In recent years, development institutions have significantly increased their lending to the private sector whilst the global financial and economic crisis has accelerated vast transformations in development finance landscape. Despite the fact that Official Development Assistance (ODA) budgets are increasingly under threat, public development finance is increasingly being used to leverage private financial resources. In 2010, on average over 50% of public finance flowing from DFIs went to the private sector, especially the financial sector. In addition, external investments to the private sector by International Financial Institutions (IFIs) exceeded US$40 billion. By 2015, the amount flowing to the private sector is expected to exceed US$100 billion. Of major concern to the civil society is the use of aid for private sector investments detracting from much needed public sector investments, which still face huge financing gaps in majority of developing countries.
AFRODAD seeks to develop an understanding of the Publicly Supported Private Financing (PSPF) in order to develop a framework that influences the outcomes of the mechanism and mobilise African civil society organisations and policy makers to engage and understand the impact of this approach. The organisation conducted research and collaborated with like-minded organisations globally to develop a better network to influence PSPF. The organisation produced a report, The Scope, Role and Impact of Publicly Supported Private Finance on Development and Poverty Reduction in Africa: Case of Rwanda & Zambia. The book was launched during the Third Financing for Development Conference (FfD3) which took place in Addis, Ababa.
The research reviews and analyses the scope, role and impact of Publicly Supported Private Finance (PSPF) provided by Development Financial Institutions (DFIs) and bilateral donors to the private sector and their contribution to development and poverty reduction in Rwanda and Zambia. It also explores the instruments that are used in PSPF investments in the two countries. The study covers the period from 2000 to 2013 which saw the dramatic rise in PSPF investments from DFIs to developing countries in Africa. The report shows there has been an increase in the amount of aid that has been channelled by these DFIs and donor governments to the private sector in developing countries in the last decade. PSPF investments have reached over US$40 billion a year, a substantial increase over the years as many developing countries are now focusing on a private sector led economy.
AFRODAD in collaboration with partners also conducted research on Public–Private Partnerships (PPPs) and produced a report, What lies beneath?: A critical assessment of public private partnerships and their impact on sustainable development. The report examines the nature and impact of PPPs. It analyses existing literature on PPPs and the experiences of Tanzania and Peru, based on the findings of African Forum and Network on Debt and Development (AFRODAD), and Latin American Network on Debt, Development and Rights (LATINDADD). European governments in particular, and financial institutions such as the World Bank, are planning to push the involvement of the private sector in development during the summit, despite the strong reservations of many experts in developing countries.
Expected outcomes under PSPF