THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
EVIDENCE
OTTAWA, Wednesday, April 17, 2024
The Standing Senate Committee on Foreign Affairs and International Trade met with videoconference this day at 4:15 p.m. [ET] to examine, and report on, Canada’s interests and engagement in Africa.
Senator Peter M. Boehm (Chair) in the chair.
[Translation]
The Chair: Honourable senators, my name is Peter Boehm. I am a senator from Ontario and the chair of the Standing Senate Committee on Foreign Affairs and International Trade. Before we begin, I wish to invite committee members participating in today’s meeting to introduce themselves, starting on my left.
Senator Gerba: Amina Gerba from Quebec.
[English]
Senator Greene: Stephen Greene, Nova Scotia.
Senator McNair: John McNair, New Brunswick, subbing in for Senator Boniface.
Senator Mary Robinson: Mary Robinson, Prince Edward Island.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Ravalia: Mohamed Ravalia, Newfoundland and Labrador.
Senator Harder: Peter Harder, Ontario.
Senator Mohammad Al Zaibak: Mohammad Al Zaibak, Ontario.
Senator Coyle: Mary Coyle, Nova Scotia.
The Chair: Welcome, Senator Deacon, right under the wire.
We are meeting today to continue our special study on Canada’s interests and engagement in Africa. I would like to welcome everyone, including those across our country who may be watching us on SenVu.
For our first panel today, from Global Affairs Canada, we welcome Marcel Lebleu, Director General, West and Central Africa Bureau; Susan Steffen, Director General, Pan-Africa Bureau; and Apeksha Kumar, Director, Maghreb and Egypt. From Agriculture and Agri-Food Canada, we have Kathleen Donohue, Assistant Deputy Minister, International Affairs Branch. Most of you have been with us before, in all probability, you will be back as well. Thank you for being with us today.
Before we hear your remarks and proceed to questions and answers, I wish, as per usual, to advise everyone to please refrain from leaning in too closely to the microphone or from doing so while you are wearing your earpiece. This affects the audio quality and can have sonic implications for the technical staff and interpreters, in particular, who are working this particular meeting. I would also ask all present to mute notifications on your various electronic devices. Thank you.
We’re ready now to hear your opening remarks, and these will be followed by questions from senators.
[Translation]
Marcel Lebleu, Director General, West and Central Africa Bureau, Global Affairs Canada: Thank you, Mr. Chair. I’d like to thank you and your colleagues for your interest in Africa. My colleagues and I will be happy to answer any questions you may have. The committee’s study is timely, as the Department of Global Affairs is currently looking to improve its approach to promoting Canada’s interests and to boost our economic cooperation with Africa.
[English]
Africa is large, increasingly integrated and forecast to be the world’s second fastest-growing region in 2024. This trend is expected to continue as tariff and non-tariff barriers to intra-regional trade are reduced under the ambitious African Continental Free Trade Area, which I will now refer to as AfCFTA.
When fully implemented, the AfCFTA will become the world’s largest free trade area in terms of members, with the potential for a combined GDP of more than US $3.4 trillion, and a new important player in global supply and value chains. The AfCFTA will not only help reduce intra-continental trade barriers but also increase the ability and confidence of Canadian companies to pursue new opportunities with their African partners. Areas of interest include clean technologies, green energy and cooperation on critical minerals.
[Translation]
Canada’s trade and investment with Africa have increased at an impressive rate over the past five years. In 2022, bilateral merchandise trade totalled $16.2 billion, and investment in Africa reached $16 billion.
A large proportion of Canadian direct investment in Africa is in the mining sector — 42.3%, in fact. In 2022, Canadian mining assets owned by some 90 companies were valued at $37 billion, accounting for 17.2% of total Canadian mining assets abroad.
However, these numbers still fall well short of what might be expected.
[English]
Canada is committed to increasing and diversifying its trade partnerships and supporting inclusive economic growth in Africa, including supporting and boosting Africa’s emerging and frontier markets.
The Trade Commissioner Service, TCS, is positioned to support and accompany Canadian companies in Africa through a network in 16 Canadian diplomatic missions. The TCS is active in more than 50 African markets and is at hand to help Canadian companies achieve their trade and investment objectives by providing tailored business assistance and support to succeed in African markets.
Canada also has eight foreign investment protection and promotion agreements in Africa. These provide Canadian investors with greater protection, increased predictability and better projections for developing their investments.
In April 2022, Canada launched the Responsible Business Conduct Abroad Strategy. This strategy applies to all Canadian companies active abroad, assisting in the integration of world-leading responsible business practices into their operations and helping mitigate potential risks of doing business abroad.
[Translation]
Canada has laid the foundation for a deeper economic partnership between Canada and Africa through a strong commitment to the African Union, the leading continental organization that speaks with one voice for Africa. The first high-level dialogue between Canada and the African Union Commission took place in 2022, under the leadership of Prime Minister Trudeau.
In May 2023, Minister Ng welcomed her counterpart from the African Union Commission, His Excellency Albert Muchanga, for a trade-related conversation at the inaugural Canada-African Union Commission trade policy dialogue.
For the past 20 years, Canada has funded the African Trade Policy Centre, based at the UN Economic Commission for Africa in Addis Ababa, which supports the implementation of the African Continental Free Trade Area, with a focus on gender equality and the environment.
The Government of Canada has committed more than $2.3 billion to help Canadian clean technology companies expand and reach new markets. Canadian clean technology exports to Africa rose 56% between 2012 and 2022.
Raysolar, for example, is an Ontario company based in Kenora that offers renewable energy systems to communities in West Africa. Toronto-based EM-ONE Energy Solutions specializes in smart-grid infrastructure and has electrified 49 health and education centres in Nigeria using solar microgrids.
On the education front, Canadian educational institutions can help meet the needs of a young and rapidly growing population through export services such as licensing of technical and vocational education and training programs.
As of December 31, 2023, over 144,000 international students from Africa had received a permit to study in Canada.
Commercial interests, often a small facet of Canada-Africa relations in the past, have become an area of focus as part of a broader engagement strategy with Africa, and promoting Canada’s export diversification strategy and the inclusive approach to Canadian trade.
With a shared interest in a stable and predictable intra-continental trading system, Canada will intensify its cooperation with African countries and institutions to improve the business and investment climate, creating new opportunities for African and Canadian businesses.
We look forward to advancing Canada’s trade interests in Africa through our strengthened collective engagement. Thank you.
The Chair: Thank you, Mr. Lebleu.
[English]
Kathleen Donohue, Assistant Deputy Minister, International Affairs Branch, Agriculture and Agri-Food Canada: I would like to begin by acknowledging that I am speaking to you from the traditional unceded territory of the Algonquin Anishinaabe people here in Ottawa, the National Capital Region.
[Translation]
I express my gratitude to the committee and its members for providing me with the opportunity to address Canada’s interests and engagement in Africa, specifically from the perspective of the agriculture and agri-food sector.
[English]
Canada’s agriculture and agri-food sector serves as a pivotal driver of economic growth here in our country, as evidenced by the $99 billion in exports recorded this last year, marking a 6.6% increase from the previous year. Our exports remain highly concentrated, though, with 84% of exports heading currently to the U.S., China, Japan, Europe and Mexico. Efforts to diversify access to markets are important to mitigate risks associated with such a high concentration of our agri-food exports going to such a handful of markets.
Africa is emerging as an increasingly important destination for global agriculture and food exports due to its growing population, rising middle class and expanding urbanization. With over 1.4 billion people and diverse dietary preferences, the continent is an important market for Canadian exporters across various agricultural sectors.
