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While it is still far from achieving a penetration similar to the American continent, Europe or Asia, venture capital investment is experiencing strong and continuous growth In Africa. For example, in 2017, some USD 560m were raised by over 120 African start-ups – a 53% increase compared to 2016 and a new record for Africa!

Based on this observation, we felt it was essential to understand the issues and mechanisms which govern venture capital in Africa. What are the components of an ecosystem conducive to the development of start-ups? How to explain why the continent is lagging somewhat in this sector? But also, how to understand the role of development finance institutions, including AFD Group, in this field?

To answer these questions, we have naturally given a voice to experts in these questions, via 12 feature articles, key figures and case studies. For example, Andrea Traversone, from the Amadeus Capital Partners fund, outlines the opportunities for venture capital in Africa. You will also have the pleasure of reading passionate entrepreneurs, such as Karim Sy, the well-known founder of the Jokkolabs network, or Mike Quinn and Grant Brooke, who tell us about their experience at the head of the start-ups Zoona and Twiga Foods.
country / region: Africa
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    Financing start-ups to build tomorrow's african economies

    This issue of Proparco's Private Sector and Development magazine is devoted to venture capital and the world of start-ups in Africa. It looks at a growing sector that set a new investment record in 2017.

    With some USD 560m raised by over 120 African start-ups in the new technologies sector, 2017 broke a new record for venture capital investments on the continent. This marked increase compared to 2016 (+53%) not only gives us a glimpse of the huge potential for investors in Africa, it also allows us to see venture capital as an essential and credible driver to meet the development challenges on the continent.

    Africa is a land with many opportunities: investment funds and international financial institutions have made no mistake about this. Despite the fact that physical and digital infrastructure is still underdeveloped and that there is a certain volatility on markets, the increase in its population (+25% between 2007 and 2016), combined with its constantly rising gross domestic product (GDP), brings the promise of a bright future. Countries such as Kenya, South Africa and Nigeria are already considered as hubs conducive to the emergence of start-ups. How could we fail to mention here the M-Pesa mobile money platform in Kenya, a real success story for the entire continent? While there has been a big boom in African e-commerce and fintech start-ups and the related venture capital investment, other sectors are also attracting more and more attention from investors (i.e., connecting the most remote populations to solar power, e-health, e-education, etc.). Consequently, can we see start-ups as new tools for development in Africa? We think so! It has been proved that start-ups can serve as building blocks for job creation and new economic models, and that they can meet needs which are still served little or not at all. However, entrepreneurship, which is often seen as an alternative to unemployment and low wages, can create false vocations in light of the media and operational success of certain start-ups.

    Devoting an issue of Private Sector & Development to venture capital and the world of start-ups in Africa means looking at a booming market, understanding the main components and discussing the potential negative externalities which can stem from this. Consequently, we wanted to give a voice to experts and avid players, who tell us about their experience. When reading the articles in this issue, we see that the common thread is that development finance institutions (DFIs), which include Proparco, undoubtedly have a crucial role to play. For Agence Française de Développement (AFD) Group, this involves a complementarity of operations. Thanks to the work conducted upstream by AFD to establish an ecosystem conducive to the emergence of start-ups (through the creation of incubators, accelerators, etc.), Proparco, for its part, can actively participate in financing these future “tech” champions in Africa
    published on
    2018
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