minded African countries, international organisations and bilateral G20 partners are cooperating closely in order to achieve the goal of the CwA – boosting the private sector to enhance the growth potential of these countries. The reforms and support programmes are designed to make these countries more attractive to business.
Since its launch in 2017, 12 countries have joined the initiative: Benin, Burkina Faso, Côte d’Ivoire, Ghana, Guinea, Egypt, Ethiopia, Morocco, Rwanda, Senegal, Togo and Tunisia. A year later, the reform efforts and reliable politics in the Compact countries are clearly paying off. This is confirmed by the monitoring report published jointly by the World Bank and the African Development Bank. In locations where the business climate has improved, investors’ interest is growing. This is powerfully illustrated by the many flagship projects.
The German government wants to support the CwA with a range of accompanying measures. For example, it is setting up a fund to incentivise small and medium-sized German businesses to take up or expand activities in participating countries. Support is also being provided for investments in small and medium-sized businesses in the Compact countries. Furthermore, there will be efforts to strengthen business ties with Africa.
We see the Compact with Africa as a long-term, demand driven process. The African countries will determine what they want to do to improve conditions for private investment, with whom they want to cooperate, and in what form. Dr. Wolfgang Schäuble, former Federal Minister of Finance
G20 Africa-Conference in Berlin
On 12-13 June 2017 the international conference “G20 Africa Partnership - Investing in a Common Future” hosted by the German Federal Ministry of Finance, the Federal Ministry for Economic Cooperation and Development and the Deutsche Bundesbank took place in Berlin.
The conference provided a platform for government representatives as well as experts and private sector stakeholders to initiate the G20 Africa Partnership and to strengthen this dialogue by exchanging views on joint opportunities and measures to overcome challenges. Central to the discussions of the conference were the three pillars of the G20 Africa Partnership: (1) to improve inclusive economic growth and employment; (2) to develop quality infrastructure especially in the energy sector; and (3) to strengthen the framework for private finance and investment in Africa (Compact with Africa). The G20 Africa Partnership builds on existing regional and international strategies in order to ensure alignment, coherence and ownership; it is based on the assumption that peace and stability are prerequisites for sustainable growth and development. Participants in the conference expressed strong support for the G20 Africa Partnership and committed to actively support it.
The conference also provided a platform for the African countries that are participating in the G20 Compact with Africa initiative to emphasise their political commitment and priorities. The finance ministers of Côte d'Ivoire, Ethiopia, Ghana, Morocco, Rwanda, Senegal and Tunisia, announced ambitious reform measures aimed at improving the framework conditions for private investment. The heads of the African Development Bank, the International Monetary Fund, and the World Bank as well as many G20 members and non-G20 partners indicated their support for the initiative and the implementation of individual investment compacts. The participating international organisations committed to work closely together to ensure effective coordination of the input from all Compact partners.
During the high-level investor round table discussions as well as during the follow-up bilateral discussions with investors, the finance ministers of the Compact with Africa countries presented the first outlines of their compacts to private investors and also pointed to specific sectors and projects where private-sector participation is most needed in their countries. They used the opportunity to ask the invited private sector representatives for their feedback on the compact outlines (prospectuses).
Investors welcomed the Compact with Africa initiative and appreciated the opportunity to start a dialogue with the Compact countries. They highlighted the importance of good governance and mutual trust, good public infrastructure, access to decision-makers, transparency of decision-making, skills and training, well-functioning domestic capital markets, transparent and reliable regulation and taxation as well as minimal red tape, which are all crucial for private investors. Several business representatives indicated their interest in investing in specific countries and sectors.
Others highlighted their presence in the Compact countries and the extent of their operations. The representatives from the development finance institutions also highlighted their commitment to the initiative and specified potential contributions, ranging from technical assistance to developing innovative products that will help to crowd-in private capital.
G20 Finance Track Documents