Tech

AfDB approves €10m investment funding for African tech start-ups -from seed to growth stages

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.

Of the equity investment, €7 million will be sourced from the African Development Bank’s resources while the additional €2.8 million will be 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 (SSA). 

The Innovation Fund focuses on financial inclusion (financial tech and insurance tech), retail and logistics platforms targeting online/mobile consumers, healthcare technologies, pay-as-you-go ecosystem and off-grid energy technologies. 

This was disclosed by AfDB in a press statement issued yesterday.

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.

AfDB’s Director for 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. 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 per cent of projects cover more than one African region. Roughly another third of the 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 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.

AfDB 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 AfDB, EU, 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.

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