The Board of Directors of the African Development Bank (AfDB) has approved an equity investment of 9.8 million euros to support venture capital investments in African start-ups, from seed to completion. growth phase.
Of the capital investment, €7 million will come from the resources of the African Development Bank, while the additional €2.8 million will be provided by the European Union (EU) through a partnership with the Organization of African, Caribbean and Pacific States (OACPS).
The investment will help Cathay-AfricInvest Innovation Fund achieve its goal of raising €110 million to invest in more than 20 early-stage companies in Sub-Saharan Africa (SSA).
The Innovation Fund focuses on financial inclusion (fintech and insurance tech), retail and logistics platforms targeting online/mobile consumers, health technologies, pay-as-you-go and off-grid energy technologies.
This was revealed by AfDB in a press release issued yesterday.
More recently, the Innovation Fund has widened its scope to include start-ups that are exploiting new digital opportunities created as a result of the Covid-19 pandemic, or that have strong potential to help combat the coronavirus. The Mauritius-based fund is jointly sponsored by AfricInvest Capital Partners and Cathay Innovation SAS.
The AfDB’s Director of Financial Sector Development, Stefan Nalletamby, 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. This signals the importance placed on high-growth technology-based entrepreneurs on the continent and the key role of AfricInvest and Cathay Innovation in supporting this key business segment in Africa to achieve growth, transformation and integration of Africa.
In its current pipeline, more than 40% of projects cover more than one African region. About another third of the start-ups it invests in are in West Africa. A quarter of the beneficiary start-ups belong to the health sector.
Other investors include Germany’s KfW/Allianz GI’s AfricaGrow, public investment bank BPI and development finance institution Proparco, both French, and Swiss impact investor Obviam.
The Bank’s investment should accelerate the creation of a new class of successful African entrepreneurs who will serve as role models for young innovators. It will also support youth and women-led start-ups and improve access and inclusion to financial and “real sector” services and goods through appropriate technology and innovation.
Although venture capitalists invested $2 billion in African technology in 2019, a 73% increase over the previous year, funding from this source for innovative start-ups remains very low in Africa. Furthermore, very few venture capital funds focused on early-stage tech start-ups have successfully closed seed rounds.
The AfDB investment aligns with the objectives of the Boost Africa program to strengthen entrepreneurship and innovation in Africa, create new quality jobs for young Africans and contribute to the development of an entrepreneurial ecosystem effective in Africa.
Boost Africa, a collaboration between the AfDB, the EU, the Organization of African, Caribbean and Pacific States (OACPS) and the European Investment Bank (EIB), provides financial support to investment funds which target innovative start-ups in sub-Saharan Africa.