Interview Grégory Clemente, CEO of Proparco « 50% of our portfolio is devoted to the continent »
Proparco is launching a new program to meet the needs of companies in this context of economic crisis, Choose Africa Resilience. The occasion for a review of the Choose Africa initiative launched in 2019. And of the young CEO who took over the head of the institution in 2016, while Proparco has new ambitions: 3 billions € in annual funding from 2022.
By Dounia Ben Mohamed
You recently announced the launch of “Choose Africa Resilience”. An initiative that is part of the Covid-19 crisis. What is the particularity of this one compared to the numerous others, launched since the beginning of the pandemic?
There have indeed been several initiatives, launched since the beginning of the crisis, which first was a health crisis and then an economic one. AFD, our parent company, rolled out the € 1.2 billion “Covid-19 – Santé en Commun” initiative on April 9 in response to the global health crisis caused by the pandemic. An initiative in which we, Proparco, participate fully, by supporting private health actors in Africa with, in particular, grants to ensure the protection of front-line personnel and strengthen the supply capacities of materials and consumables to welcome patients with the disease. of Covid-19. For example, Proparco has awarded grants to two major players in the health sector in Morocco: the Groupe Oncologie and Diagnostic du Maroc (ODM) and Amanys Pharma (ex-Saham Pharma). Likewise, since March, we have supported our clients by meeting their most urgent needs and in particular by offering them extensions.
Thus, Proparco has deployed additional financing to respond to the crisis with, for example for Africa, 450 million € of dedicated bank lines to encourage local financial institutions to maintain and strengthen their support for SMEs.
More recently, there was the launch of the new “Bridge by Digital Africa” fund with 5 million € in favor of start-ups limited in their development due to the crisis, which is supported by Digital Africa and deployed by Proparco . This fund will make it possible to make bridging loans for a maximum period of 24 months to companies whose fundraising has been canceled or delayed due to the contraction of the investment market, while waiting for them to resume. the process of strengthening their own funds.
And of course Choose Africa Resilience, with an additional 1 billion € to support MSMEs in Africa affected by the crisis. This Resilience component complements the existing initiative, Choose Africa, and the range of financial tools implemented by Proparco by offering new products thanks to the 100 million € in guarantees raised from the EU and the 160 million €. guarantees from the French State. Of these 160 million €, 100 million will be used to offer an 80% guarantee to 125 million € of loans granted by local banks to micro-enterprises or SMEs affected by the crisis. The remaining 60 million € of guarantees will be used to guarantee short-term financing granted by local banks to VSEs / SMEs, micro-loans granted by MFIs or direct loans from Proparco to companies.
These resources from the French State and the European Union will therefore enable us to deploy this additional billion €.
Concretely, we are already deploying in 4 countries, Madagascar, Senegal, Ivory Coast and Cameroon, this offer of loans exceptionally guaranteed at 80% by the AFD Group. The funding will be distributed there by Societe Generale to micro-businesses and SMEs affected by the crisis. A means of derisking operations for the banks and allowing the financing of local economic actors. For the moment, we are deploying this guarantee in countries where we have already set up guarantee instruments and above all where we have partnership agreements with local banks. These are 250 million € in loans that will supplement the 450 million € of bank lines already deployed as an emergency that I mentioned earlier.
This new Resilience component of 1 billion € represents the commitment of France and AFD Group in the 4 billion dollars announced at the recent Common Finance Summit by development banks, especially European ones, to help African SMEs.
Because during this period, we worked closely with the various donors to join forces and develop a common response to support the private sector. Our parent company, AFD, and in particular its CEO Rémy Rioux, thus succeeded in bringing together all the development banks during the Common Finance Summit, last November. These have notably committed to dedicate the 4 billion dollars that I have just mentioned in favor of small African companies by the end of 2021, including 1 billion € from France which will be managed by AFD and Proparco . The Choose Africa Resilience initiative is the billion that we will deploy by the end of 2021.
This is, you specified, an additional billion that complements the Choose Africa program. The opportunity to take stock of this program, which is reaching mid-term …
This additional billion € indeed complements the initiative launched in 2019, Choose Africa which had, I would remind you, the initial objective of devoting 2.5 billion € to the financing of VSEs / SMEs over the period 2018-2022. . If we take a mid-term assessment, and if I set aside the additional billion from Choose Africa Resilience, 2 billion € in funding have already been committed, which has made it possible to support more than 16,000 very small businesses and SMEs and tens of thousands of microenterprises.
We have succeeded in mobilizing our parent company, AFD, the EU, the French government, to obtain specific resources and provide responses to the economic crisis affecting the African continent. This is recognition of the success of Choose Africa, on the part of the State, which entrusts us with this type of resource, and also on the part of the EU.
Based on this experience, how do you judge the evolution of France-EU cooperation on the continent as the Union reviews its cooperation strategy with Africa?
There is a long-standing partnership between Proparco and the European Union. The latter has a long history of financing and directly implementing support programs for the private sector. Proparco has been accredited for several years by the EU, which has enabled us to use funds made available by the EU to set up actions in favor of the financing of SMEs in Africa.
We are working with the European Commission to create specific products, for example the Euriz guarantee which encourages local banks and microfinance institutions to finance SMEs, in particular those owned by women or young people. We were thus able to deploy this Euriz product in Nigeria, with the UBA bank, which was the first beneficiary of this guarantee. This product allows UBA to finance projects with a strong development impact, in particular those carried by entrepreneurs incubated by the Tony Elumelu Foundation. This project was signed in May 2019 for an amount of 8.6 million €.
