Afreximbank’s FEDA fund to support AfCFTA goals

Afreximbank's recently created Fund for Export Development in Africa (FEDA) has set its sights on revolutionizing Africa's export markets. CNBC Africa had the opportunity to speak with the fund's CEO, Philip Kamau, about the fund's mission and the strategic decision to establish its headquarters in Kigali. The Fund for Export Development in Africa, an initiative by the Africa Export-Import Bank, aims to alleviate the chronic issue of long-term capital shortages hindering Africa's trade and export development. The fund is geared towards boosting value addition and manufacturing capabilities within the continent, ultimately enhancing Africa's export potential. Kamau emphasized FEDA's vision as an impact fund dedicated to driving structural transformation in Africa's trade landscape. The fund's primary mission is to provide capital, particularly equity capital, focusing on labor and development impact within African trade, industrialization, and export development. With a funding gap of approximately $110 billion in the intra-African trade and export development sectors, FEDA aims to play a pivotal role in bridging this financial divide. FEDA's interventions will span across various sectors including financial services, technology, consumer goods, tourism, agribusiness, manufacturing, transport logistics, warehousing, industrial parks, and special economic zones. It seeks to address existing funding deficiencies in the African impact investing sphere, prioritizing development impact in its financing endeavors. One of FEDA's key objectives is to ensure that its funding initiatives translate into job creation and foreign exchange generation, propelling companies engaged in intra-African trade. The fund plans to provide equity capital and related non-financial support services to operators in Africa's tradable and support sectors, with a particular focus on activities promoting intra-African trade industrialization and value-added exports. Kamau underscored the significance of value addition in Africa's export sector, citing examples such as raw cocoa beans and unprocessed cashew nuts leaving the continent without additional processing. By enhancing manufacturing capabilities, Africa can create more opportunities for job seekers and ensure higher value retention within the region. In terms of funding capacity, FEDA targets an initial fund size of $500 million, with plans to expand to $1 billion over the coming years. The fund has thus far secured commitments totaling $350 million from the Africa Export-Import Bank, which includes allocations for a private credit fund, principal investments in strategic initiatives, and deployment in a limited partnership framework. FEDA's strategy involves setting up a private equity fund, Fund One, slated to launch in late next year. The fund aims to mobilize capital from limited partners, with the Africa Export-Import Bank serving as an anchor investor. Kamau anticipates Fund One to reach a targeted size of $500 million, catering to the equity funding needs of export-related businesses across the continent. With Africa facing an equity funding gap of around $110 billion annually for export-centric enterprises, FEDA's ambitious goal is to attract foreign direct investment and collaborate with other stakeholders to address this financial shortfall. Kamau highlighted the importance of leveraging available capital in Africa by providing a conducive investment platform that can deliver returns to investors while driving sustainable economic growth on the continent. In summary, Afreximbank's FEDA Fund stands as a beacon of hope for Africa's export markets, positioning itself as a catalyst for economic transformation and trade enhancement across the continent.