The Board of Directors of the African Development Bank (www.AfDB.org) has approved an equity investment of €9.8 million to support venture capital investments in African start-ups, from seed to growth stages.
Of the equity investment, €7 million will
be sourced from the African Development Bank’s own resources; the additional
€2.8 million represents funds provided by the European Union (EU) through a
partnership with the Organisation of African Caribbean and Pacific States
(OACPS).
The investment will help Cathay-AfricInvest
Innovation Fund meet its target of securing €110m to invest in over 20
early-stage ventures across sub-Saharan Africa. The Innovation Fund focuses on
financial inclusion (financial tech and insurance tech), retail and logistics
platforms targeting online and mobile consumers, healthcare technologies, and
pay as you go, off-grid energy technologies.
More recently, the Innovation Fund has
expanded its focus to include start-ups that are harnessing new digital
opportunities created as a result of the Covid-19 pandemic, or with high
potential to help fight the coronavirus. The Mauritius-based Fund is jointly
sponsored by AfricInvest Capital Partners and Cathay Innovation SAS.
Stefan Nalletamby, the African Development
Bank’s Director for financial sector development, said: “The Bank’s approval is
another milestone in the implementation of the Boost Africa Program and its
partnership with the EU, OACPS and the European Investment Bank. It signals the
importance given to tech-enabled high growth entrepreneurs on the continent and
the key role of AfricInvest and Cathay Innovation in supporting this key
business segment in Africa to achieve Africa’s growth, transformation and
integration objectives.”
In its current pipeline, over 40% of
projects cover more than one African region. Roughly another third of start-ups
it invests in are in West Africa. A quarter of investee start-ups are in the
health care sector.
Other investors include German KfW/Allianz
GI’s AfricaGrow, public investment bank BPI and development finance institution
Proparco, both of France, and Swiss impact investor Obviam.
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.
Boost Africa, a collaboration between the
African Development Bank, the European Union, the Organisation of African
Caribbean and Pacific States (OACPS) and the European Investment Bank (EIB),
provides financial support to investment funds that target early-stage
innovative enterprises across sub-Saharan Africa.