[Translation]
Over the past five years, Canadian exports of agriculture and food products to Africa increased by 15% every year in value, culminating in an all-time high of $3 billion last year.
[English]
In terms of the African market’s importance, Canadian exports are predominantly defined by the following four commodities: durum wheat, non-durum wheat, soybeans and lentils. Collectively, those four commodities comprise roughly 89% of the total value of our exports into Africa. Between 2019 and 2023, we saw Canada as the largest supplier of lentils, accounting for roughly 43% of the region’s total global lentil imports. We are the fifth-largest supplier of durum wheat to the region, and we are ranked sixth in terms of non-durum wheat.
The growth of Canadian exports in this agriculture and agri‑food can be largely attributed to an increase in export volumes of certain commodities, notably soybeans. We can also see some of that is also due to value. We have seen price hikes, for example, in certain commodities such as durum wheat and non-durum wheat. We have also seen the effects of severe drought in the region in terms of its domestic productions. That’s increased a further reliance on imports sourced from various global markets.
[Translation]
Canada’s imports of agriculture and food products from Africa are also significant, as they reached $1.58 billion in 2023. Our largest imports are cocoa beans, clementines and oranges, and we import mainly from Côte d’Ivoire, South Africa and Morocco.
[English]
While AAFC does not have specific programming related to trade activities in Africa, its AgriMarketing Program is a federally funded program under the Sustainable Canadian Agricultural Partnership, and it is available to support industry efforts should they wish to explore and to do business in Africa.
Looking ahead, we can see that Canadian exports to Africa are anticipated to continue to rise. Africa remains a net importer of food due to challenges such as limited infrastructure, value chain concerns, climate variability and so forth. However, it’s also important to underscore that several African governments are also prioritizing agriculture as a driver for economic growth and to address their food security needs, and they are implementing policies and initiatives in this regard.
To support Global Affairs Canada’s efforts in Africa and towards food security, the Department of Agriculture works in collaboration with several African countries to help support food security, as does the Canadian Food Inspection Agency when it comes to technical cooperation.
One example would be how Agriculture and Agri-Food Canada has supported a wheat research accelerator fund, which was launched just last year, to improve food security by enhancing the resilience of wheat-based production systems that are being impacted due to climate change, drought, heat and other disruptions in Africa and the Middle East. Under this initiative, Agriculture and Agri-Food Canada invested $2 million. Canada’s International Development Research Centre also invested another $1 million for projects specifically in Morocco and Tunisia to enhance food security and climate resilience in terms of looking at agronomic practices and improving seed development and crop yields.
Under the Canadian Food Inspection Agency, through assistance from Global Affairs Canada and their international programming fund, the agency concluded a multi-year technical cooperation project in Senegal — that was from 2019 to 2022 — and this was designed to help improve the capacity in Senegal with regard to its seed-testing laboratory functions. That is designed to help its capacity in terms of cereal production.
In closing, Africa is a diverse and growing region. Its agriculture and agri-food sector is an important element to consider as we look to develop partnerships and opportunities to support Canada’s ambition to deepen its relationships with Africa.
I’m pleased to answer any questions. Thank you.
[Translation]
The Chair: Thank you, Ms. Donohue. It’s time for questions. I’d like to point out to senators that they have a maximum of four minutes each for the first round, including questions and answers. I would ask senators and witnesses to be concise. We’ll have a second round if time permits.
[English]
I would also like to acknowledge that we have two guest senators here today. Senator Robinson and Senator Al Zaibak, you are also entitled to ask questions, if you so wish.
[Translation]
Senator Gerba: I’d like to thank our guests today. It’s always a pleasure to welcome representatives from Global Affairs Canada.
I have several questions. I’ll start with the topic of the day, which is the budget. Yesterday’s budget announced an additional $160 million for Global Affairs Canada. Specifically, $18 million will be allocated over five years to strengthen Canada’s presence in its mission to the United Nations.
We now have a new representative to the African Union. As I understand it, his job will be to support Global Affairs Canada and our mission to the United Nations, in addition to helping them with the 54 African countries. I didn’t see any mention of the African Union in the budget, yet now we have a permanent representative.
Were you consulted on the budget and the resources allocated to this mission to the United Nations in New York? Have you taken steps to ensure that there’s something for the permanent mission to the African Union?
Mr. Lebleu: Thank you for the question.
There’s an internal government process for drawing up budgets. Officials make recommendations. The minister communicates her priorities to the Minister of Finance. Normally, recommendations from officials to the minister are confidential, so I’ll respect that confidentiality.
Two budget items will have an impact on our network. First, there will be an injection of funds for our local employees. We’re talking about employees working in our embassies. We’ve talked about a network of almost 20 diplomatic missions. For the most part, our employees in Africa are recruited locally; they’re African employees. This envelope will enable us to hire new employees or to make up for structural deficits.
As regards the African Union, I’ll turn to my colleague. For the moment, as you mentioned, it’s a relatively recent announcement and decision. There’s a permanent representative who is assisted by a Canadian colleague and local employees. In this envelope for local employees, a contribution will be made not only for our representation, but for the entire embassy in Addis Ababa, since we have diplomatic missions there.
I’ll turn to my colleague, Ms. Steffen, who is Director General of the Pan-Africa Bureau.
[English]
Susan Steffen, Director General, Pan-Africa Bureau, Global Affairs Canada: Thank you for the question, Senator Gerba.
We are very pleased with the establishment of our new dedicated mission to the African Union, headed by Ben Marc Diendéré. He has been in place since the fall and has generated significant interest in Canada’s approach to Africa and the African Union. The most recent impact was a very successful visit — we believe it was successful — of Bankole Adeoye, Commissioner for Political Affairs, Peace and Security, African Union Commission, who is very high placed in that organization. The ambassador is doing a great job, and we support him to the best of our abilities with what we are accorded by the government.
The Chair: Thank you. We were delighted to have had Commissioner Bankole here as a witness last week. It was very edifying for all concerned.
Senator MacDonald: Thank you, witnesses.
Mr. Lebleu, my first question is for you. Given the significant investments in infrastructure projects undertaken by China and the Belt and Road Initiative in Africa, how does Global Affairs Canada navigate potential geopolitical tensions and competition with China while promoting Canada’s economic interests and values in the region?
Mr. Lebleu: It is obviously something we’re monitoring quite closely. China’s political and economic footprint in Africa presents a significant implication for the continent’s future development. We recognize the significant historical engagement of China in the region, and we mentioned the Belt and Road Initiative which has been funded by generous low-cost financing from China. China today is the largest trading partner and largest source of foreign direct investment, and this is a fact that we won’t change, but we are competing in different submarkets. There are various ways to look at it. One is that the G7 has responded to its own initiative under the American initiative of providing up to eventually $600 billion under the G Fund umbrella to develop the infrastructure project.
Right now, Canada, as you know, has had a policy of supporting its companies, providing services through the Trade Commissioner Service. We’re not in the business of providing low-cost financing. I understand you’ll have Export Development Canada, or EDC, at the table for the second part of the meeting, so you may want to ask them specifically about their treatment, but typically Canada operates at market rate in Africa and supports its enterprises and companies through services.
Senator MacDonald: Ms. Donohue, given the growing demand for agricultural products in African markets and Canada’s interest in expanding its agriculture exports, how does Agriculture and Agri-Food Canada plan to leverage its initiatives and resources to support Canadian farmers and the agri-food businesses in accessing and capitalizing on these opportunities in Africa, especially in light of the increasing competition from other global players such as China and the European Union?
Ms. Donohue: Thank you very much for the question, senator.
