Funding businesses and start-ups across Africa

Innovative businesses and start-ups across Africa are poised to benefit from increased access to risk capital, according to the head of the European Investment Bank regional office in Nairobi, Edward Tyson. This heightened access to capital is expected to fuel the growth of companies, leading to the creation of skilled jobs and enhancements in products and services for both businesses and customers in the region. Starz Africa Ventures is a new fund that is currently in the process of raising funds to invest in innovation and digitalization, particularly focusing on young start-ups across Africa. The fund aims to raise between $80 and $100 million, with a recent announcement of a commitment of $30 million from the European Investment Bank. Tyson emphasized the challenges faced by businesses in Africa, noting that many do not celebrate their second anniversary due to a lack of funding. The $30 million investment from the European Investment Bank is expected to have a significant impact on businesses and start-ups across Africa. The EIB has a history of supporting funds on the continent, having invested in 124 funds totaling 2.5 billion euros over the years. These funds have backed 1500 companies across Africa, demonstrating the crucial role of supporting start-ups and innovative companies in fostering a thriving private sector. Tyson highlighted the importance of equity funding for young companies, particularly in situations where traditional banking loans are not accessible due to a lack of collateral or revenue. In addressing the risks associated with funding young businesses with no collateral, Tyson acknowledged the high-risk nature of venture capital funds. These funds typically invest in a large number of companies, with an expectation that some may fail while others succeed significantly. The goal is for the successful companies to outweigh the losses incurred by the failures, ultimately resulting in a positive financial return for investors. To mitigate risks, the European Investment Bank provides a junior tranche that absorbs initial losses and de-risks the fund for other investors, potentially attracting more private sector participation. Looking ahead, the EIB maintains a generalist approach to supporting various sectors, with a particular interest in digitalization, innovation, and technology in agriculture. The focus is on fast-growing sectors that have the potential to create high-value jobs across Africa. Tyson emphasized the importance of job creation and supporting dynamic entrepreneurs in driving economic growth on the continent. The European Investment Bank aims to support the entire African continent through its funding initiatives, with investments in diverse regions and sectors. While some countries like Kenya, Nigeria, Egypt, and South Africa may be more developed, the EIB remains committed to supporting emerging markets across Africa. The institution has invested in 124 funds across the continent, with a focus on expanding its reach to benefit entrepreneurs and start-ups in various African nations. The global equity investment by the EIB, backed by the European Union through the ACP Trust Fund and the Boost Africa program, reflects a long-term commitment to supporting fund managers and entrepreneurs in Africa. Looking ahead to 2024, the EIB plans to launch a follow-up program to Boost Africa, with a budget of over 150 million euros. This new program aims to continue backing fund managers and start-up companies across Africa, signaling a sustained effort to drive economic growth and innovation in the region.