Examining the Afreximbank US$25 mil startup fund: Not nearly enough a share of US$650 mil available

Afreximbank has reiterated its US$25 million startup fund at the Second SME Summit in Addis Ababa, Ethiopia. Now, before we get carried away this is a drop in the ocean in comparison to the flows of startup funding across the continent of Africa. The existence of the fund, which was termed "The Fund for Export Development in Africa (FEDA)" was made public in September 2022 when it announced a US$670 million fund that will be funnelled across four fund strategies:

US$270 Million will be earmarked for FEDA Direct Equity Fund I, which will provide equity and quasi-equity financing to businesses aligned with FEDA’s mandate.
US$250 million is allocated to the Strategic Initiatives Fund, a proprietary fund established by Afreximbank to implement landmark and high-impact greenfield investments in sectors critical to the growth of intra-African trade and value-added export development across the African Continent.
US$125 million involves the implementation of a private credit fund, Africa Credit Opportunities Fund, L.P. (ACOF) jointly sponsored by FEDA and Gateway Partners Group
US$25 million Venture Fund to provide equity, quasi-equity and venture debt financing to high-impact early-stage ventures across Africa.

Afreximbank's plan to deliver the fund

The "Instruments of Intervention" as the Africa Export and Import Bank calls it are going to be structured by way of the 4 "I"s:

Investment:
- Soft Loans enable export-ready beneficiaries to fulfil orders from international buyers.
- Convertible Grants that target digital startups with the propensity for scaling across borders
- Venture Fund as a patient equity-linked capital to enable youth enterprises to scale.
Innovation
- Incubation and Acceleration activities for youth enterprises in target sectors
- Periodic Innovation challenges organized by developmental partners e.g. UNECA, AUC, IFC etc
Integration
- Integrating youth engagement components into the design of Bank projects and into the Bank's digital ecosystem.
- Support the emergence of digital trade enabling infrastructures e.g. internet connectivity
Inclusion

The problem with the Afreximbank FEDA startup fund

Figures from 2022 showed that startups on the continent raised US$3 billion which is a fraction of what Afreximbank has on offer for the moment. Of the 633 startups funded in 2022, they employed 34,201 individuals, with an average of about 54 people per startup according to a report by Disrupt Africa. This means, at least to me, if there is more money that is coming in from the continent to help startups scale it would help the reported 9.53% unemployment rate across the continent.

It should be mentioned that the number quoted above is something of generalisation and might not have factored in some key metrics happening in each of the individual countries recorded. However, it is what we have at the moment and it gives a general picture of the state of affairs in Africa.