The African Development Bank’s (AfDB) Board of Directors has approved a €9.8 million equity investment to support venture capital investments in African entrepreneurs at all stages of their development.
The African Development Bank (AfDB) will provide €7 million to the equity fund from its own assets, while the European Union (EU) will contribute €2.8 million in partnership with the Organization of African, California, and Pacific States (OACPS).
The funds will be used to help Cathay-AfricInvest Innovation Fund meet its goal of raising €110 million to invest in over 20 early-stage businesses in Sub-Saharan Africa.
The Innovation Fund focuses on financial inclusion (financial technology and insurance technology), logistics and retail systems for mobile and internet users, pay-as-you-go, healthcare innovations, and off-grid energy solutions.
The Innovation Fund has recently broadened its scope to include start-ups that are capitalizing on the new digital opportunities presented by the Covid-19 epidemic, or that have a great potential to help in the coronavirus fight. AfricInvest Capital Partners and Cathay Innovation SAS are co-sponsors of the Mauritius-based Fund.
“The Bank’s clearance signals another key step forward in the integration of the Boost Africa Program and its partnership with the EU, OACPS, and the European Investment Bank,” said AfDB Director for Financial Sector Development Stefan Nalletamby.
“It illustrates the importance given to Africa’s tech-enabled rising entrepreneurs, as well as the significant role played by AfricInvest and Cathay Innovation in aiding this important business segment in attaining Africa’s growth, reform, and integration aspirations.”
Over 40% of the initiatives in the company’s current pipeline span multiple African regions. A third of the start-ups in which it invests are in West Africa. The healthcare industry accounts for one-quarter of all shareholder start-ups.
Among the other investors are AfricaGrow of Germany’s KfW/Allianz GI, Swiss impact investor Obviam, France’s public investment bank BPI, and development financing organization Proparco.
The Bank’s investment is expected to accelerate the creation of a new class of successful African entrepreneurs that will serve as a model to younger innovators. It will also support youth and women-led start-ups and increase access and inclusion to financial and ‘real sector’ services and goods through appropriate technology and innovation.
Although venture capital firms invested $2 billion in African tech in 2019, a 73% increase over the previous year, funding from this source for innovative start-ups remains very low in Africa. In addition very few venture capital funds focusing on early-stage tech start-ups have successfully closed rounds.
The African Development Bank’s investment aligns with the Boost Africa program goals to enhance entrepreneurship and innovation across Africa, create new and quality jobs for young Africans, and contribute to developing an efficient entrepreneurial ecosystem in Africa.
