By Zayamu Hassan
The Board of Directors of the African Development Bank (AfDB), has approved an equity investment of €9.8 million to support venture capital investments in African start-ups, from seed to growth stages.
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.
In a statement, the bank disclosed that €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 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 pau as you go, off-grid energy technologies.
According to the African Development Bank’s Director for Financial Sector Development, Stefan Nalletamby: “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.”
The statement further noted that 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.
Although venture capital firms invested $2 billion in African tech in 2019, a 73 per cent 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 AfDB’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.