One of the things that we do is work with our industry and also our provincial and territorial partners when it comes to priority setting and so forth. Certainly, diversification is a top priority. What we have heard from our industry is that they do see some opportunities in Africa, particularly in the area of, for example, livestock genetics. There is an interest in some African markets to build up their livestock capacity. In this regard, the Canadian Food Inspection Agency is currently negotiating access for certain livestock genetic products. This is a very tangible, concrete way that we can help to support that diversification and look at opportunities to improve access in the region.
Senator MacDonald: Are there any notable successes to date that you can think of off the top of your head?
Ms. Donohue: Not offhand, per se, in terms of specific companies. In my opening remarks, I noted that we see an increase in trade. This past year, there was a 15% increase in agriculture products from Canada into the region.
The Chair: Thank you very much. I’m sorry, I have to cut you off.
Senator Ravalia: Thank you to all of you and your staff for being here today.
I will add on to Senator MacDonald’s question. We were very blessed to have His Excellency Bankole Adeoye here last week. During his testimony, he repeatedly referred to the goodwill towards Canada within the continent. However, it would appear that we have fallen behind some of our major partners — the U.S., China and Russia — in particular in terms of visibility and competitiveness on the continent. As part of your work, are looking at tangible strategic measures that would help us make up ground and increase our footprint on the continent, particularly with reference to specific sectors or regions? My question is for you, Ms. Steffen.
Ms. Steffen: Thank you for the question. I will start off and then pass it to my colleagues who may have other things they wish to contribute.
Are we looking towards doing better and raising our profile on the continent? Obviously, we will say yes to that. How we go about that is part of the discussions that we are having around a policy product that we will be coming out with. It’s part of the conversation we are having with you — your best ideas through your reporting and your study — as well as with the House Committee on Foreign Affairs. There are lots of ideas out there. We have to be realistic about what’s possible, and we have to be quite measured in terms of financial resources.
There are some clear things that Canada does and can do that are very attractive to our African partners. Our dialogues with the African Union Commission are the heart of the way we are approaching this and asking for their opinions about where we would be best placed, and then we match that with the offer from Canada, both from the Canadian government and the private sector.
Senator Ravalia: Given the fact that the continent is far from homogeneous, to what extent, outside of the AU, have we dialogued bilaterally with respect to groups like ICOA, SADC and the more regional partners in terms of enhancing our development?
Ms. Steffen: That’s also an excellent question because the question of the RECs, the regional economic communities, is tricky sometimes. There are eight recognized regional economic communities, recognized by the African Union Commission, established as key building blocks for African integration, both economic and political, and they are of varying capacity and varying interests. We engage significantly with four of them: IGAD, ECOWAS, SADC and EAC. Those are generally considered to be the ones that are a bit more advanced in terms of their ability to exercise their mandates.
We have some development programming with a few of them at this point to support the integration of gender equality into their activities to make sure that the work they are doing on economic integration is gender positive, as well as supporting their capacity to look at how to implement the AfCFTA, which my colleague spoke about. We do engage with them. It’s not a deep engagement at this point on the development or technical assistance side. We also have designated ambassadors who are accredited to each one of those organizations.
Senator Ravalia: Thank you.
Senator Harder: Thank you for being here.
I will follow up on Senator Ravalia’s questions. If there is an advantage to a study like the one we are undertaking, it’s trying to take a pulse of the changes taking place in Africa and how we can get ahead of that curve. It seems, from our testimony so far, and indeed some of what Mr. Lebleu and Ms. Steffen have said, that it’s the growth of regional institutions, not only the free trade agreement but the AU itself becoming a more mature organization and the regional economic communities. We have to recognize that our bilateral presence is not as robust as a number of countries — not that it’s insignificant, but 16 or 17 bilateral missions are not great for a continent of 57.
If we put a bit of wind in the sails on increasing our bilateral instrument of international influence, would that be something that we ought to pursue in terms of better understanding and making some suggestions, or are we going down a track that you think the pace of which will not be very robust? I’d like your comments, please.
Mr. Lebleu: This is a good question. Obviously, they are some of these considerations that come up daily.
We could ask ourselves why we are in these countries and not in other countries. The way we look at it, there is some story behind that. Largely, our presence in that continent, with a few exceptions, has been driven by our international assistance program, some particular linkage, and we are in that position. The question of expanding our footprint is a question that could be the subject of a recommendation to the minister, but this has not been formulated yet. Ms. Steffen will tell you a bit about where we are in our thinking on this specific question.
Having said that, we have recently announced how we will look at Africa. It has been announced by the deputy minister that we are reorganizing ourselves. We are both responsible here for sub-Saharan Africa. Our colleague Ms. Kumar is from another sector, North Africa. We decided part of the reaction to regional institution is to put Africa together. There are some reasons behind that, and that makes sense from a reorganization point of view.
On expanding on bilateral relations, I’ll turn to Ms. Steffen.
Ms. Steffen: Thank you for the question, senator.
Our bilateral relations are at the heart of everything that we do. Our regional relations are growing and are important as well, but nothing beats a presence on the ground, the relationships that you build that way and the presence on the ground that facilitates other kinds of relationships, like private sector relationships, person-to-person relationships and institutional relationships. More is always better, but more needs to be taken into consideration with financial measures. It’s very expensive to work on the continent, including because of security concerns.
We have opened two new missions recently. One is the one that Senator Gerba referred to as our permanent observer at the African Union, as well as our high commission or embassy in Rwanda. It’s not that we haven’t expanded recently. It’s minimal, and it’s in the places where we think we can have the highest impact.
The Chair: Thank you very much.
Senator M. Deacon: Thank you all, and your support team, for being here today to support the study.
My first question is for Mr. Lebleu. I might be putting you on the spot a little bit. I hope not. We did have His Excellency Bankole Adeoye here last week, and I asked him what he would do if he were running Canadian foreign policy in Africa. It was a bit of a dreaming exercise, but near the end, he said:
Doing things differently from the classical Western powers, if you follow your own path. I described to the ministers yesterday and today the examples of the Scandinavians. Chart your own course without deviating from your values.
As I ponder on that this week, Mr. Lebleu, I’m wondering if I could get a sense of what this means to you and how you might interpret this specifically on doing things differently from the classical Western powers.
Mr. Lebleu: Thank you. This is a great question. There are two paths for me to answer that.
One would be how we project ourselves as a trading nation and how we establish principles. This government launched a strategy for a responsible code of conduct abroad for corporations. How do we expect companies to behave? How do we condition the offer of services to these companies with any declaration of integrity? How do we put in place the core, which is the ombudsman facilities for groups who have some issues, and how do our corporations abroad invest in our work with communities? How do we have a national point of contact for communities to come and talk and have those mechanisms in place for communities to hear what we are doing? I think this is a testimonial that is recognized by the international community and African leaders. We can talk about the way we project ourselves as ethical businesspeople.
The other element by which I would say we have branded Canada is with the Feminist International Assistance Policy, FIAP, and how much we have decided and invested in women and girls on global health issues. Now we are adding climate change to the mix, which is an issue that is quite dramatic, particularly in sub-Saharan Africa. In the region, we invest about 70% of our budget development and international assistance budget in global health issues that are focused directly at the most vulnerable population, which are typically women and girls.
Ms. Steffen: I was going to go in the same direction and say that the Canadian brand in sub-Saharan Africa, and I would think in North Africa as well, is very much tied with our values, particularly the values around gender equality and inclusiveness. That permeates everything that we do in our work with the private sector as well as our work with our development organizations and our bilateral relations. We are charting our own course on our values in that way. Sometimes we get a good audience and sometimes we don’t get a good audience, but there’s not a public servant in our department that will stray from those values. His Excellency Bankole Adeoye’s ideology on that is something that we can certainly say we are proud to support.
