Focus on Africa

A key implementation instrument of the Compact with Africa initiative is the AfricaGrow Fund. Through this umbrella fund, KfW, together with DEG and the Allianz Group, promotes African SMEs and start-ups with financing and advice. This fund completed its fundraising in 2020 and reached its maximum volume of EUR 200 million. KfW Development Bank has provided EUR 100 million as a fiduciary investment and EUR 15 million for advisory services and training.

AfricaGrow aims to finance 150 innovative small and medium-sized enterprises (SMEs) and start-ups in reform-oriented African countries via local funds by 2030 in order to promote sustainable, economic and social development. The investments will create around 140,000 new jobs by 2030. When designing the fund, great importance was attached to ensuring that the investments pursue clear sustainability goals. Regular and careful monitoring is intended to ensure a measurable positive social and/or economic impact in the form of income security and the creation of decent jobs, for example in the areas of education, energy and financial services.

AfricaGrow (allianzgi.com)

As part of the BMZ's Special Initiative “Decent Work for a Just Transition” (formerly the Special Initiative “Training and Employment”), KfW Development Bank established the FC facility “Investments for Employment” (IFE) in the form of a German GmbH (limited liability company). Through ideas competitions in the six reform partnership countries as well as Egypt and Rwanda, IFE provides grants to promote investments that contribute to the creation and improvement of jobs.

IFE has already launched 28 rounds of competitions in the partner countries. The last regional call for proposals in June 2023 attracted 500 applications from private companies, non-profit organisations and public partners. In a multi-stage selection process, 28 investment projects have been selected so far, creating 37,000 new jobs and leveraging EUR 142 million in private capital. Many more investment projects are in the selection process. When selecting projects, particular attention is paid to ensuring that jobs are created equally for women and men and that young job seekers find employment.

IFE Facility

Ongoing instability, increasing extremism, a lack of economic prospects, poor access to education and employment as well as basic services such as water and electricity - these are the many challenges facing the Sahel countries of Mauritania, Mali, Niger, Burkina Faso and Chad. This alliance is supported by the Sahel Alliance, which was launched in 2017 and includes the United Nations, the African Development Bank, the World Bank, the EU, France, Germany and other European countries. With substantial pledges for poverty reduction, agriculture and infrastructure development, the donors are attempting to stabilise the situation in the fragile region and avert a humanitarian crisis. The consequences of climate change are further destabilising the region.

In order to adequately underpin the importance of the Sahel Alliance, the German Minister for Economic Cooperation and Development, Svenja Schultze, took over the chairmanship of the Sahel Alliance in July 2023.

The members of the Sahel Alliance have decided on four guiding principles: Targeting their actions on priority sectors, accountability between partners on common objectives, new innovative and more flexible forms of action and special engagement in vulnerable and fragile areas.

Priority sectors are: "Education and youth employment", "Agriculture, rural development, food security", "Energy and climate", "Governance", "Decentralisation and basic services" and "Internal security". The goals to be achieved are defined, measured and shared by all partners. To accelerate their implementation and effectiveness, the projects adopt new forms of action through innovative, more flexible financing methods and a diversification of the actors implementing them (NGOs, local authorities, private sector).

In June 2021, KfW launched the "G5 Sahel Facility", a new financing instrument for the five Sahel countries. Initially, the facility - a German foundation - will be endowed with funds totalling EUR 50 million by the German Federal Ministry for Economic Cooperation and Development (BMZ). This offers the donors of the Sahel Alliance the opportunity to co-finance projects in the region via a joint instrument. France is already on board as the first co-financier.

Projects are being implemented in the areas of municipal infrastructure, training and income-generating measures. Each project financed by the facility focuses on cross-sectoral territorial studies and conflict dynamics, dialogue with the community and consultations with national authorities.

Alliance Sahel

Turning a good idea into a successful start-up requires equity, venture or risk capital. In Africa in particular, the market for this is still in its infancy. The total financing gap for small and medium-sized enterprises in Africa - including start-ups - is estimated at over USD 300 billion. Investors are often only prepared to invest in established companies. Start-ups and young companies often fall by the wayside. KfW's participation in Partech Africa Fund I, a venture capital fund active in Africa, on behalf of the German Federal Government has closed this gap to some extent. Launched in 2017, the fund has raised almost EUR 125 million from public and private investors, providing venture capital to over 15 companies in 9 different African countries. The fund's clients include successful technology companies that are making a valuable contribution to the digitalisation process in their countries.

Impact funds – social commitment with returns