France Pledges $2.84B To Support African Innovation. What’s In It For France?

Written by Peter Pedroncelli

French President Emmanuel Macron announced a program called Choose Africa during his March visit to Africa, pledging $2.84 billion to support 10,000 companies by 2022.

The funds will support entrepreneurship and innovation across Africa, and the program will be coordinated by the French Development Agency and its subsidiary Proparco, according to Nairametrics.

It’s not charity. France will make money off its African investments in the form of interest from loans and equity ownership in startups.

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The fund is targeting innovative startups and small- and medium-sized businesses.

France is aiming to profit from small- and medium-sized African businesses. These are the businesses that typically form the economic backbone of industrialized countries across Europe and North America, according to the U.S. Department of Housing and Urban Development.

The same is true of one of Africa’s most developed economies. More than 90 percent of the formal South African economy is made up of small- and medium-sized businesses, which contribute 60 percent of all jobs, according to Sowetanlive.

African innovation
France’s President Emmanuel Macron shakes hands with Kenya’s President Uhuru Kenyatta in Nairobi. Photo – AP – Ben Curtis

France will benefit from the sizeable investment by charging interest on loans. Around $1.1 billion of the fund will go towards equity investment in promising startups and small businesses, according to Innov8tiv.

The remaining $1.7 billion or so will be used to fund loans to Africans, providing access to credit for African businesses through public and private money-lending institutions.

The interest rates that these lenders will charge has not been made public, but France will profit from these loans to entrepreneurs.

Supporting African innovation

France will also own equity in the tech companies it decides to fund.

One of the potential equity investments, for example, has seen government-owned French electric utility firm EDF Group, committing to invest an undisclosed amount in Kenyan solar irrigation firm SunCulture through convertible bonds, according to Weetracker.

France plans to support 10,000 companies in the next three years through the Choose Africa program, with the French president announcing the fund during a three-day visit to Africa.

Macron’s visit included stops in Djibouti, Ethiopia and Kenya, according to Quartz.

Elected in 2017, Macron has been an advocate for startup culture and entrepreneurship in France and is now pushing support for the African tech ecosystem.

Macron has made several visits to Africa in the past few years. He visited Burkina Faso, Ghana and Ivory Coast in November 2017 and Tunisia in February 2018. These trips underscore the importance of Africa in his foreign policy, according to News24.

In 2018 Macron announced the launch of Digital Africa, a French government-backed initiative and $76 million fund to support African startups through investments, according to Aptantech.

Digital Africa aims to promote France’s Aix-Marseille region as an innovation gateway between Africa and Europe.

Digital Africa invests $35,000 to $59,000 in African entrepreneurs and African startups via the French Development Agency, according to Techpoint. Proparco, the agency’s subsidiary, provides funding and support to businesses and financial institutions in emerging markets across Africa, Asia, Latin America and the Middle-East. It leverages private-sector money.

As part of Digital Africa, incubators and innovation hubs from the Aix-Marseille region of France have pledged support for African startups willing to develop their activities in Europe in the hopes of attracting businesses with high-growth potential, according to Techmoran.