Deutsche Investitions- und Entwicklungsgesellschaft mbH is supporting African small and medium-sized enterprises and start-ups to gain access to long-term financing more easily. It has committed EUR30mn to the AfricaGrow fund of funds, managed by Allianz Global Investors. KfW Development Bank, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), together with Allianz Global Investors, has set up this fund of funds that will invest into African private equity and venture capital funds.
The AfricaGrow Fund is designed as a fund of funds for promoting small and medium-sized enterprises (SMEs) and start-ups primarily in countries associated with the G20 Compact with Africa (CwA). The AfricaGrow Fund aims to have a catalytic effect on the emerging and dynamic SME and start-up ecosystem and thus promote jobs and income across the CwA countries.
David Weiss, lead investment manager for DEG’s investment in the fund, explains: “DEG specializes in mobilizing long-term financing in emerging and developing markets. The AfricaGrow fund of funds is an excellent opportunity to provide capital to SMEs and venture capital funds in Africa who experience a significant funding gap.”
The aim of the fund is to finance innovative SMEs and start-ups in reform-oriented African countries through local funds in order to promote sustainable economic and social development. For measuring this impact, the AfricaGrow fund will use DEG’s Development Effectiveness Rating. Guided by the Social Development Goals, this impact rating tool uses five categories to assess the development contributions of each investment, such as decent jobs, local income and community benefits.
The fund is a cooperation between public and private partners and it starts with initially EUR170mn. Apart from DEG’s EUR30mn, EUR85mn comes from the Federal Ministry for Economic Cooperation and Development, and EUR 55 to 70 million from Allianz companies.
“With a portfolio of 40 private equity funds in Africa and 5 local offices, DEG is one of the largest private equity investors in Africa and welcomes this opportunity to cooperate with Allianz and KfW in this milestone transaction” adds Carola Bose, DEG’s team Head for African Private Equity Funds and Equity.
The fund is designed to address the financing needs of SMEs across multiple industrial sectors and technology-based start-ups (e.g. FinTech, off-grid, AgTech, EdTech, HealthTech, mobility, e-commerce), especially those that pursue innovative business models (e.g. pay as you go) and have strong growth potential and a clear focus on exports, including cluster-based growth models.