The European Union (EU) has announced a $30 million equity investment in Seedstars Africa Ventures’ Fund I, a venture capital fund that supports African digital technology companies.
The fund, which is managed by Seedstars, a global organization that invests and supports entrepreneurs in emerging markets, aims to grow companies that create skilled jobs, improve products and services, and address basic needs such as education, healthcare, and utilities.
The EU investment is backed by $20 million from the ACP Trust Fund and $10 million from the Boost Africa program, both of which are initiatives to foster sustainable development and inclusive growth in Africa.
The EU’s Vice-President for Promoting the European Way of Life, Margaritis Schinas, said the digital sector is a driver of growth and innovation and that small and medium-sized enterprises, together with start-ups, are fuelling the digital economy.
“Kenyan and African digital economies have tremendous potential and helping entrepreneurs access finance can be a game changer to foster quality growth and jobs, a common priority for both the EU and its African partners,” he said.
The EU’s investment follows the launch of the Global Gateway, a European strategy to boost smart, clean, and secure links in digital, energy, and transport sectors, and to strengthen health, education, and research systems across the world.
The EU also supports the Digital Transformation Strategy for Africa, endorsed by the African Union in 2019, which aims to harness digital technologies and innovation to transform African society and economy, generate inclusive economic growth, stimulate job creation, and break the digital divide.
The EU’s move is in line with the growing interest and investment in Africa’s digital economy, which could contribute nearly $180 billion to the region’s growth by 2025, according to the World Economic Forum.
In 2020, Google announced a $1 billion investment to support digital transformation across Africa, which includes laying a new subsea cable between Europe and Africa that will multiply the continent’s digital network capacity by 20, leading to an estimated 1.7 million new jobs by 2025.
However, despite the tremendous growth potential, Africa still faces significant challenges in joining the global knowledge-based digital economy, such as low internet penetration, lack of digital skills, unfavorable business environment, and limited access to finance.
According to the EU-AU Digital Economy Task Force, a multi-stakeholder group that presented a report with concrete policy recommendations in 2019, Africa needs to accelerate the achievement of universal access to affordable broadband, guarantee essential skills for all, improve the business environment and facilitate access to finance and business support services, and adopt digital services such as e-government, e-education, e-health, e-commerce, and fintech.
Seedstars Africa Ventures’ Fund I is designed to address some of these challenges by investing in Seed+ and Series A rounds, with an ability to follow on significantly, effectively bridging the pools of capital available.
The fund also provides strong operational support that is critically lacking in the regional venture capital space and leverages the resources of the Seedstars acceleration platform.
The fund, which is targeting to have an investment portfolio of between $80 million and $100 million, has already completed four transactions, including in Beacon Power Services, Poa! Internet, Shamba Pride, and Bizao, each of which is building an innovative solution to tackle some of the continent’s most pressing needs.
For example, Lagos-based Beacon Power Services has developed proprietary grid management software and data solutions for Africa’s power industry, reducing grid energy losses by an average of 25% per utility and saving 1.7 million tons of carbon dioxide in 2023.
The fund’s investment manager, Charlie Graham-Brown, said the fund is looking for “the next generation of African tech entrepreneurs who are building scalable businesses that solve real problems and have the potential to make a lasting impact”.
The EU’s Vice-President for the European Investment Bank, Ambroise Fayolle, said encouraging and promoting innovation and digitalization is crucial to developing strong and sustainable economies in Africa.
He added that the EU’s investment in Seedstars Africa Ventures’ Fund I “will help African entrepreneurs to unlock their full potential and shape the continent’s future”.
Source: Engineering News
