The African Development Bank (AfDB) is playing a pivotal role in fostering the growth of African startups through its investments as a limited partner (LP) in various venture capital and private equity funds. A recent analysis of the AfDB’s venture capital portfolio, gleaned from its most recent accounts, reveals a diverse range of investments, with some funds showing promising growth, while others face challenges and declining valuations.
Newcomers Show Promise
The Africa GoGreen Fund, a recent addition to the AfDB’s venture capital portfolio, launched in 2021 with $5.4 million in callable capital from the AfDB. While still in its early stages, the fund’s current carrying value of $1.8 million suggests a focus on early-stage investments that have yet to fully mature. The Africa Go Green Fund recently signed a USD 5.5 million loan with cleantech startup Bboxx to support the rollout of renewable energy and clean cooking systems across Africa. Callable capital refers to the amount of capital that investors have committed to provide to a fund upon request.
Growth and Stability in Established Funds
Several established funds in the AfDB’s portfolio have demonstrated significant growth and stability. The Alitheia IDF Fund, for instance, saw its carrying value increase from $4.2 million in 2022 to $5.1 million in 2023, indicating successful investments and positive performance. Similarly, VEROD experienced substantial growth, with its carrying value surging from $4.2 million in 2022 to $7.5 million in 2023. In the context of investment funds, carrying value reflects the current valuation of the investments held by the fund.
The Arch African Renewable Power Fund, a long-standing player in the AfDB’s portfolio, has maintained a high carrying value, reflecting stable and potentially lucrative investments in the renewable energy sector.
Challenges and Declines
Not all investments have fared as well. The Catalyst Fund, which the AfDB invested in in 2010, saw its carrying value decrease significantly from $1.1 million in 2022 to $563,000 in 2023. This decline could be attributed to underperforming investments or strategic divestments.
The Cathay Africinvest Innovation Fund, despite having $3.1 million in callable capital, experienced a sharp drop in carrying value from $2 million in 2022 to a mere $308,000 in 2023. This suggests that either investments have not yet matured or substantial write-downs have occurred. The Fund recently lost over $2.8 million which it invested in South African mobility startup, WhereIsMyTransport.
The TIDE AFRICA LP FUND also faced a decline in carrying value, dropping from $11.9 million in 2022 to $8.6 million in 2023. This could be indicative of a decline in the performance of its investments or market value adjustments.
| Fund Name | Year of Investment | Callable Capital ($) | Carrying Value 2023 ($) | Carrying Value 2022 ($) |
|---|---|---|---|---|
| Africa GoGreen Fund | 2023 | 5,456,000 | 1,818,000 | – |
| Alitheia IDF Fund | 2019 | 3,275,000 | 5,168,000 | 4,243,000 |
| Arch African Renewable Power Fund LP (ARPF) | 2010 | 8,347,000 | 9,733,000 | 8,710,000 |
| Azur Innovation Fund | 2020 | – | 778,000 | 510,000 |
| Catalyst Fund (CATALYST) | 2010 | 5,000 | 563,000 | 1,101,000 |
| Cathay Africinvest Innovation Fund LLC | 2022 | 3,154,000 | 308,000 | 2,028,000 |
| I & P Afrique Entrepreneurs | 2012 | 403,000 | 2,568,000 | 2,943,000 |
| I & P AFRIQUE ENTREPRENEURS | 2020 | 1,991,000 | 2,947,000 | 2,304,000 |
| Janngo Start Up Fund Senior | 2022 | 1,779,000 | 2,771,000 | 263,000 |
| TIDE AFRICA LP FUND | 2017 | – | 8,683,000 | 11,914,000 |
| VEROD | 2019 | 2,937,000 | 7,512,000 | 4,289,000 |
A Diverse and Dynamic Portfolio
The AfDB’s venture capital portfolio reflects the dynamic nature of startup investments. While some funds have flourished, others have faced setbacks. The bank’s commitment to supporting diverse sectors, including renewable energy, innovation, and entrepreneurship, underscores its crucial role in fostering economic development in Africa.
“Africa is experiencing rapid mobile penetration. This provides huge opportunity to the development of startups and small and medium scale enterprises. But there is a scarce risk capital to venture capital funds targeting early stage businesses…equity investment will leverage innovations to leapfrog technologies and harness key opportunities that have the potential to scale across Africa,” said Stefan Nalletamby, the Bank’s Director for Financial Sector Development, recently.
Overall, the AfDB’s investments have contributed to the growth and development of African startups, providing much-needed capital and support. However, the variability in fund performance highlights the inherent risks and challenges associated with venture capital and private equity investments.