Germany’s New USD 1 Bn Africa Fund Focusing On SMEs

By  |  June 6, 2019

November 2018, German Chancellor Angela Merkel, at the G20 Compact with Africa Conference held in Berlin, pledged € 1 Bn (USD 1.1 Bn) to support African businesses and other Small and Medium-sized Enterprises investing in Africa.

The fund, which represented a fundamental shift in Germany’s development policy, was expected to provide further development stimulus via the improvement of structural conditions for private investment in Africa.

June 4, German Ambassador to Ghana, Christoph Retzlaff, tweeted that the German government has finally pushed the live button on the massive fund.

In collaboration with the International Monetary Fund, the African Development Bank, the World Bank and reform-minded African heads of state, the USD 1 Bn facility looks to foster increased private sector participation in the continent.

Per previous disclosures, the fund which is part of the European country’s G20 Compact for Africa initiative, is intended to support follow-on investments of no less than USD 2 Bn from German SMEs towards Africa.

During the meeting in Berlin last year, Merkel stressed Africa’s “huge potential for growth,” and noted that: “For many years we have been very focused on Asia. I think that in future we should turn our sights more on Africa. It is of great interest to Europeans that African states have good economic prospects”.

While Kenya, Nigeria, and South Africa are yet to join the financial initiative, at least 12 African states form part of the initiative. They are Benin, Togo, Ghana, Ivory Coast, Burkina Faso, Guinea, Senegal, Morocco, Tunisia, Egypt, Ethiopia, and Rwanda.

When the investments would kick off and which startup verticals the fund will target are not yet known, but the facility has scaling, competition, development, and business growth written all over it.

The sizes of individual investments are also yet to be revealed, but the fund will offer loan and equity financing to European and German SMEs seeking to invest in Africa, equity financing for African SMEs as well as the establishment of a network offering advice to potential investors.

Ghana, Tunisia, and Ivory Coast have together already received USD 414 Mn in financial assistance under the “Compact with Africa” initiative, mainly in the form of low-interest loans.

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