AFRICA – African start-up in the agriculture and ecommerce sectors are set to benefit from the newly launched US$225m platform by the International Finance Corporation (IFC), aimed to strengthen venture capital ecosystems and invest in early-stage companies addressing development challenges through technological innovations.
The platform will be backed by an additional us$50 million from the Blended Finance Facility of the International Development Association’s Private Sector Window, which helps de-risk investments in low-income countries.
In addition, IFC will mobilize capital from other development institutions and the private sector to support entrepreneurs and tech companies in those countries.
Its launch aims to strengthen the regions’ nascent venture capital markets, which have demonstrated early growth potential but face challenging global economic conditions.
To this end, IFC will make equity or equity-like investments in tech startups and help them grow into scalable ventures that can attract mainstream equity and debt financing.
The international financial institution will also use the platform to collaborate with other teams in the World Bank Group to create and bolster venture capital ecosystems through regulatory reforms, sector analyses, and other tools.
In addition, the platform will focus on investments in low-income and fragile countries and help generate a pipeline of credible early-stage companies.
Makhtar Diop, IFC’s Managing Director said, “Support for entrepreneurship and digital transformation is essential to economic growth, job creation, and resilience.
“IFC’s Venture Capital Platform will help tech companies and entrepreneurs expand during a time of capital shortage, creating scalable investment opportunities and backing countries’ efforts to build transformative tech ecosystems.
“We want to help develop homegrown innovative solutions that are not only relevant to emerging countries but can also be exported to the rest of the world.”
Other than the agriculture and ecommerce industries, players in the climate, health care, education, and other sectors are also set to benefit from the platform that will build a digital economy in not only Africa but also Middle East, Central Asia, and Pakistan.
In 2021, these regions collectively received less than 2% of US$643 billion of global venture capital funding.
Access to capital has been exacerbated by a slowdown in global venture capital investment, the COVID-19 pandemic, the rise in food and supply chain costs, higher interest rates, and currency depreciation.
In addition, tech ecosystems are nascent or even non-existent outside of more established markets such as Egypt, Kenya, Nigeria, Pakistan, Senegal, and South Africa.
The growth potential, however, is enormous across these regions. In Africa, for example, the digital economy has the potential to contribute US$712 billion to the continent’s gross domestic product (GDP) by 2050.
In the Middle East and North Africa, technology could boost GDP by 40%, or US$1.6 trillion, and create 1.5 million manufacturing jobs in the next 30 years.
In Pakistan, the digital transformation can unlock up to US$59.7 billion in annual economic value by 2030, equivalent to about 19% of the country’s GDP.
The platform will build on IFC’s investments in companies like Twiga Foods, a Kenyan-based technology food distribution platform; TradeDepot, an e-commerce startup connecting international brands with African retailers; and Toters, a leading on-demand delivery platform in Lebanon and Iraq.