France Pledges USD 2.8 Bn For African Startups And SMEs

As the world focuses on Silicon Valley as the sole hub of innovation, investors are eyeing and making investments in African startups. There was an impressive increase in total startup funding received for African startups in 2018. According to a Weetracker report, 30 startups made it to the 5 million club of fund raising across the continent. In total, African startups raised a record $725.6 million across 458 deals and the funding is expected to further increase in 2019.

The African startup ecosystem has yet again received a major boost following a USD 2.8 bn pledge from French President Emmanuel Macron. The funds committed will be channeled to provide financial and technical support for startups and SMEs in Africa.

10,000 African startups and SMEs will benefit from the entrepreneurship drive by visiting French President Emmanuel Macron. Macron is on a three-day official tour of the continent and is currently in Kenya to boost trade ties.

‘Choose Africa’ initiative was launched by Macron to fulfill the commitment he made to support the African entrepreneurial and innovation impetus. Following his pledge, all the instruments of the AFD Group (Agence Française de Développement) and its private sector financing-arm, Proparco will be mobilised to support the initiative.

The Choose Africa campaign attempts to evoke innovative and entrepreneurial ideas among African youth and help create home-grown jobs and wealth. Unemployment in Africa has become a major challenge the youth especially have had to grapple with for a long time.

It is almost impossible for Small businesses to access bank loans largely due to the lack of collateral and insufficient documents to support loan application. This lack of financial track record is the main constraint faced by small-scale businesses in accessing financing. This is despite the fact that these small businesses provide jobs for over 80 per cent of the population.

Out of the USD 2.8 bn to be allocated, the AFD will offer businesses USD 1.1 bn through equity investment and a further USD 1.7 bn through credit lines at local banks. Under the equity investment model, for instance, government-owned French electric utility firm EDF Group, has committed to invest in Kenyan solar irrigation firm SunCulture through convertible bonds.

The French President has been keen on investing in Africa and he has over time shown effort to boost France’s global presence. He has also focused on building mature relationships that display Africa’s growth and potential for true independence. In May last year, the French president announced USD 76 Mn for African startups.

While committing the USD 76 Mn funds, Macron said “African startups have energy, but the big providers of development aid and financiers have not adapted to that. We ourselves are too slow, too hesitant.”

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