Independent research & practical ideas for global prosperity

The Investment Climate Facility for Africa: Does it Deserve U.S. Support?

Todd Moss and Sarah Rose

08/21/2006

By: Todd Moss and Sarah Rose

The Investment Climate Facility (ICF) for Africa was launched in June 2006 to tackle Africa's continued trouble in mobilizing domestic and foreign private investment. The plan has been endorsed by the G8 and is backed by the African Union, the New Partnership for Africa's Development and UK Prime Minister Tony Blair's Africa Commission, among others. The new body would work to improve the investment climate through the promotion of property rights and financial markets, anti-corruption efforts, and the reform of regulations, taxation, and customs. Backers hope to raise $550 million ($50 million from each of 10 donor countries and $2.5 million from each of 20 private companies). Will it work? Should the U.S. participate?

CGD senior fellow Todd Moss considers these questions by first listing five important strengths of the proposal. He follows with some tough questions: What, exactly, does the ICF plan to do with $550 million? How will the ICF distinguish between political and technical problems? Will the ICF allocate projects based on diagnostics or political trends? What is the real relationship with its "partners"? Finally, and perhaps most importantly, why no independent evaluation? Moss writes that that the U.S. should consider contributing to the ICF if these questions are answered convincingly and comprehensively. "A modest $7 million annual contribution for seven years would also be a strong signal that the U.S. is still a global leader in this area--and could even help to push the ICF to live up to its potential," he concludes.