To take another example, in another sector, that of energy, it is always thanks to the EU that we were able to set up the « African Renewable Energy Scale-Up » facility (ARE Scale Up facility) which makes it possible to support young (and small) businesses in the growth phase in the field of decentralized energy, particularly in rural areas. In 2020, we were thus able to invest $ 3 million in equity in Rensource, a major player in renewable energies in Nigeria.
More recently, the EU launched a new investment plan, the External Investment Plan, notably with an FEDD guarantee tool, particularly suitable for institutions like Proparco wishing to support African SMEs. To implement Choose Africa Resilience, 68 million € of FEDD guarantees (out of the 100 million in total that I mentioned previously) will allow Proparco to cover part of the risk it takes on certain clients in the financial sector such as microfinance institutions, leasing institutions or banks specializing in the SME segment to which it wishes to provide an emergency financial response to the impacts of the current crisis.
Another action, the EU should also soon provide a guarantee to deploy the FISEA + initiative, following on from Fisea, in favor of impact investing, by encouraging investment in Social and Inclusive Business, in venture Capital or in fragile countries.
Even in a degraded context, the EU therefore continues to support us through new guarantees.
It should also be noted that the EU offers us the opportunity to offer our customers technical assistance packages, which are very important for Proparco because we can thus technically support them towards better environmental, social and governance practices. This technical assistant is a channel for disseminating good practices.
Finally, the European Parliament has just adopted, within the framework of the 2021-2027 multiannual plan, an envelope of more than 70 billion € for external aid. It is from this envelope that Proparco wishes to once again mobilize European funds to promote the contribution of the private sector to development objectives and in particular to encourage the fight against climate change.
On this point precisely, since Proparco has a network in Africa which provides it with a certain expertise in supporting the private sector, do you manage to be heard by your peers in the EU?
Yes, and more and more. First, because we belong to a powerful group, the AFD Group, which has a historic and increasingly important relationship with the EU. This allows us to develop a Group approach and thus to be heard more.
Then because we have developed, for more than 40 years, an expertise, a good control of our markets, and a local network. Finally because we are part of the association of European development finance institutions (IEFD or EDFI under its acronym in English). In recent years, Proparco has grown and changed in scale enormously. Today we are almost comparable to our Dutch and British counterparts, and that allows us to take positions and help move the lines. In particular, there is a whole lot of harmonization work to be carried out between the different actors on good practices, particularly environmental and social and impact measurement. And today, we are not doing it alone, but within the EDFI association, and also by dialoguing with other partners, in particular IFC (World Bank Group) with which we have recently established an important partnership. Proparco and IFC have thus signed a framework agreement allowing them to collaborate more closely to support the poorest countries (https://www.proparco.fr/fr/actualites/proparco-et-ifc-vont-collabor-plus– closely-to-increase-their-impact-on-it).
So, you said, Proparco has now reached its critical size, these new funds will allow it to finance its actions. Is this your record? Concretely, what orientation have you given to Proparco since your arrival? The objectives set and achieved, what remains to be achieved, and therefore your new roadmap …
I arrived in April 2016, which is almost five years. When I arrived, Proparco had, for two or three years, between 2013 and 2015, financed around 1 billion € each year. We started in 2016 by working on the strategy for 2017-2020, with the objective of doubling in size, increasing to 2 billion financial commitments per year and thus strengthening the contribution of the private sector to sustainable development. Our objective was also that by 2020, Proparco triples its impacts in favor of employment, the climate or access to essential services. At the same time, we wanted to change the distribution between our financing activity and that of equity investments. It was about expanding our equity investment activity, because demand is very strong, especially in Africa, to strengthen the equity of very small businesses and enable them to raise funds. This involved strengthening our organization and our team to change dimension and ultimately target 25% of our activity in 2020.
A lot has happened since then. First, Proparco has become the single point of entry into the private sector for AFD Group. This has enabled us to reach our targets more quickly and even exceed them, with for example in 2020 nearly 2.5 billion € in commitments, a record. Today, our target increases to 3 billion financial commitments per year, starting in 2022, although we remain cautious because we do not yet fully measure the impact of the crisis. But we maintain this strong ambition.
Another major element in the transformation started since 2016: we have maintained our African priority, with 50% of our portfolio dedicated to the continent. Since 2016, we have also decided to have a strong focus in favor of so-called fragile countries. Our new strategy for 2020-2022 reaffirms this commitment to fragile countries, notably with the establishment of the strategic partnership with IFC which I have just told you about, which allows us to join forces and work more on upstream, in favor of the G5 Sahel countries and the DRC. We have divided up a number of sectors and we are working to create the conditions for the emergence of future projects.
Over this period, we have therefore managed to change size, which now allows us to be on par with the main European donors. And finally we achieved all of our objectives, both in terms of equity, global volumes, African priority and fragile countries … We also achieved our objectives in terms of impacts on development, on climate, which is a strong marker for Proparco, but also on maintaining and creating jobs. For example, the projects we funded in 2019 made it possible to create or maintain nearly 1.6 million jobs (https://www.proparco.fr/fr/ressources/rapport-de-developpement-durable-2019 ). Since its launch, the Choose Africa initiative has made it possible to create or maintain 20,000 direct jobs and 1.4 million indirect jobs (https://choose-africa.com/reportages/bilan-a-mi-parcours -of-the-choose-africa /) initiative.
All this is possible thanks to belonging to a strong group, the AFD Group, which itself has experienced a strong growth trajectory, but also thanks to the quality of Proparco’s teams, which is particularly evident in these troubled times. Expert and motivated teams, who did not count their time to adapt the instruments and be at the bedside of our customers and partners. I am fortunate to serve a very beautiful mandate and a very beautiful mission.
