Startups

Trump’s DFC investment play in African private funds and startups so far

September 15, 2020 · 4 min read
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On January 2, 2020, the Trump administration launched a new agency: the U.S. International Development Finance Corporation (DFC).

Acting as the US’ development bank, the agency was set to deepen the US’ foreign policy and national security interests in emerging markets. And also help businesses expand and foster growth in these markets.

Similarly, the DFC which is a merger of the Overseas Private Investment Corporation (OPIC) — US’ former development finance institution — and the Development Credit Authority (DCA), is said to bolster the US support for private-sector projects in low and lower-to-middle income countries.

“DFC has three objectives. First, to invest in highly impactful projects in developing countries. Second, to advance U.S. foreign policy. And third, to continue our consistent track record of generating returns for the American taxpayer,” Adam Boehler, DFC CEO, said at the time of launch.

Backed with a $60 billion investment cap, twice as much as OPIC’s budget, the agency’s aim is to advance a private sector-led model providing financing, insurance, or other financial tools where the ones from commercial sources are unavailable or insufficient.

Injecting capital into investment firms

Six months after its launch, DFC made a series of investments into projects of established investment funds and organisations across Africa, Latin America, the Indo-Pacific, and other emerging markets.

The size of this investment, which is one of the agency’s largest tranches disbursed at once, was $1 billion.

Private firms to have received some investment from DFC

According to the DFC, the projects centred on strengthening health systems, bolstering food security, as well as expanding access to financial services for women, small businesses, and other underserved groups.

SPE Capital, a Mauritian-based private equity fund, received $25 million to invest in businesses across North and sub-Saharan Africa. These businesses will be in industries such as healthcare, education, and logistics.

Also, AfricInvest Fund, an investment fund targeted at sub-Saharan and North African markets received a $30m investment. Businesses offering healthcare and financial services are the firm’s focus.

For a smaller pie of Africa, US-based WorldBusiness Capital got a $14.6 million loan guaranty to expand its lending to SMEs in Nigeria through Sterling Bank, a commercial bank in the country.

Similarly, DFC also gave One Acre Fund a $7 million guaranty to help smallholder farmers, most of which are women, access credit in Kenya.

And within East Africa, iungo capital, an impact investment firm, received a $4 million loan to give SMEs access to equity and debt financing.

Startups are getting a piece too

In July, the agency launched its Africa Investment Advisor Program, thereby establishing a regional team in the continent. According to the DFC, the team will help advance investments and expand the agency’s portfolio in the region.

And in September, the DFC invested in three separate African-focused organisations from its $3.6 billion quarterly approved financing.

To provide financing for SMEs and microfinance institutions in Burkina Faso, Sierra Leone, Guinea, and Mali, Stitching Cordaid received a $14.75 million loan portfolio guaranty from the agency.

The agency also took interest in Achill Island Investments, a table grape farm in Namibia, by providing $36 million in political risk insurance for the company’s growth.

Similarly, Zambia Seed Company, a seed company in East Africa, got $32 million in political risk insurance for expansion.

African companies DFC has invested in

Startups were not left out.

Before announcing its $1 billion tranche investment in June, the DFC had already given a $5 million loan to Kenyan startup, Twiga Foods in March.

Founded in 2014 by Peter Njonjo and Grant Brooke, the agritech startup has helped streamline the fragmented food distribution network in Kenya.

By packaging, storing, and distributing fresh produce it purchases from remote farms, Twiga Foods has been able to connect over 17,000 farmers with more than 8,000 produce vendors.

Before receiving the loan from the DFC, Twiga Foods had raised over $60 million. This includes its $30 million Series B raise last year led by Goldman Sachs.

The agency says its investment in the company will “empower smallholder farmers and urban produce vendors—the majority of whom are women.”

As part of its $3.6 billion quarterly announced financing this September, other startups to have received some type of investment from the DFC include 4G Capital, Copia Global, and Kasha.

For 4G Capital, the neobank headquartered in Mauritius, it received a $2.9 million loan guaranty to provide microloans to SMEs in Kenya. Before this, the seven-year-old company had raised $4 million in total including its $2 million debt facility from Ceniarth LLC in January.

Copia Global, on the other hand, received a $5 million equity investment.

The eCommerce platform founded by Jonathan Lewis and Tracey Turner helps deliver essential goods like food and personal care products to low and middle-income consumers in rural Kenya.

Prior to raising this money from the DFC, the company had raised $46 million since launching in 2012. 

Similar to Copia Global, Kasha is an eCommerce platform founded by Amanda Arch and Joanna Bichsel in 2016. But it’s targeted at women in urban and rural areas across Kenya and Rwanda as Kasha delivers critical health and personal care products that prove vital to their wellbeing.

It received a $1 million equity investment from DFC in addition to the same amount it got from Finnish Fund for Industrial Cooperation (Finnfund) in April.

While these investments from the DFC seem like goodwill from the US to the continent, a lot of experts see them as the country’s attempt to thwart China’s influence in Africa.

If that’s the case, Africa’s private investment firms, organisations, and startups stand to gain a lot as the US and China seek to outperform each other.

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Tage Kene-Okafor

Tage Kene-Okafor

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Endlessly amused by technology. @ulonnaya

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