Senator Coyle: I have so many questions. I will try to narrow it down.
First of all, for our Global Affairs people, I’m curious about the next level. You gave us the big picture — green tech, green energy, critical minerals, et cetera. I’m interested to know whether there is much, if any, diaspora involvement in our trade relationships with Africa.
What does the geography look like in terms of where we have most of our trade activity or commercial activity going on in Africa, and in which parts of Africa? It would be good to know that. In terms of Canadian businesses, what’s the geographic mix there in Canada?
Mr. Lebleu: This is an interesting question.
When we talk about inclusive trade, we do think about members of the diaspora. It’s one of our competitive advantages, in a sense. I do have anecdotes of companies that have succeeded. I can give you an example of a company, Logistik Unicorp. Basically, it’s a gentleman from Togo, and he’s now installed and invested there in Togo to supply some non-lethal military gear to regional governments. I had another large company that, in its international marketing force, is employing the diaspora.
You talk about the biggest market. Our largest trading partner is probably Nigeria. Nigeria has a strong community based in Toronto. I don’t know if you know Burna Boy. Burna Boy is an Afrobeat singer. He was in Montreal three weeks ago and sold out the Bell Centre twice. That’s about 35,000 people. He was in Toronto. We don’t think about the cultural industry a lot, but this is a — and they talk about Nollywood. You look at Netflix, and there is some content. So it’s not only one-way, it’s actually both ways, and we are looking at co-production agreements with South Africa. We are looking at negotiating one with Nigeria.
Obviously, coming from Quebec, I know the impact of the international students on our regional academic institutions. There are lots of universities and colleges that would not survive. If you look at Université du Québec à Trois-Rivières or Université du Québec à Chicoutimi, 30% or 40% of the students are from Africa. There are 144,000 students. That was the figure last year. That’s a lot, and it’s a big plus for us. Some of them stay after that, obviously, and we are happy to have them with us contributing to the success of our country.
When we look at activity of the Chamber of Commerce, this is driven by traditional companies, but also some members of the diaspora who have their own contacts and inroads in the marketplace. It’s pretty much a key pillar of our engagement with the local diaspora. I know we have some members around the table who were involved in past activities.
The Chair: I was listening to Burna Boy just the other night. I happen to like his music.
I wanted to ask a question based on both Senator Coyle’s question and Senator Deacon’s question, and it’s about our capacity for commercial intelligence gathering in Africa. Some of us will remember that there used to be a structure called CIDA-INC. There were other attempts, I should say, to look at crossing that bridge between development assistance into the commercial area. Senator Deacon asked about best practices from other countries. We’ll set China aside. China has a different approach. But do we have sufficient resources? Is it still traditionally the Trade Commissioner Service who will do this, or can we rely on other sources in terms of branching out and looking at more commercial and investment opportunities? Perhaps I can go to Ms. Donohue first in terms of agri-food and those particular aspects but also swing it back to more traditional investment.
Ms. Donohue: Thank you for the question.
For us, it’s really about looking at how we can leverage the technical capacity that we have in a very targeted fashion to help support Canadian business. I would say also to support broader food security goals. Hence, I think I have mentioned the work that we had done with Senegal through bilateral programming managed by Global Affairs, which was aimed at improving Senegal’s capacity when it comes to seed diagnostics. This is actually a very critical and important part of that country’s ability to improve their cereal production and processing, in particular, and to be able to identify pests and so forth in their agricultural production. For us, it’s about that targeted approach that we can take as part of a broader set of goals managed by Global Affairs with regard to how we can address and improve capacity building in the area of food security.
The Chair: Mr. Lebleu, when we first met, you were a trade commissioner. Can you bring a perspective on that?
Mr. Lebleu: I started my career in Cameroon, and I did work on the Comprehensive Economic and Trade Agreement, or CETA, as you also mentioned.
What you are talking about is a potential gap, missing tools in our tool box. We did some consultations, and I’ll turn to my colleague.
Before that, I need to have a quick, 30-second intervention on the Trade Commissioner Service, or TCS, for Africa. What does it mean? We’ll give you our figures. There were 1,060 Canadians clients served in the last fiscal year, 82% of whom said that the TCS helped them gain access to information intelligence, so this service is provided.
In addition to that, we have the CanExport program, which supported 113 countries, targeting at least one African market for $3.1 million. That’s in the last fiscal year. It is a little program.
There is still a potential gap identified there, so I’ll turn to you, Ms. Steffen, because you and your team conducted this outreach through the private sector.
Ms. Steffen: We did. Thank you.
As part of looking at essentially the same questions that you are looking at — how do we increase our engagement with Africa? — we looked at the commercial side. What did Canadians, Canadian businesses and African businesses and leaders think that we should be engaging in? I’ll just give you a few of the highlights.
There is a real interest in having a responsible expansion of trade and investment with African countries, with the extractive sector and beyond; partnering with African countries and institutions on global issues where there is collective action needed, and that could include in the World Trade Organization, or WTO, for example; knowledge diplomacy, which is what I think our colleague at AAFC was looking at; collaboration in education, science, research and innovative partnerships; developing closer people-to-people ties, including through more engagement with African diaspora entrepreneurs; a real need to update the narrative on risk in Africa — the difference between perceived risk and actual risk; increasing Canadian visibility on the ground; better leveraging Canada’s know-how and capacity; building linkages between trade and development efforts; and acknowledging and addressing some of the impediments that currently exist.
I see you are trying to push the button, so I will stop there.
The Chair: I am, because we are over time. It’s my own segment, so if I let it go too long, I will be criticized. Thank you for the answer.
[Translation]
Senator Gerba: Thank you, Mr. Lebleu, for anticipating one of my questions about locally recruited employees. I’d like to come back to the African Continental Free Trade Area, or AfCFTA, which you mentioned earlier, and the collaboration with Canada to support the establishment of this important free trade area.
To date, what has Canada done to support the development of this free trade area? Also, what is being done to help Canadian businesses take advantage of this rather important free trade area in Africa?
Mr. Lebleu: Thank you.
I’ll quickly turn to my colleague. The agreement hasn’t yet been finalized, so the area is an aspiration for now. We hope that it will happen, and we’re working with our partners to make it a reality. Through our international aid envelope, we’ve provided concrete support to certain partners on very specific projects. I’ll turn to Ms. Steffen, who will be able to present these projects and talk about the technical collaboration of these partner organizations.
Ms. Steffen: Thank you for the question. The AfCFTA is what we call among ourselves a turning point for the African continent. We’re focused on finding concrete and useful ways to support the African Union and partner countries to ensure that the implementation of this free trade area is effective, useful and inclusive.
Our development to this end is largely focused on technical support, support for an organization that provides technical support and advice to the African Union in implementing the agreement itself, and also to governments that are interested in finding an implementation plan.
[English]
That’s the African Trade Policy Centre at the United Nations Economic Commission for Africa, or UNECA. We were a founding member of the Trade Policy Centre 20 years ago, and we have been supporting them since that time. They have been providing excellent services both in helping negotiate the instrument itself as well as the implementation of the instrument. There was a Ghanaian-Canadian at the head of that organization for a long time, Dr. David Luke, who has since gone on to a university in England.
Canadian companies and the free trade area is a long-term project. If you think about the three countries in our region that put together a free trade area, it took a long time to negotiate it, to work on the implementation of it and for everyone to see the benefits. If you think about the fact that they are working with 55 member states, that’s going to take a long time. The direct impacts for Canadian companies right now would be for those who have a presence on the ground because the borders will start to open up, but they are indirect, I would say, for the most part, for the short-term. Let’s see what happens in the medium-term. But I think we need to be in this over the long haul.
