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Financing start-ups to build tomorrow's African economies

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Africa is a land with many opportunities: investment funds and international financial institutions have made no mistake about this. Despite the fact that physical and digital infrastructure is still underdeveloped and that there is a certain volatility on markets, the increase in its population (+25% between 2007 and 2016), combined with its constantly rising gross domestic product (GDP), brings the promise of a bright future. Countries such as Kenya, South Africa and Nigeria are already considered as hubs conducive to the emergence of start-ups. How could we fail to mention here the M-Pesa mobile money platform in Kenya, a real success story for the entire continent? While there has been a big boom in African e-commerce and fintech start-ups and the related venture capital investment, other sectors are also attracting more and more attention from investors (i.e., connecting the most remote populations to solar power, e-health, e-education, etc.).

 

Consequently, can we see start-ups as new tools for development in Africa? We think so! It has been proved that start-ups can serve as building blocks for job creation and new economic models, and that they can meet needs which are still served little or not at all. However, entrepreneurship, which is often seen as an alternative to unemployment and low wages, can create false vocations in light of the media and operational success of certain start-ups.

 

Devoting an issue of Private Sector & Development to venture capital and the world of start-ups in Africa means looking at a booming market, understanding the main components and discussing the potential negative externalities which can stem from this. Consequently, we wanted to give a voice to experts and avid players, who tell us about their experience. When reading the articles in this issue, we see that the common thread is that development finance institutions (DFIs), which include Proparco, undoubtedly have a crucial role to play. For Agence Franaise de Developpement (AFD) Group, this involves a complementarity of operations. Thanks to the work conducted upstream by AFD to establish an ecosystem conducive to the emergence of start-ups (through the creation of incubators, accelerators, etc.), Proparco, for its part, can actively participate in financing these future “tech” champions in Africa.

 

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