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African venture capital (VC) funds are in for a bonanza. VC funds in at least 12 African states, will be able to tap up to €400-million in funding from a €1-billion Africa development investment fund set up by the German government.

This, according to German business publication Handelsblatt.

The newspaper reported in an article earlier this month that €400-million of a €1-billion Africa development investment fund announced by German Chancellor Angela Merkel in October last year will flow into the Africa Grow Fund managed by development bank KfW.

The fund, the newspaper pointed out, will work with “proven” pan-African regional and country funds in G20 Compact with Africa member states.

Of the €1-billion investment fund, €400-million has been allocated to KfW’s Africa Grow Fund

At least 12 African states form part of the G20 Compact with Africa initiative. They are Benin, Togo, Ghana, Ivory Coast, Burkina Faso, Guinea, Senegal, Morocco, Tunisia, Egypt, Ethiopia and Rwanda.

According to the same publication, a further €400-million of the €1-billion has been allocated for investments in German and European small business through the Africa Connect programme which offers loans of between €750 000 and €4-million.

It’s unclear where the remaining €200-million of the €1-billion will be allocated.

“Fund of funds”

The Africa Grow Fund, the article explained, is meant to be a “fund of funds” for African VC  funds, with the KfW providing a “first loss tranche” to encourage additional investors on behalf of the German Federal Ministry of Economic Co-operation and Development (BMZ).

In a statement earlier this month, the economic ministry explained that the development investment fund will consist of the Africa Connect Programme, Africa Grow Fund, as well as the Business Network of Africa.

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The network is meant to facilitate market entry of German small businesses and the expansion of businesses in African growth markets.

The ministry said KfW will invest in African VC and private equity funds so that they can support additional companies. This, the economic ministry said, will promote local financial market structures on the continent.

The German Investment Corporation (DEG) will also be involved in the Africa Grow Fund.

Earlier this month, Ventureburn reported the German ambassador to Ghana Christoph Retzlaff’s announcement that the German government had launched the €1-billion Africa fund (see this story).

At the time, Retzlaff said in a tweet, that the fund will support African startups and small businesses, as well as German and European companies.

Ventureburn, at the time, sought comment from the German embassy in Accra, but had yet to receive a response by time of publication.

The German economic ministry did not respond to repeated requests for comment from Ventureburn on the specifics of the Africa Grow Fund.

Credit: ventureburn.com