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EU's new Africa fund aims to attract private investors to Sahel region

European International Cooperation and Development Commissioner-designate Neven Mimica of Croatia addresses the European Parliament's Committee on Development at the EU Parliament in Brussels September 29, 2014. REUTERS/Francois Lenoir

By Robin Emmott and Marilyn Haigh BRUSSELS (Reuters) - The European Union's new 44 billion euro (37.73 billion pounds) Africa fund aims to entice private investors to some of the world's poorest nations and slow mass migration to Europe, the EU's development chief Neven Mimica said. The fund, unveiled last week by European Commission President Jean-Claude Juncker, could be up and running by mid-2017, Mimica said, and is based on a similar, larger fund for Europe already operating. http://tmsnrt.rs/2d1w3iL It will rely mainly on private investors and development banks to fund selected commercial projects that might otherwise be considered too risky for funding by commercial lenders, Mimica told Reuters in an interview. "We would like to have new investments in primarily fragile, conflict-affected countries; risky markets where the investment would not come without such an investment scheme," he said. The fund's focus should be on the most fragile countries, particularly in the semi-arid Sahel region, where climate change, poverty and natural disasters are driving millions of people north to Europe's shores. "We are tackling the root causes of migration, because poverty is the root cause of migration," said Mimica. The EU is keen to stem migration after more than 1.3 million people arrived in a mass influx last year, straining relations between the bloc's 28 members and compounding an identity crisis caused by Britain voting to leave the union. While overall arrival numbers have fallen partly due to a deal between the EU and Turkey under which Ankara prevents migrants from embarking for Europe from its shores, numbers arriving from Africa to Italy have stayed level. Some 130,000 migrants reached Italy from Africa so far this year, similar to last year's figures, according to the United Nations. Since the EU considers most African migrants to be looking for work, not fleeing war or oppression, this makes it less likely they will be granted asylum. Mimica cited countries such as Niger and Mali as a priority for the fund, as well as Rwanda. He is set to travel to Mali next week to discuss the fund with officials there. In a bid to attract private companies, the bloc will guarantee any commercial projects that fail in the early stages. Later, EU governments may also come on board as guarantors, which EU officials hope could as much as double the investment in the fund. NOT ENOUGH The European Union, from where more than half of the world's development aid comes every year, making it the largest donor, donates some 20 billion euros annually to Africa. At a summit in Malta last year, EU and African leaders also agreed a 1.8 billion euro trust fund for the region made up of public money. That is separate from the new 44 billion euro initiative, which is focused on attracting private investors. Of the private capital in Africa, less than 10 percent goes to so-called fragile states. In such countries, the cost of setting up a business is three times higher than in the rest of Africa, according to EU data. Angola, Chad, Ethiopia, Nigeria and Rwanda were all fast-growing economies over the past decade, but they remain classed by the World Bank as fragile and more likely for their populations to emigrate because of lack of clean water. "In Rwanda, I saw nicely arranged terraces for wheat, beans, coffee, tea. But the next step is missing ... the processing of the coffee beans, of the tea leaves," Mimica said, adding that global contributions to development aid still fall short. "We have to engage private sector and domestic resources. "They are much more capable of bridging the gap from billions to trillions," he said. (Writing by Robin Emmott; Editing by Raissa Kasolowsky)