German Chancellor Angela Merkel

German Chancellor Angela Merkel on Tuesday pledged a billion euros to incite businesses to invest in Africa, as she urged the private sector to take a closer look at the continent’s “huge” economic opportunities.

The creation of the fund announced during an investment forum in Berlin is aimed at getting small and medium-sized companies to grow their presence in Africa.

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For Merkel, economic development requires not just government support but also private investment.

“This is modern development policy,” she told the forum.

The new fund would go towards offering loan and equity financing to European and German SMEs seeking to invest in Africa, equity financing for African SMEs as well as the establishment of a network offering advice to potential investors.

Stressing Africa’s “huge potential for growth”, Merkel noted that “for many years we have been very focused on Asia. I think that in future we should turn our sights more on Africa.”

The gathering, attended by leaders from around a dozen African countries, is part of Merkel’s so-called “Compact with Africa” initiative launched last year during Germany’s stint as G20 president.

“It is of great interest to Europeans that African states have good economic prospects,” Merkel told the audience, which included Rwandan President Paul Kagame and South Africa’s Cyril Ramaphosa.