African Development Bank to Inject €9.8 Million to Promote African Start-Ups
African Development Bank to Inject €9.8 Million
The African Development Bank’s Board of Directors has approved a €9.8 million equity investment to promote venture capital investments in African start-ups from the seed to the development stages. The African Development Bank will contribute €7 million of the equity investment from its own funds; the remaining €2.8 million comes from the European Union (EU) in collaboration with the Organization of African, Caribbean, and Pacific States (OACPS). With the investment, Cathay-AfricInvest Innovation Fund will be able to invest in over 20 early-stage businesses across sub-Saharan Africa, helping it to reach its goal of raising €110 million.
The Innovation Fund focuses on pay-as-you-go, off-grid energy solutions, retail and logistics platforms aimed at online and mobile users, financial inclusion (financial tech and insurance tech), and healthcare technology. The Innovation Fund has more recently broadened its focus to include start-ups that are taking advantage of the new digital opportunities brought about by the Covid-19 pandemic or that have a strong potential to aid in the coronavirus eradication effort. AfricInvest Capital Partners and Cathay Innovation SAS jointly sponsor the Fund, which has its headquarters in Mauritius.
“The Bank’s clearance is another milestone in the implementation of the Boost Africa Program and its partnership with the EU, OACPS, and the European Investment Bank,” said Stefan Nalletamby, the African Development Bank’s director for financial sector development. It conveys the value placed on tech-enabled, high-growth entrepreneurs on the continent and highlights AfricInvest and Cathay Innovation’s crucial role in assisting this important business sector in Africa to meet the continent’s goals for growth, transformation, and integration. More than 40% of the initiatives in its current pipeline span multiple African regions. It invests in around a third more start-ups in West Africa. The health care industry accounts for one-fourth of investee start-ups. Other investors include the German KfW/Allianz GI’s AfricaGrow, the French public investment banks BPI and Proparco, as well as the Swiss impact investor Obviam.
The Bank’s funding is anticipated to hasten the emergence of a new generation of prosperous African businesspeople who will act as role models for upcoming innovators. Through suitable technology and innovation, it will also assist start-ups founded by young people and women and enhance access to and inclusion in the “real sector” of financial services and goods. Despite a 73 percent increase in investment to $2 billion in 2019 from the prior year, venture capital funding for innovative start-ups in Africa is still very low. Furthermore, relatively few venture capital companies that target early-stage tech start-ups have closed rounds. The African Development Bank‘s investment supports the Boost Africa program’s objectives to foster innovation and entrepreneurship across Africa, provide young Africans with high-quality jobs, and help the continent build an effective entrepreneurial environment.
The investment funds that target early-stage innovative businesses across sub-Saharan Africa receive financial support from Boost Africa, a partnership between the African Development Bank, the European Union, the Organization of African Caribbean and Pacific States (OACPS), and the European Investment Bank (EIB). African Development Bank to Inject €9.8 Million
