The European Union (EU) has announced a new €1.5 billion credit guarantee scheme to help companies across Africa get access to cheaper credit.
The arrangement, open to Ghana and other African countries, is an intervention under the European Partnership Agreements (EPA) with Africa, of which Ghana is a participant. Its main purpose is to help de-risk investments in EPA member countries by providing credit guarantees for companies to grow and increase export into the European market.
Although the programme is in its initial stage, the EU said by working with international development organisations like African Development Bank and European Investment Bank, it can help companies to successfully navigate prohibitive interest rates of about 35 percent as in the case of Ghana.
This, along with interventions like capacity building, investment promotion and business linkages for companies, it noted, will put companies in EPA member states in a position to expand, increase exports and be profitable.
“We agreed that access to credit is a major obstacle in Ghana; it is impossible to borrow at 35 percent interest and be profitable. So this programme will provide guarantees to de-risk investments,” said Head of EU Delegation to Ghana, Diana Acconcia.
She spoke in Accra during an EU funded Investment Promotion and Business Linkages project, which was organised in collaboration with the Accra Branch of the Association of Ghana Industries (AGI).
She said Ghana is already benefitting from a number of inventions in sectors like the renewable energy sector, “but we want to take the next step by making credit guarantees available to local financial institutions to be made available to businesses.”
On the country’s credit crunch situation, she said, “I really admire Ghanaian entrepreneurs who manage invest, expand and make profit with 35 percent interest rate plus collateral. It is really intriguing and amazing,” adding that: “They can even be more profitable with cheaper credit.”
Ambassador Acconcia further noted that the €1.5 billion programme is expected to leverage investments to the tune of €40 billion across all countries.
Responding to a question on how much will be assigned to Ghana, she said, “This programme will be available to African countries and those in Middle East and wherever there are good projects and ideas, it will be made available.”
She however added that Ghana was well-positioned because of its relatively stable and diversified economy, vibrant local private sector, as well as several better conditions than in other countries.
The EU also added that the programme is open to European investors who want to come into Africa and will fully be launched by middle of this year.