The African Enterprise Challenge Fund recently launched the Renewable Energy and Adoption to Climate Technologies window, aimed at nurturing business ideas based on low cost, clean energy and solutions that will help farmers adapt to climate change.
The AECF REACT will co-fund successful applicants with grants and repayable grants of between Sh20 million to Sh120 million. BUSINESS EDITOR JULIUS MOKAYA spoke to Hugh Scott, the fund’s director. Excerpts:
What is Africa Enterprise Challenge Fund?
The Africa Enterprise Challenge Fund is a fund to support private sector investment that benefits the rural poor in Africa. It is backed by some of the biggest names in development finances and hosted by the Alliance for Green Revolution in Africa (Agra). Our aim is to encourage private sector companies to compete for like-for-like investment support for new business projects. We are a $100 million (Sh8 billion) private sector fund, backed by some of the biggest names in development finance and hosted by Agra.The fund is designed to stimulate investment by the private sector in new and innovative business ideas with potential for wider social benefit. It does this by reducing the financial risks related to pursuing those ideas.
Why is this challenge fund different?
Unlike other funds, this one focuses exclusively on supporting the private sector. We also provide transparent competition for donor funds. Another notable difference is the fact that this fund is focused on financing projects that are commercially viable and will have a broad developmental impact on the rural poor.
In addition, we are structured and governed along private sector principles, with strong and sustained business engagement to ensure a flexible, results-oriented approach that the private sector can understand.
What is the AECF React window?
The Renewable Energy and Adaptation to Climate Technologies (React) window is a special fund of the AECF that is open to business ideas based on low cost, clean energy; and solutions that help farmers adapt to climate change. We recently launched the React window in Kenya, Tanzania, Uganda, Rwanda and Burundi.
Which ideas does React prepared to support?
React funding window will support private sector investments in providing increased access to low cost, clean energy for rural business and households including cost effective renewable power, commercially viable renewable fuels and other clean energy alternatives. We will also consider products and services that help small holder farmers adapt to climate change, which will include drought resistant seeds and technologies or weather early warnings systems that increase resilience and reduce vulnerability.
Other financial services that increase access to funding for low cost clean energy and climate resilient technologies or catalyse financial solutions such as weather insurance for smallholder farmers will also be given consideration.
To qualify for React funding, your business idea must demonstrate a positive impact on the rural poor through increased incomes, employment and productivity or reduced cost.
How does the challenge fund work?
The AECF window is a competition, open only for-profit companies. African and international companies are welcome to apply: There is no restriction on where the applicant company is from, only that the project must take place in one or more of the East African Community (EAC) countries (Burundi, Kenya, Rwanda, Tanzania and Uganda). AECF React will co-fund successful applicants with grants and repayable grants between $250,000 and $1.5 million.
How does one apply?
To find out more about the React window visit the AECF website (www.aecfafrica.org) and follow the links to the React page to find out more and to complete/download the initial application form.
The application is easy to complete and only requires an outline description of your company and your project.
Does the applicant’s company have to contribute?
It is very important that the companies that enter into this competition must provide matching funds equal to, or greater than, 50 per cent of the total cost of the project.
The AECF React aims to leverage its funds and those applications where companies provide a greater percentage of the funds for the projects from their own resources will be greater more favorably. Similarly, those projects with a greater repayable grant percentage will have a greater chance winning.
How are successful proposal selected?
All proposals received will be screened and the best ones will be short-listed and forwarded to the AECF’s independent Investment Committee.
Proposals that are considered to have the most positive impact on the rural poor in Africa will be invited to present a detailed business plan for the next stage of the completion.
What are the chances of winning?
AECF React operates like
a "social" venture capital fund seeking and engaging with many companies to find those projects and business ideas with the greatest rate of return against our objectives. We anticipate that one in ten of the applications made to AECF Reactwill be awarded funds.
Who funds the AECF and AECF REACT?
The UK department for International Development is the initial funder of the AECF React window.
The other major funders are the Australian Government Aid programme in conjunction with the Consultative Group to Assist the Poor, the International Fund for Agricultural Development and the Netherlands Ministry of Foreign affairs.
And who manages AECF?
The Fund Manger of the AECF is KPMG Development Advisory Services, in Association with Triple Line Consulting (TLC) and Imani Development Group. Y&R handle the AECF’s marketing.
