Investing in Young Businesses in Africa

• European Investment Bank
• European Bank for Reconstruction and Development (EBRD)
• Association of European Development Finance Institutions (EDFI)

Core African partners

• African Development Bank (AfDB)
• VC4A

Objectives

The initiative has 3 objectives that reflect the needs of businesses and entrepreneurs at different stages of development.

1. Support for very early-stage businesses and entrepreneurs needing the earliest rounds of financing (known as ‘pre-seed financing’).
2. Support for early-stage businesses and entrepreneurs needing early rounds of financing (known as ‘seed capital’ and ‘Series A’ or ‘Series B’ equity financing).
3. Support for the ‘entrepreneurship ecosystem’ - public and private organisations providing either finance or other forms of business support to early-stage companies and entrepreneurs. This support means:

• strengthening and connecting entrepreneurship ecosystems, so they also work for the smallest players – not just the bigger ones
• enabling partner countries to put in place regulations and policies that allow entrepreneurs and early-stage businesses to launch, consolidate and grow
• promoting an enabling entrepreneurship culture at all levels – including in schools, colleges, and universities, and in the media

The focus is on women and young people (18-35).

Investing in Young Businesses in Africa will contribute to sustainable growth and decent jobs.

Implementation

We’re focusing on 4 areas in which to put the initiative into practice.

Improving access to finance

Entrepreneurs across Africa consistently say that the biggest hurdle they face in starting or growing a business is difficulty in accessing finance. So new financing to support early-stage businesses and entrepreneurs will be available, in the form of

• guarantees, backed by the EFSD+, through which the EU shares the risks involved in investing. Development finance institutions incentivise local banks to provide extra financing to young businesses and entrepreneurs. They will also fund technical assistance to help those businesses take off
• blending projects, which combine EU grants with loans and other financing from public and private investors

Finding solutions to persistent issues

In addition, we’ve set up 3 working groups to

• identify the reasons why development finance institutions find it hard to invest in early-stage businesses in Africa, and devise ways to enable them to do so
• pinpoint the additional challenges which women entrepreneurs in Africa face, and possible solutions to overcome them
• design and oversee a new entrepreneurship support programme, IYBA SEED

Strengthening organisations that support entrepreneurs

A new €23 million, 8-year programme, IYBA SEED, is supporting the needs of entrepreneurs and early-stage businesses for the long term in Benin, Kenya, Senegal, South Africa and Togo.

In each country the programme will help to strengthen the networks, or ‘ecosystems’, of business incubators, accelerators, venture capital funds and microfinance institutions which support entrepreneurs and early-stage businesses. It also aims to create a culture of entrepreneurship, especially amongst women and young people.

Implementing the initiative at country level

The initiative has already been launched at country level in Kenya, Nigeria, Senegal and Togo and will soon launch in Comoros, Benin and South Africa. Activities include

• boosting dialogue between the public and private sectors
• scaling up innovative initiatives that support entrepreneurs

fostering closer collaboration between EU Member States, development finance institutions and other key actors

Initial results

An initial mapping exercise identified 180 programmes and projects which this Team Europe initiative encompasses, amounting to €4.6 billion.

One example is the €25 million region-wide programme, Women Entrepreneurship for Africa (WE4A).

This has offered 2,500 African women

• entrepreneurship training
• seed funding of USD 5,000 to start or grow their business
• access to an extensive alumni network

Another example is BeniBiz, a national programme in Benin.

In its first phase, which ended in August 2022, it enabled more than 5,500 entrepreneurs to increase their sales by over 130% on average in less than 12 months.

In its second phase, which will start in 2024, it is expected to reach

• over 10,000 people through direct support
• almost 7,000 through support for entrepreneurship organisations in Benin

Other partners

• African and European initiatives supporting early-stage businesses
• Micro, small and medium sized enterprises associations
• Business support organisations
• Impact investors and venture capital funds
• Business incubators and accelerators
• Non-profit organisations such as the Tony Elumelu Foundation and Women’s World Banking