Senator M. Deacon: This question is for Ms. Donohue. Last week, we heard from witnesses about the overwhelming majority of African farmers who hold small-hold farms which are largely farmed to subsist but also raise some amount of revenue if they have a small surplus to do so. I know that Canada’s role, of course, would be to go to bat for Canadian farmers and advocate and create those trade partnerships, but we also want to see development on the continent continue to thrive for the continent and don’t want to price out these small farmers. My question is, how do we find that balance? How do we establish agricultural trade links with Africa that complement and don’t damage or interrupt an agricultural economy that we also want to see grow and flourish?
Ms. Donohue: Thank you for the question, senator.
First off, there is the worldwide demand for agricultural products. The pressures in terms of food security are such that the broader challenge for the world is how to produce enough food to feed the world. When it comes to small land holders in Africa, how is that balance struck? I can certainly think of a number of ways. One would be the support that the Department of Agriculture, along with the IDRC, has given towards this wheat fund for those two markets in North Africa, Tunisia and Morocco. I think they are very much geared towards that. It’s around sharing best practices around agronomic practices to deal with drought and so forth in these regions and to be able to support better capacity building.
I can think of other examples, perhaps not relevant to Africa, per se, where we have farmers, either through CFA or UPAA, who are involved in projects abroad. Most recently, I was with Minister McCauley in the Philippines, and we heard about how potato farmers in Canada have been working to help farmers in the Philippines improve their potato yields, both by selling them the seed and also by providing them knowledge transfer around better management practices on farm.
Senator M. Deacon: Thank you.
The Chair: Potatoes are a perfect segue to Senator Robinson. Senator Harder has agreed to give up his spot for you, so senator, please go ahead.
Senator Robinson: I’m not going to speak about potatoes. I could for a long time, but I won’t put you through that.
Assistant deputy minister, I wanted to go to your point. I think you had said that over the past five years, we have seen 15% growth, and I understood that to be durum, non-durum, soybeans and lentils, which is more than 89% of what our agricultural exports were to Africa. Those are really impressive numbers. I’m happy to see that. I’m looking at the volatility we have seen over those last five years, in pricing in particular. I’m wondering if that 15% represents dollars or volume. Maybe you could speak to what our market share is in Africa in those major commodities and what Canada could be looking at. The subsistence question is a valid question and a totally different one. I’m looking more as Canadian producers look to capture more international markets. I think you said $3.4 trillion is what this area represents? I’m just wondering where we might be looking to go with that. Are those numbers over the past five years volume- or price-driven?
Ms. Donohue: It’s a combination of the two in certain areas. As I mentioned in my opening statement, we do see an uptick in volume, specifically in the area of wheat. In other areas, it was driven more by value, pricing pressures and so forth. In terms of the broader context of where Africa fits for our agricultural exports, roughly, right now, Africa represents 3% of where we export to around the world. To maybe put that into a bit of perspective, 54% of what we export goes into the U.S., followed by 32% in Asia, and Europe represents 7%. When I say Europe, I’m including the U.K., not just the EU portion. There is 4% to Latin America and then 3% to Africa. I think it is encouraging to see that uptick of 15%. As I said, some of it is due to volume.
As you know, senator, particularly when it comes to commodities, the market will go where it can find the best price. I do think, particularly when you look at a product like wheat, we tend to produce a product with very certain high-calibre attributes around quality, and it tends to be a higher price. That puts us in a different competitive class, and sometimes there will be a demand elsewhere for the product.
As a final note, we are seeing a lot of interest in terms of livestock genetics, and that goes to the point of certain African countries looking to improve their livestock yields, and the genetics industry sees that as a potential opportunity. That’s why we’re putting some resources around trying to negotiate access to those products. I think that’s another element of growth.
The Chair: We have come to the end of this particular session. On behalf of the committee, I would like to thank, from Global Affairs Canada, Marcel Lebleu, Director General, West and Central Africa Bureau; Susan Steffen, Director General, Pan-Africa Bureau; and Apeksha Kumar, Director, Maghreb and Egypt; and from Agriculture and Agri-Food Canada, Kathleen Donohue, Assistant Deputy Minister of the International Affairs Branch. Thank you all for joining us and providing such a comprehensive overview of the issues related to commerce, trade and investment in Africa. It’s helping us, obviously, in our study.
Colleagues, for our next panel, we welcome, from Export and Development Canada, Joanne Tognarelli, Vice-President, Global Business Development; and Lorraine Audsley, Senior Vice-President and Chief Risk and Sustainability Officer.
[Translation]
We also welcome, by video conference, Stéphanie Émond, Vice-President and Chief Impact Officer, and Agathe Gouot, Senior Advisor to the Chief Investment Officer, from FinDev Canada.
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Welcome. We’re ready to hear your opening remarks, and these will be followed by questions from senators.
Joanne Tognarelli, Vice-President, Global Business Development, Export Development Canada: Good afternoon, Mr. Chair and members of the committee. Thank you for inviting us here today. We’re happy to contribute on the committee’s study on Canada’s engagement and interest in Africa.
For those who may be less familiar with EDC, we’re a Crown corporation that operates under a mandate to support and grow Canada’s export trade. EDC supports Canadian exporters and investors of all sizes and in all sectors of the economy through a suite of financing and insurance products that help mitigate the risks of international trade and help ensure financial capacity for growth. We also offer knowledge products such as webinars and digital content. Together, these offerings give Canadian companies the tools they need to reduce financial risk and get access to capital to enter into and invest in new markets with confidence and ultimately grow internationally.
Our strategy and approach put the pursuit of sustainable, responsible, progressive and inclusive trade at the centre of our business operations. We share a fundamental belief that good environmental, social and governance, or ESG, practices are key to our organization’s sustainability, to the long-term success of Canadian companies and to Canada’s international competitiveness and continued prosperity. Strong ESG practices mitigate risks, open doors to new opportunities, drive innovation, attract top talent and strengthen the social and economic fabric of our communities.
I’m looking forward to today’s discussion on the study. From our vantage point, we see the region as a source of important opportunities for Canadian trade. As a whole, Africa represents an integrated market of more than 1.3 billion people with combined GDP of $3.4 trillion U.S. The continent boasts significant deposits of metal and minerals, which are critical to develop battery technologies, electronics and other elements in the green economy. Africa is also an attractive export destination for finance and professional services, consumer goods and agricultural products.
That being said, trade growth in the region continues to be constrained. This is in part on account of weak infrastructure networks, low integration of some countries into global markets and financial infrastructure, as well as some political corruption and operational security issues in some countries. We do hope to see the continent benefit from the ambitious African Continental Free Trade Area pact, which will reduce barriers to trade. It should also be noted that many of the world’s major economies, including Europe, China and the United States, are doubling down on economic and political ties to Africa and at an intensifying pace.
With some notable exceptions, most African economies are dominated by the state, which makes support from export credit agencies such as EDC all the more relevant. EDC offers both risk mitigation through insurance solutions and buyer financing directly to these sovereign buyers to help Canadian companies compete with global peers for these opportunities. EDC can also help exporters understand the risks related to business in individual countries and select the best manner in which to mitigate these in order to grow their business successfully.
Recognizing the importance of this continent for Canadian trade, EDC opened its first permanent representative office in Johannesburg in 2015. This representation reports to London, where additional resources are assigned to Africa, noting that most of the global banks cover the continent from that location.
Again, we look forward to this discussion and the opportunity to discuss Canada’s engagement in Africa and EDC’s engagement in the continent.
The Chair: Thank you very much.
[Translation]
Ms. Émond, you have the floor.
