The International Finance Corporation (IFC) is set to make an equity investment worth Sh3.14 billion in Partech Africa Fund II, a tech-focused venture capital fund that has a presence in Nairobi.
The IFC said in disclosures on the investment that it is looking at up to 20 percent of the equity in the fund from its investment, and will commit an additional Sh1.88 billion to the asset manager for future joint investments.
“IFC’s proposed investment in Partech Africa Fund is an equity investment of up to €25 million (Sh3.14 billion), not to exceed 20 percent of the total Fund commitment,” said the IFC.
“In addition, IFC has proposed a separate co-investment envelope of up to €15 million (Sh1.88 billion) on a delegated authority basis, to facilitate IFC’s ability to participate in potential future co-investment opportunities alongside the Fund.”
In addition to the IFC, Dutch development finance institution FMO announced in April that it was also considering investing €25 million (Sh3.1 billion) in the Partech Africa Fund II.
The fund is looking to make early-stage investments of between €1 million (Sh125.4 million) and €15 million (Sh1.88 billion) in African tech startups dealing with supply chain services, mobile and online consumer services, fintech, and mobility.
These sectors, alongside agribusiness and healthcare, have been attracting significant private equity and venture capital funding in Kenya and other African countries.
A survey by Partech on venture capital investments in the African tech sector indicated that the continent’s start-ups raised a total of $5.2 billion (Sh608 billion) in equity funding last year, up from $1.43 billion (Sh167 billion) in 2020.
Venture capital and private equity funds have found Africa a rich ground for investing in startups in previously underserved and fast-growing sectors of the economy in the past decade.
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They are attracted by high returns —although the risk is high— with family offices and financial institutions in the west providing them with capital.
Such funds provide African start-ups and SMEs with much-needed capital that they would otherwise struggle to get from formal financial institutions such as banks and the capital markets, while also providing technical expertise that the small firms need in order to grow their operations.