Africa Needs More Venture Capital And Partnerships Not Aid: The Case of Catapult - Inclusion Africa

On the 22nd of February, I received information of a competition with a 7-hour deadline. I decided to give it a shot, so I set a timer and began filling out the application while keeping an eye on the stopwatch. I provided all of the needed information one hour before the application deadline. After ten days, I received an email from the Catapult – Inclusion Africa team informing me that eMaisha Pay had been selected for the Catapult – Inclusion Africa Dubai 2022 Edition organized by The Luxembourg House of Financial Technology and several partner organizations, and that the organizers wanted to know if I needed a visa to travel to Dubai. Coincidentally, I had intended to visit Dubai for some activities at the end of March, so my Visa was still valid.

I arrived in Dubai on March 18th, and the program began on March 20th, with an introduction to the program and the Luxembourg financial environment, which was extremely impressive for a small country with a small population to develop itself as a financial hub in Europe. On the 23rd of March, final pitch competitions were held, with eMaisha Pay being named winner of the Catapult – Inclusion Africa Dubai 2022 Edition, following a three-day bootcamp featuring business mentorship and coaching from investors, entrepreneurs, and prominent industry experts.

I found myself profoundly contemplating on what all of this meant for Africa and its 1.3 billion people while on the way back to Kampala. Political instability, civil wars, military coups, malnutrition, epidemics, corruption, poverty, and hunger have dominated the African narrative in mainstream media for more than 60 years since independence. To use Prime Minister Tony Blair's phraseology, the plight of Africa had indeed become a scar on the world's conscience. Despite this, young Africans, many of whom were born in the last two decades of the twentieth century, were working hard to push the boundaries of technology in order to rethink what is possible and shape a new narrative for Africa and its people.

Listening to the nine founders pitch their creative business concepts and convey their tales to the world boosted my confidence and optimism that Africa can contribute something to the world and that a better new narrative, one of a continent on the move, may emerge. When I interacted with these entrepreneurs, I sensed their enthusiasm and optimism, and I was inspired by their belief in the power of their solutions to change the twenty-first century into an African century. In my mind, I was thinking, "These are the beacons of hope for Africa's 1.3 billion residents; the fate of Africa rests on their shoulders."

Supporting these entrepreneurs is the most important thing anyone can do for Africa, because their success results in the creation of millions of jobs, both directly and indirectly, and the lifting of hundreds of millions of people out of poverty. However, if they fail, it will mean that millions of farmers will be unable to insure their crops, protecting themselves against devastating losses due to droughts, and will be unable to invest in mechanization through tailored loans because eAgro will no longer exist; it will also mean that millions of market women across the continent will be unable to expand their businesses in order to support their children's education and healthcare because MamaMoni will no longer exist. This just demonstrates that in Africa, innovation is about more than just what's popular and cool; it's about solving real-life threatening problems and improving the lives of millions of people.

Despite the crucial role that entrepreneurs and startups play in Africa's economic transformation, they operate in extraordinarily challenging and uncertain conditions, with all odds stacked against them. In this region of the world, finding the proper mentorship, a platform to communicate your story, and raising venture capital to scale is exceedingly difficult. The constant pessimism presented by mainstream media has harmed the continent's image, and because capital is a coward, it has always seen Africa as a high-risk region. According to Partech, only $5.2 billion of the $643 billion in global venture financing in 2021 went to African entrepreneurs, representing only 0.8% of overall venture capital for a region with 17% of the world's population. Of course, the venture capital community is becoming more interested in Africa, with more investors from around the world writing larger checks for African startups, as evidenced by a 263% increase in venture capital funding from $1.43 billion in 2020 to $5.2 billion in 2021, the highest in the world, ahead of Latin America with 212% and Europe with 157%, according to Partech and Pitchbook. Despite these amazing developments, Africa still maintains a small fraction of global venture funding, preventing many potential African unicorns from ever seeing the light of day.

When you compare it to worldwide foreign aid, however, you'll notice an interesting phenomena. According to the World Bank, $30 billion of the total $161 billion in foreign aid went to Africa in 2020, accounting for 18.6% of total worldwide foreign aid compared to 0.8% of total global venture capital. Consider the Democratic Republic of the Congo, which received $1.05 billion in humanitarian aid in 2020 but only $4.6 million in venture capital.

Foreign aid has unquestionably benefited many African countries in their post-war recovery and in coping with many of the continent's humanitarian issues since independence, but it has not resulted in long-term economic transformation. It has more of a pain relieving effect than a curative effect. To take off and claim the twenty-first century, Africa requires more venture capital than foreign aid, which leads me to believe that entrepreneurs and startups, not donors, are Africa's greatest and final hope for true economic and social revival.

And the Luxembourg government recognized this when it launched the Catapult: Inclusion Africa under the Luxembourg House of Financial Technology (LHoFT), an initiative that helps African financial technology entrepreneurs build and scale their businesses by providing a platform for them to share their vision and network with investors, mentors, and financial institutions in Luxembourg and the European Union. The LHoFT believes that if entrepreneurs are given a platform to express their vision, access to investors, and the necessary mentorship to develop their creative ideas into repeatable, scalable, and successful business models, they can transform the continent through inclusive financing. Most of the time, all an entrepreneur needs is a platform to communicate their concept with possible partners, investors, and mentors, and that is exactly what LHoFT is delivering to entrepreneurs disrupting the financial space in Africa with Catapult: Inclusion Africa.

The LHoFT experience can be utilized as a model for development partners and funders in the West. Consider what would happen if half of all development money, or $15 billion, went directly to African startups in all sectors of the African economy. This can take the shape of equity, convertible notes, credit guarantee schemes, funding startup-friendly regulations or initiatives in legislatures, business advising services, or matching investments. Imagine what firms like Akiba Digital, Social Lender, Halal Pay, mOtito, International Top-up, and others who took part in the Dubai 2022 edition could achieve if they were given the necessary mentorship and venture funding to scale their business ideas across Africa. These are solutions to extraordinarily challenging problems in sensitive economic sectors. In the next ten years, with these and hundreds of other innovators and startups empowered, this continent will be fixed, and this century will become an African century.