Stéphanie Émond, Vice-President and Chief Impact Officer, FinDev Canada: Thank you, Mr. Chair. Good afternoon, and thank you for this invitation. We’re delighted to have this opportunity to present the role that FinDev Canada plays as a development finance institution. We support development through the private sector, offering financing, investment, blended finance and technical assistance solutions to promote sustainable and inclusive growth in emerging and developing countries contributing to the United Nations Sustainable Development Goals and Paris Agreement commitments.
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We were established to complement the range of tools that Canada has to address the significant development challenges that emerging markets face, with a particular focus on supporting the private sector and stimulating private investments, with the recognition that the public sector — both developing market governments and international donor countries — do not have the resources to address these challenges on their own. The scale is just too great.
Operating in Latin America, the Caribbean, Sub-Saharan Africa and, more recently, the Indo-Pacific region, we have a dual mandate to achieve both development impact and financial sustainability. In terms of development, we are guided by three impact goals: climate and nature action, gender equality and market development. In terms of financial sustainability, this means using our capital, yes, to take greater commercial risk than private sector investors, but with an eye towards return and our long-term viability.
We focus on three sectors: First, the financial industry, including banks, financial cooperatives, investment funds and other financial intermediaries that fuel local economic activity and enable us to reach end users that we would not have the capacity to reach directly — for example, microenterprises and small businesses; second, agribusiness, forestry and their value chains, with the objective of contributing to job creation, economic development and food security; and third, sustainable infrastructure, in particular investments in renewable energy, transport, water, technology, sustainable infrastructure, which are essential to building inclusive, connected, low-carbon and climate-resilient economies.
[Translation]
Since its inception in 2018, FinDev Canada has invested more than $1.3 billion with more than 40 clients. One-third of our commitments support climate finance, and two-thirds actively contribute to women’s economic empowerment.
Sub-Saharan Africa has always been one of our priority regions. It currently represents 40% of our portfolio, resulting in over $500 million in funding and investments with 15 clients.
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One example is Ecobank, which operates across 33 countries in Africa. Our financing is enabling them to lend on to small and medium enterprises across the region, with a focus to increase their support to women-owned businesses. Another example is ETG, Export Trading Group, an African-based agricultural conglomerate committed to elevating farmers’ livelihoods and bridging supply chain gaps. Our financing aims to support access to critical food supplies across Africa while supporting the company to advance sustainable and climate-resilient practices. Another example is our investment in Alitheia IDF, a first-time women-led fund in Africa that’s committed to investing in growth-stage companies.
We’re excited about the opportunity that Africa represents, both from a business perspective as well as for its tremendous development potential, and I’m pleased to be here today with my colleague Agathe Gouot to share with you more about our commitment to reducing the financing gap in Africa and how we can contribute to private sector development to help African economies become more prosperous, inclusive and resilient to the climate emergency.
Thank you very much.
The Chair: Thank you very much for your comments. We’ll move straight into the question round. The first question goes to the deputy chair of the committee, Senator Harder.
Senator Harder: Thank you for being here both virtually and actually.
I’d like to pick up on one of the points you raised, Ms. Tognarelli, and that is the risk profile in Africa. What’s the direction, what are the new risks that you’re seeing, or is there a risk mitigation that is advantageous to Africa?
You use the word “corruption.” Do you work with Transparency International on their monitoring of corruption? Do you see this as an increasing presence and, therefore, an obstacle to development, or are there mitigations taking place that we should be welcoming and furthering?
Ms. Tognarelli: Thank you, Mr. Chair.
From a credit risk perspective, the pandemic certainly had the effect of stalling some of the great growth that we were seeing prior to that event driving a certain amount of inflation, particularly in the food exports, which caused some distress with many governments by causing an increasingly social investment, the cost of food imports. We are seeing about 22 markets now with high-debt distress. We do see an increase in the financial risk.
Our approach tends to be responsive to where Canadian exports are going, though we are proactive in some markets where we see a very strong growth potential, Côte d’Ivoire and Senegal as examples.
It should be noted that, in 2024 and 2025, Africa is expected to be the second-highest growth region by GDP, so we are seeing an improvement on the economic front.
I may pass it off to Lorraine to speak to the corruption trends.
Lorraine Audsley, Senior Vice-President and Chief Risk and Sustainability Officer, Export Development Canada: Thank you.
Africa has ample, huge opportunity, 1.3 billion population, and it is slightly tempered by the risk profile. For example, from an environmental and social perspective, we rate the countries in Africa. We have 20 countries that are rated high from an environmental and social risk aspect. We also look at them from a financial crime perspective. Some of the aspects that we are looking at there are things like sanctions. There are nine countries with various sanctions. Another example we look at very carefully is the contract award process where there can be some influence, particularly by politically exposed persons, et cetera.
We have a team of experts that do due diligence on all of those fronts. From an environmental social perspective, our concern is often human rights; particularly we are talking about critical minerals. Often they are small mines, and in the small mines they have higher environmental risks, often concerns around things like child labour. We are very conscious of those risks. We do due diligence. We have policies and such around them. When transactions come in, as I say, we do a great deal of due diligence around them. I’m happy to talk a little bit more about that if you’d like some more detail.
Senator Harder: Thank you very much.
Senator Ravalia: Thank you to our witnesses.
I’d like to begin by asking Ms. Tognarelli the first question. To what extent, if at all, have you had to re-evaluate your strategy in service offering to Africa taking into account the creation of the African Continental Free Trade Area? Has that brought you new opportunities? Have you had to make modifications? Are there areas that you previously have not been in that may have opened doors?
Ms. Tognarelli: Speaking at this moment, Africa is within what I would call our core markets. Those are the markets in which we are seeking to be very responsive to Canadian companies who show an interest there as opposed to trying to draw them into the market, as we are doing, for example, with our Indo-Pacific Strategy, which aligns to the shareholder priorities.
The exception, however, is that we were piloting with Global Affairs Canada and Canadian Commercial Corporation, an all‑of-Canada very proactive approach in Côte d’Ivoire and, should this pilot be successful, we would look to expand it further. This is approaching the various ministries of the government on infrastructure projects, bringing to the table what EDC may bring in terms of financing and setting up a proactive matchmaking, if you will, with 12 Canadian companies who did express an interest in the market. Here we are looking to draw Canadian engineering, design and construction companies specifically into the market. There are six projects that are under advanced discussions. Based on how this pilot advances, we may look to extend it to further markets.
Senator Ravalia: To what extent do you use key performance indicators or metrics to evaluate the effectiveness of the service that you provide?
Ms. Tognarelli: EDC, at an enterprise level, definitely has a number of KPIs, or key performance indicators, that we use. We try to either directly or by proxy assess the impact on Canadian exports of our trade. We do a footprint analysis, which is essentially the performance in the various countries across the globe to do a frequent assessment of our footprint and the performance of each of our regional offices.
As an example, for the African region, in 2023, we had $1.4 billion of business facilitated, and this reflected generally demand from Canadian companies, and $1.2 billion of this was in the insurance space, so very responsive to exports and helping Canadian exporters mitigate their risk. With the rest, a large percentage was in guarantees for very small projects, so we see a lot of small- and mid-sized companies active in the region and using our support.
Senator Ravalia: Thank you.
Senator MacDonald: We have increasing competition in Africa. That’s become fairly obvious. China is buying up a lot of things and projecting a lot of influence. Russia is in there, as are the European Union and the Middle East. Has the EDC adapted strategies and its services to maintain our competitiveness in these markets, especially when Canada’s social agenda may not be shared by our competitors?
Ms. Tognarelli: Thank you.
In terms of how EDC has evolved in recent years, we try to lean on our risk appetite and ensure that we are constantly assessing our export credit agency peers to ensure that we are levelling the playing field.
