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 off-grid energy technologies and other critical sectors in African start-ups, from seed to growth stages.
This was contained in a statement obtained by EnergyDay through Olufemi Terry, Communication and External Relations Department, African Development Bank on Tuesday.
AfDB revealed that 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.
According to the statement, “Out 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).
“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.
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.
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 are located in the African region. Roughly another third of start-ups it invests in are in West Africa.
EnergyDay gathered that AfDB has co-joined with All On to set up the Nigeria Energy Access Fund (NEAF), a USD 50-60 million climate impact fund underwriting equity/quasi-equity investments in small- to medium-scale sustainable energy projects that have measurable, climate positive and energy access impact.
In particular, NEAF’s investment is focused on companies developing off-grid solar (OGS), green mini-grid, and small/medium-scale renewable IPP solutions – all of which have generally encountered significant obstacles to obtaining the requisite equity from local and foreign investors to scale-up despite the fact that they represent the most cost-effective and sustainable means to electrifying Nigeria’s enormous off-grid population.
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 AfDB’s investment revealed that it is aligning 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.
EnergyDay gathered that the Boost Africa, a collaboration between AfDB, 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 in Nigeria sub-Saharan Africa.