She led the Western world’s second-biggest foreign aid donor for 16 years. So what are former German Chancellor Angela Merkel’s takeaways on the investment challenge in Africa?
Merkel’s recently released memoirs, also available in English, were doubtless under a few Christmas trees this holiday season. Her thoughts on the partnership with Africa were telling:
• She recounts the worrying impact of a whispered remark by Senegal’s then-President Abdoulaye Wade, who told her: “If I need something quickly — a stadium or a new bridge — I turn to China. Then within one or two years, I’ve got what I want. If it’s not so urgent, I ask the Europeans. It’s just that then I have to bear in mind that the tendering will take a long time, and that some projects never see the light of day.”
• Merkel writes: “The countries of Africa, it transpired, had embroiled themselves in Chinese dependencies whose repercussions only became clear much later.”
• She feared that “the conventional methods of development cooperation” would not be enough to meet the U.N. Sustainable Development Goals unless accompanied by a “self-sustaining economic upturn in African countries.” Hence Germany’s Compact with Africa, started during its G20 presidency in 2017, was defined by Merkel as “contracts or pacts through which conditions for private investment would improve, for example, by protecting private donors or lowering interest rates for private loans.”
• In return came the promise of greater investment from Europe, including German companies. By 2021, some 12 African countries had negotiated compacts, Merkel writes, and foreign investment was rising, “albeit not as swiftly as many of the African countries and I had hoped.”
Related opinion from our archives: After Merkel’s exit, Germany must remain committed to Africa
Brussels bubbles
The European Commission is talking a lot about Chinese dependencies these days, too, including in its development policy, where it is trying to portray its Global Gateway investment strategy as an alternative to China’s Belt and Road initiative.
2025 is the year the commission will present its proposal for the EU’s collective 2028-2034 budget, which works out to the Western world’s third-largest aid budget each year.
The think tank ECDPM has just put out a handy primer on the budget negotiations, which typically take years once EU member states and the European Parliament get involved.
• Expect aid to Ukraine and migration management to feature prominently, the authors write, as EU development policy also shifts toward “projects aligned with economic priorities, such as trade agreements, infrastructure, access to raw materials and energy security.”
• And that means: “Future EU external action will likely prioritise collaboration with like-minded partners and regional alliances, and find pragmatic ways to engage with non-like-minded states on shared agendas, such as climate change.”
• The downside? “This shift risks leaving regions like Africa and the Middle East, and groups such as the Least Developed Countries (LDCs), potentially underfunded unless there is a robust defence in their favour.”
Aidsfonds, Global Citizen, the ONE Campaign, and the Pandemic Action Network recently launched a website for, in their words, “an informal network that rallies efforts to increase financing for development, humanitarian help and global climate action in the next [long-term budget of the EU], including through new resources.”
We suspect the real battle, however, will be on what form that financing takes. Will humanitarian aid retain its distinct, more politically neutral, status? How big a bet will the commission put on its still-unproven de-risking program for private sector investment? And will LDCs get ring-fenced funding envelopes, or will they be forced to compete for funds with more geopolitically advantageous states to the EU?
ICYMI: European aid is both ‘self-interested’ and ‘generous,’ says top official (Pro)
See also: EU to shun ‘less performant’ countries under new strategy (Pro)
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The scaling handbook
Another pearl you may have missed in the rush to Christmas was the OECD Development Assistance Committee’s Guidance on Scaling Development Outcomes, available here.
Some 19 experts took two years to produce the concise advice on how to ensure development initiatives create sustainable and widespread change.
Our favorite tips may seem obvious, but if you have to say it, well, maybe it isn’t … yet:
• Invest in qualitative research to understand not only the needs but also what is wanted by the targeted populations and in-country government partners.
• Avoid rewarding the initiation of new interventions, and instead incentivize and prioritize collaboration and the continuation of development interventions that have demonstrated evidence and scaling potential.
• Consider whether your organization can and should stay engaged throughout the entire scaling journey. Plan ahead to determine when it is appropriate for your organization to phase out, and invest in partnerships, local capacity strengthening, and resource mobilization from an early stage.
• Emphasize that scaling does not usually mean larger projects, but rather to work toward creating systemic change for lasting impact at scale.
• Note that development work is rarely fully binary — failure or success — and focus on continuous improvements.
Net-zero exodus
We wrote last month about Goldman Sachs’ exit from the United Nations’ Net-Zero Banking Alliance. Now Morgan Stanley, Citigroup, and Bank of America have left, too.
That prompted GFANZ — the Glasgow Financial Alliance for Net Zero, which encompasses the Net-Zero Banking Alliance — to change its rules, announcing that membership in one of the sector alliances is no longer required in order to participate in GFANZ.
GFANZ said in a statement that it will “turn its focus to closing the investment gap to help unlock the more than $5 trillion a year opportunity created by countries modernizing their energy systems and putting economies onto a low-carbon path in the next decade.”
Meanwhile, Allison Fajans-Turner, bank engagement and policy lead at Rainforest Action Network, said the banks had made a New Year’s resolution to “turn back on their climate promises, disgracefully ending 2024 — a year marred by continued bank funding for fossil fuel expansion and policy backtracking — by exiting the Net Zero Banking Alliance for Net Zero.”
ICYMI: Are big banks backing away from climate commitments?
Predictions for 2025
“If the international community embraces the Bridge proposal as the consensus framework for promoting debt sustainability in 2025, it could mark a shift from reactive crisis management to a proactive strategy aimed at genuine economic empowerment.”
— Kalpana Kochhar, director of development policy and finance, Gates Foundation
As part of Devex’s Predictions for Global Development series for the year ahead, Kochhar champions a new proposal — led by the Finance for Development Lab and Columbia University’s Initiative for Policy Dialogue — to address liquidity challenges facing the developing world and redefine how the international community supports countries to achieve long-term economic stability.
Opinion: Why 2025 could be a ‘Bridge year’ for the global south
The look-ahead
Want more on the trends to watch in global development in 2025? Join Devex President and Editor-in-Chief Raj Kumar tomorrow, Jan. 8, as he sits down with our Pro members to share insights on the year ahead.
Each year, Raj moderates hundreds of global development events and spends his days speaking to executives, social entrepreneurs, philanthropists, NGO chiefs, and policy and political leaders across the global development space, giving him a unique perspective on what to prepare for.
This is a FREE members-only event for Devex Pro members. Don’t have the right membership level? You can upgrade or sign up for a FREE TRIAL when registering for the event.
Your next job?
Senior Climate Finance Specialist, Agribusiness
Asian Development Bank
Manila, Philippines
What we’re reading
EIB fears “reputational disaster” over revised EU green reporting. [Financial Times]
Debt burden of the lowest-income countries hits 30-year high. [Axios]
Kenyan President William Ruto argues that the “historic $100 billion IDA pledge is proof we can come together.” [Devex Opinion]
About the author
Vince Chadwickvchadw
Vince Chadwick is a contributing reporter at Devex. A law graduate from Melbourne, Australia, he was social affairs reporter for The Age newspaper, before covering breaking news, the arts, and public policy across Europe, including as a reporter and editor at POLITICO Europe. He was long-listed for International Journalist of the Year at the 2023 One World Media Awards.
