The Trade Hub partners with Injaro Investments Ltd to Promote Economic Diversification in Cabo Verde
By Akua Mensah
With its dazzling beaches and mountain ranges, Cabo Verde is a tourist haven in West Africa, and the industry has been a major contributor to the country’s GDP, employment, and foreign investment. With the shocks of the COVID-19 pandemic on tourism globally, the country reckoned with the need to diversify and strengthen other economic sectors. The median age of Cabo Verdeans is 28, and with an adult literacy rate of 91%, the archipelago has much more to offer beyond sun, sand, and sea.
Unlocking private investment is the key to tapping into Cabo Verde’s economic growth potential. SMEs in Cabo Verde face challenges in raising the necessary capital to sustain or scale their operations. According to the World Bank, SMEs received only 58% of bank loans, despite representing 90% of companies operating in Cabo Verde in 2017. Consequently, private investment is needed to provide these companies the leg up they need to succeed. Private equity investment, in particular, presents a well-suited solution as it requires that companies have a strong track record of operations and management, and the ability to become a strong national or regional player in their sector. Private equity investment can also help to bridge skill and knowledge gaps in effective management and business models.
With this in mind, the USAID-funded West Africa Trade & Investment Hub partnered with Injaro Investments Ltd., the World Bank, and Pro Capital, the venture capital vehicle of the government of Cabo Verde, to establish the Fundo Pro Impacto, a venture capital impact investment fund that invests in SMEs in diverse sectors of the economy including technology, clean energy, aquaculture, and health. Slated to launch in the first quarter of 2022, the fund saw some delays as Investment Capital Partners (ICP), the fund manager, faced challenges acquiring the necessary licenses to operate in Cabo Verde. The Trade Hub PPP manager in Cabo Verde, Frantz Tavares, played a vital role in advancing discussions with the project partners and the Cabo Verde Central Bank, eventually leading to a Central Bank approval for ICP to operate as a fund manager in Cabo Verde.
The Fundo Pro Impacto was officially launched in the final quarter of 2022. Over the next decade, the fund will make individual investments north of $350,000 in SMEs, strengthening critical sectors of the Cabo Verdean economy. Speaking at the launch event, held in the auditorium of the Central Bank of Cabo Verde, were key government representatives including His Excellency Dr. Olavo Correia, Vice Prime Minister and Minister of Cabo Verde; His Excellency Ambassador John Daigle, the U.S. ambassador to Cabo Verde; Her Excellency Dr. Eneida Fernandes, Resident Representative of the World Bank in Cabo Verde; and Dr. Eugenio Moeda, Chairman of the Board of Directors of Pro Capital.
“The Fundo Pro Impacto will make available needed access to finance to SMEs to aid various sectors of the private sector,” remarked Ambassador John Daigle in his address, “The fund will help the country seize private investment and promote critical sectors of the economy. We can see the transformation has already started.”
The event also featured a panel discussion on the necessity for private equity investment with panelists Dadié Tayoraud, Chief Operating Officer, Injaro Investments Ltd., Victoria Ryan, Private Sector Engagement Officer, USAID Sahel, Mazen Bouri, Lead Financial Sector Specialist, World Bank, and moderated by Joao Carlos Silva, ICP Cabo Verde Country Manager and Frantz Tavares, Trade Hub PPP Manager.
“Private equity brings long-term financing needed for businesses to grow and attracts local investors,” noted M. Tayoraud, “It is important that we can invite Africans to invest locally.”
With the Trade Hub co-investment grant of $1 million, the Fundo Pro Impacto will catalyze about $11 million in new private investment, create 120 new jobs, and impact 2,034 direct and indirect jobs, position select SMEs as champions in sectors beyond tourism and generate $5million in exports over the course of the partnership.