In Africa in particular, with the extent of sovereign lending, this follows a level playing field of financial terms and conditions at the OECD, so we seek to leverage those to the fullest. The OECD recently underwent modernization, giving us the climate change sector understanding, and for projects that may meet these requirements, it would allow us to offer financing with tenures of up to 22 years.
Lorraine, you can complement this, if you wish. We do feel that ultimately engaging in business in a socially responsible manner does benefit Canadian companies as well. We do seek to apply all of our Canadian values in our assessment of the business and focus most proactively in those markets where these can be acceptable and mitigated.
Ms. Audsley: I would just add one comment. We would help Canadian companies that come to us and that are doing business on the African continent to review their compliance programs to make sure they are set up as well as they can be to understand the risks of doing business there — for example, supply chain or partners, and as I mentioned previously, contract awards and understanding the environmental impacts and risks in their supply chain of things like child labour and forced labour. Our Canadian exporters having good compliance programs helps them to be responsible players as they do trade around the world, and that’s something that we would help with from a risk management and advisory perspective.
I would add that if a company is not well prepared or not capable of managing the risks of going into a venture that’s perhaps high risk, there are instances where we decline to provide support if we don’t have partners there that are able to, as I say, manage the risks.
Senator MacDonald: I have a question for FinDev. In terms of significant success or substantial failure, can you identify perhaps one of each in your workings with sub-Saharan Africa? Where have you been disappointed when things have gone off the rails? Where have you been pleasantly surprised when things have gone well?
Ms. Émond: Thank you for your question, Senator MacDonald. What a great one.
Perhaps I’ll start by saying that it’s early days for us. We can speak more about successes in terms of our ability to build a solid, diversified portfolio of more than 15 transactions and clients in Africa that are aligned to driving our three impact goals. With this, even during the pandemic when travel was limited, I think that’s a key success on our books, our ability to develop business and show our value and that we can provide additional value to local private sector in a way that’s aligned to our responsible business conduct and in a way that meets our development impact objectives.
In terms of challenges or failures, again, it’s early days for us so there are no key failures to report yet. We are monitoring the portfolio quite actively, and we do see challenges in terms of transactions where the value is less than we anticipated, but they are still in our books so things can change. I would think that, for now, we don’t have any failures to report.
I hope that answers your questions. Agathe, I wonder if you have anything to add. I’d be happy to provide more details.
Senator MacDonald: Okay, thank you.
Senator M. Deacon: I will carry on with our virtual colleagues today from FinDev. My question concerns some of the social goals in your work. In looking at the website, I noted a graphic that shows where the money is going in each of your investments. One of the filters that you describe is two times aligned. I’d like to get more information on what this heading means concerning promoting gender equality and, more broadly, what sorts of qualifications FinDev looks for and works towards in promoting projects that work toward these two times aligned goals.
Ms. Émond: Thank you, senator, for this question.
Indeed, the 2X — by “two times,” I think you’re referring to “2X.” It’s actually an initiative that was launched at the G7 summit in Canada in 2018 as a way to challenge development finance institutions to mobilize more capital towards advancing women’s economic empowerment. FinDev Canada was launched in 2018, so part of the founding group of DFIs are behind this 2X initiative.
The 2X criterion was developed to identify ways that investors like ourselves and others can channel and direct their financing as a way to advance gender equality and women’s economic empowerment in particular through different ways, such as women’s representation at the board level or in senior management, supporting the growth of women as employees through quality jobs and supporting goods and services that are particularly designed and directed towards women to improve their economic opportunities or livelihoods. That is what the 2X criterion defines. We apply this lens to everything that we do. To date, over two thirds of our portfolio qualifies as a 2X investment, meaning it intentionally aims to drive and advance gender equality and women’s empowerment.
Senator M. Deacon: Thank you.
It is early days, as you’ve indicated. I’m trying to think about how you navigate your work through Africa. There are, as you know, lots of armed conflicts in Africa. I believe there are no less than maybe 34 or 35 non-international armed conflicts. Development assistance plays a huge role in fostering an environment conducive to peace, but for now, I’m wondering how your organization navigates through a sometimes chaotic situation. How do you ensure that FinDev commitments don’t directly support groups or individuals who are taking part in, encouraging or perpetuating the violent conflict we see on the continent?
Ms. Émond: Thank you for that.
We are active in a number of sub-Saharan African countries, particularly the ones that are open for business and conducive to receiving the support of investors like ourselves. Of course, as part of our due diligence process, even in the countries where we operate, we want to ensure that we know our customers and ensure that our financing is managed in a way that is really directed towards our development impact objectives.
We talked earlier about the financial crime risks that we are exposed to, just like EDC is. As part of our due diligence for all the transactions, our business integrity team conducts rigorous due diligence, including knowing your customer, to ensure that our flow of funds is really focused on the intended purposes.
Senator M. Deacon: Thank you.
[Translation]
Senator Gerba: I’d like to thank our witnesses for being here.
I’d like to come back to the issue of risk assessment. As Senator Macdonald mentioned earlier, there’s a lot of competition on the ground in Africa, because Africa is considered a developing continent, where competition is quite significant, particularly in the areas of trade and infrastructure, with a potential of 1.3 billion consumers and 2.5 billion in 2040, while one in four human beings will be in Africa.
Is your approach to risk assessment the same as that of your competitors? We know that China and the United States have their own approach. I know that France, too, has institutions that support businesses. Are your assessment criteria the same?
If not, how do you assess the risk for Canadian companies trading with Africa? Is it more severe? What are the criteria?
Ms. Tognarelli: Thank you for the question. On the credit side and in terms of the financing structure we offer, you mentioned the U.S. All OECD countries have fairly uniform criteria and conditions governing all their members. As far as that aspect is concerned, it’s quite uniform.
There are established rules between countries. Obviously, with China, it’s a completely different matter. However, it’s important to understand that we act as a credit and export company. There are also development banks and other forms of support from other countries. When it comes to export credit companies, in that sense, we are still governed by the same conditions.
In terms of social and environmental responsibilities, I’d say that we have fairly high standards of due diligence and values. We really respect the values of the Canadian government, which are sometimes even higher than some of our counterparts in European countries. Some countries are at the same level, but there is diversity between countries.
Senator Gerba: Is there a strategy to support and help our businesses benefit much more from these markets? I don’t know how much higher the risk is in South Africa compared to Mexico, Brazil, or any other country. Is there something that makes it very different? What’s the difference?
Ms. Tognarelli: That’s an excellent point.
When we look at risk, it’s not really by continent, but by country. Therefore, in Africa, there’s the full range of risks.
There are countries where we have a proactive strategy, such as Côte d’Ivoire, as I mentioned, and there are countries where we are closed to support. So there’s a whole range.
There are countries in Africa that are stronger or lower risk than Mexico, for instance, and there are countries that are higher risk.
As far as the continent is concerned, when we assess risk, it’s really country by country, because there’s a great diversity of practices.
Senator Gerba: You talked about an office that has been opened, which is great, but in your strategy, in your vision, do you foresee other offices in the medium or long term on the continent?
Ms. Tognarelli: Right now, in terms of capacity and resource management, the new representations we’re assessing would be in the Indo-Pacific.
As far as my team is concerned, we have a London-based resource adding support for West Africa, so we’ve divided the continent, but basically we have to make choices. In terms of the immediate plan, our only representations that are in the process of being assessed are in Indo-Pacific.
Our representations are always being reviewed, but that’s what’s happening today.
The Chair: Thank you.
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Senator Coyle: Thank you very much to all of our guests for being with us today.
