EIB steps up venture capital fund through boost Africa initiative

The European Investment Bank (EIB) has significantly ramped up its support for venture capital in sub-Saharan Africa through the Boost Africa initiative, a collaborative effort with the African Development Bank and additional backing for technical assistance through the German development agency, KFW. With an investment of €78 million from the EIB, this initiative has attracted an impressive €382 million in new funds aimed at nurturing the burgeoning private sector across the continent.

In an effort to bridge the venture capital gap and stimulate economic growth, the Boost Africa program aims to support first-generation venture capital funds focused on technology and tech-enabled sectors. The initiative is driven by EIB Global, the development arm of the EIB, and provides crucial financial backing to Africa’s venture capital fund managers and entrepreneurs. The bank ensures that nearly half of these managers are women, underlining the inclusive growth approach.

The essence of the initiative lies in its ability to provide patient capital, vital for fostering startups expected to have longer growth cycles typical of developing markets. By understanding the challenges posed by Africa’s fragmented markets, varying consumer spending power, and infrastructural shortfalls, the EIB strives to create a conducive business environment. “We look at key significant factors,” EIB’s spokesperson Andrea Clerici explains, “such as patient capital and support to local expertise, which help founders and entrepreneurs navigate complex markets.”

Boost Africa’s investment model is particularly innovative, providing a first loss junior tranche to emerging venture capital funds. This mechanism incentivizes further local and international investment by reducing the perceived risk associated with ventures in Africa. Hence, the program has successfully leveraged the initial EIB funding to mobilize an additional five times the seed amount into the participating funds.

Despite Africa housing 18% of the world’s population, the continent currently only garners about 2% of global venture capital investment. This discrepancy underscores the need for enhanced investment and continued international cooperation. Boost Africa is not only about financial input but also about strategic growth and knowledge sharing across the venture capital landscape. An in-person executive program engages over 40 leading venture capital fund managers from Africa in a week of peer learning and strategic dialogue, emphasizing skill development and exchange of insights on current challenges and opportunities.

The EIB’s long-standing commitment to Africa has seen investments exceeding €2.7 billion across 134 funds, resulting in amplified growth. This legacy and continuous investment mark the EIB’s dedication to nurturing sustainable economic progress. Boost Africa has already invested across vital sectors including ICT, healthcare, climate solutions, education, financial services, and manufacturing.

Looking ahead, the current deployment of Boost Africa funds signals confidence and progress. The EIB is actively exploring ways to enhance Boost Africa further, broadening its reach and deepening its impact across the continent. “I trust more than hope,” says Clerici, “that we will hear very soon good news regarding an enhanced version of Boost Africa, allowing us to attract more capital and develop further opportunities.”

Boost Africa’s impact is augmented by its focus on capacity building. Notably, €2 million was allocated for technical assistance to address the skills gap and empower fund managers and startups. Moreover, most fund founders have international educational backgrounds, and their return to Africa signifies a deep-seated commitment to leveraging global knowledge for local development.

As the EIB contemplates the future of the Boost Africa initiative, collaboration remains key. The synergistic efforts of local and international development banks embody the mutual objective of transforming Africa’s economic landscape through strategic investment in its most promising sectors.

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