The Lusophone Compact is one of many successes that have emerged from the innovative Africa Investment Forum. The compact is a financing platform that provides risk mitigation, financing products and technical assistance to accelerate the development of the private sector in Africa’s Portuguese-speaking countries.
The African Development Bank, the government of Portugal and six Portuguese-speaking African countries—Angola, Cabo Verde, Equatorial Guinea, Guinea-Bissau, Mozambique and São Tomé and Principe—signed a memorandum of understanding during the inaugural Africa Investment Forum Market Days event in November 2018.
The African Development Bank president, Dr Akinwumi A. Adesina, says the partnership was “designed with one simple, overarching goal: more private sector and public-private partnership investments in Africa’s Portuguese-speaking countries.”
The compact was conceived in 2017 during a visit by Adesina to Lisbon, where he urged Portugal’s participation in driving private sector development in Africa’s Portuguese-speaking countries.
Since its establishment, the compact’s partners have worked to address differences in size and structure of member economies. Angola, for instance, is Africa’s tenth-largest economy. Sao Tome and Principe is the continent’s smallest, but it is one with a traditionally heavy reliance on agriculture.
The Africa Investment Forum continues to be a conduit for investment into these economies. The Africa Investment Forum Market Days 2019 event featured six projects with a value of over $700 million, which were eligible for Lusophone Compact financing.
One project at that event—though ineligible for compact financing, was the African Development Bank-led structuring of the largest ever single foreign direct investment in Africa. This was the Mozambique Liquified Natural Gas (LNG) Area 1 Project, valued at over $24 billion. The African Development Bank contributed $400 million to the project.
Two years ago, the Mozambique LNG Area 1 Project and the African Development Bank jointly received Project Finance Magazine’s Multilateral Deal of the Year 2020 Award.
Since its establishment, the compact has continued to grow in scope. In September 2022, during a business and investment forum organized as part of the 5th Luso-Mozambican Summit in Maputo, the African Development Bank and the Portuguese government signed a guarantee agreement for €400 million. Under the agreement, Portugal is providing guarantees of up to €400 million exclusively to African Development Bank-financed projects approved under the arrangement.
As African countries currently face challenging conditions linked to the Covid-19 pandemic, Russia’s war in Ukraine and climate change, the Africa Investment Forum is prioritizing the areas of transport, health, energy, infrastructure, and food security. These are the areas the forum finds necessary to dwell on to drive recovery.
This year’s Market Days event will also promote opportunities in industries where Africa has a comparative advantage, notably music, film and textiles. In addition, it will promote transactions that offer considerable benefit to women.
The investment transactions will be sourced from the investment pipelines of the eight founding partners of the platform. These partners are the African Development Bank, Africa 50; the Africa Finance Corporation; the African Export-Import Bank; the Development Bank of Southern Africa; the Trade and Development Bank; the European Investment Bank; and the Islamic Development Bank.