I’m curious about FinDev. If I could hear from Ms. Émond, or whoever would like to speak, going back to the basics of your purpose in life as a development finance institution helping to develop the private sector in developing countries. In this case, we’re looking at Africa in particular and supporting sustainable development, helping them create jobs and growing the local private sector. All of that good stuff is what we want to see happen. It sounds like you’re having some good success. When you first assess opportunities for investment, how much weight do you give to those factors in terms of the contribution to the development goals that Canada has as compared to other things that you weigh in your decision making? Do you measure the impacts of those investments over time against the goals of growing the private sector, creating jobs, et cetera? Could you talk about that?
Ms. Émond: I would be happy to, Senator Coyle. Thank you for the great question.
FinDev Canada is a development finance institution, so our mandate is to use our financial tools and solutions to drive development impact. We want to see positive change through our financing and investment activities. Development impact is a core driver of decision-making.
What this means practically is that for every opportunity, at the prescreening stage, we have an impact officer that works as part of the deal team. A deal team is led by the investment officer, but it has a development impact officer, as well as environmental and social risk and business integrity. From the development impact perspective at the very initial stage, they are part of the deal team, and their role is to assess the potential positive impact that this transaction could have. For example, with a loan to a financial institution, is it aiming to increase access to finance for excluded populations like women or small- and medium- sized enterprises? Is it trying to help the bank un-lend for green activities, sustainable infrastructure or a particular project? Is it aiming to increase access to an essential service? As part of the pre-screening, the impact officer will do that initial assessment of the type of positive impact that the transaction can potentially drive.
Once it passes the prescreening stage to due diligence, we go into greater details. That’s where we engage with the potential clients to understand their business and understand their business plan. What are the areas of growth? What are their current practices? Are there opportunities to help them improve some practices, for example? Do they intend to increase jobs locally as a result of our financing? What’s their supply chain like? We try to understand at due diligence the positive change that will be a result of our financing activity. What are the data points that exist and they have that will enable us to monitor this and measure this over time? We use this as part of the investment recommendation memo as part of the impact proposition to really describe the theory of change and the results-based management approach to advanced development impact.
That’s the prescreening and due diligence, and then, of course, if the investment is approved and eventually closed, that impact team will also look at the data that is being reported as part of annual reviews and engage with the client on an annual basis to see if the transaction is on track, the key changes that are happening and any gaps to fill. We have a very robust impact management and measurement practices in line with the operating principles for impact management, to which we’re a signatory, and on an annual basis we disclose this on our website.
The Chair: I wanted to follow up on Senator Coyle’s question and then I have another one also for EDC.
With respect to FinDev, Madam Émond, I was a little involved in the establishment of FinDev a few years ago, and there were a lot of questions being asked. I appreciate the fact that you said it’s taken a while, obviously, to get going and it’s early days and everything. Have you picked up any best practices from institutions similar to yours in major donor countries?
Ms. Émond: Thank you, Mr. Chair.
Yes, indeed, it’s early days, but coming back on that success, I think we’re very proud of our portfolio of over a billion dollars in commitments. That is, of course, as a result of the strength of our team but also because of our close collaboration with peer development finance institutions — the European DFIs in particular, our U.S. colleagues, as well as some partnerships with multilateral development banks, IDB Invest, African Development Bank. We collaborate with them to build our portfolio and find investment opportunities that guests can share, but we also engage with them quite a bit to share best practices, practices in terms of impact management and measurement, for example, and practices in terms of managing environmental, social and human rights risks. Our approach is to really support our private sector clients to succeed and become more sustainable and inclusive at the same time.
The Chair: Thank you very much.
My other question is for Madam Tognarelli. Senator Harder asked at the outset about risk and risk assessments. In my experience, Canadian business has been very risk adverse, very content with the North American market and really not looking that much further, although a little bit more now in Asia with the CPTPP and CETA in Europe. Are you offering or can you think of any incentives for Canadian businesses to get more active in Africa?
Ms. Tognarelli: Thank you, Mr. Chair.
I agree with your observation. The vast majority of Canadian exports still go to the U.S., particularly for small- and mid-sized enterprises. Our approach is to seek to ensure that we help them to be as successful as possible in their chosen export destinations. One of the things that we’re exploring is to see how they can leverage global relationships as an entry point to new markets, so leveraging buyers in the U.S. and Europe to move into the Indo-Pacific, to move into Africa, partner with some of the larger Canadian companies. As well, we do try to bring as many knowledge products as we can to Canadian exporters to try to demystify markets beyond the United States. As you rightly pointed out, often Canadian companies do tend to stay close to home, so we do see an important part of our role as trying to draw them into further international markets.
The Chair: Thank you very much.
[Translation]
Senator Gerba: My question is for Ms. Émond from FinDev Canada.
According to a study by Roland Berger, Africa is the world champion for women entrepreneurs, with an entrepreneurship rate of 27%. However, according to the African Development Bank, their access to financing remains problematic. In fact, they account for only 0% to 5% of commercial bank portfolios. The financing gap for women-owned businesses in Africa is $42 billion.
Within FinDev Canada, what specific measures and programs are aimed at these women? You mentioned capacity building, but is there anything aimed directly at these women to give them better access to financing?
Ms. Émond: Thank you for your question, Senator Gerba.
Indeed, the challenge facing women entrepreneurs around the world, but in Africa in particular, is accessing the financing they need to run and grow their businesses. It’s a problem we feel very strongly about. That’s why, through our investments and financing, we’re going to try to support and limit this deficit and shortfall.
In concrete terms, how are these practices put into place? With financial institutions, commercial banks, for example. We’ll encourage them to direct our capital to increase the proportion of their portfolio that targets women entrepreneurs.
I spoke earlier about the 2X Challenge. Our 2X transactions with financial institutions will all have this objective of encouraging financial institutions to expand their services to women entrepreneurs.
We also offer technical assistance to help financial institutions understand the women’s market and develop appropriate products.
As part of our fund investments, we’ll also be taking an approach to support investment funds so that they understand and realize the potential of women-led and women-run businesses represent, not only for their impact potential, but also for their performance. Evidence shows that women entrepreneurs are very good clients of financial institutions and good managers. The returns are therefore attractive for investment funds.
It’s a goal we feel very strongly about.
Senator Gerba: Thank you.
Do you have any international practices, or are there other institutions like yours that we could learn from here in Canada?
Ms. Émond: That’s a very good question. Thank you, Madam Senator.
Integrating a gender equality lens into our analysis of investment opportunities is something that we’re incorporating through the 2X Challenge, and something our peers, development finance institutions, but also our private sector partners, are starting to integrate. Having a gender equality lens when making our investment decisions means studying, having the right data, and realizing the different potential that women‑led businesses represent, as opposed to businesses where there is less diversity.
The idea is to have a real capacity to integrate a diversity, equity and inclusion perspective into investment decisions.
[English]
The Chair: Thank you very much.
With that, we have come to the end of our question period. On behalf of the committee, I would like to thank Joanne Tognarelli, Vice-President, Global Business Development at Export Development Canada; Lorraine Audsley, Senior Vice-President and Chief Risk and Sustainability Officer; and, of course, joining us from Montreal, Stéphanie Émond, Vice-President and Chief Impact Officer; and Agathe Gouot, Senior Advisor to the Chief Investment Officer of FinDev Canada. Your comments have been very helpful to us as we continue our deliberations on this study.
Colleagues, tomorrow, we will meet in camera to discuss our plans for our study on Africa, and, indeed, how we can shape it. I want to remind you — take careful note of this — that we’re not meeting in this room. We’re going to meet in room W120 at 1 Wellington, across the street. This room is being used by the Speaker for a function tomorrow. Thank you very much.
(The committee adjourned.)