Introducing the YouthAtWork Fund

With almost 60% of its total population under 25, Africa is the youngest continent. Over the next thirty years, the African youth population will increase by another 50%. In 2050, the continent will have the largest youth population, making up for nearly twice the number of young people of South Asia, Southeast Asia, East Asia and Oceania. When it comes to the job market, over 12 million young African men and women enter it every year and only 3 million of those find employment.

This incredible increase and gap in demand of employees comes with tremendous risks, including insecurity, instability, and is associated with mass migration. Efforts to reduce poverty of current and future youth populations encompass catalysing productivity and innovation. Young people are seen as innovators, leaders and workers of the future and are already stressing the importance of unlocking their full potential.

The Challenge Fund for Youth Employment is introducing the YouthAtWork (Y@W) Fund to enable 25,000 youth in Africa, 50% of whom are women, to secure decent jobs through small and growing businesses (SGBs). These businesses face a financing gap of USD 245 billion and are the bedrock of local economies and the main providers of jobs. The Y@W Fund, with a targeted fund size of EUR 50m, will be managed by GroFin.

Background

In 2019, the Ministry of Foreign Affairs of the Netherlands set up a challenge fund to address the urgent need of creating employment opportunities for youth in regions across Africa and the Middle East: the Challenge Fund for Youth Employment, or CFYE in short:

  • CFYE aims to create, match or improve a prosperous future for 200.000 young women and men.
  • This will be achieved by supporting youth employment initiatives in these regions.
  • Initiatives will offer youth, particularly young women, opportunities for decent work that delivers better prospects for personal development, is productive, and offers a stable income, social protection and safe working conditions.

Role of the Private Sector

The private sector is the most important partner for CFYE. As companies are working in competitive environments, it is important for us to make sure that fund activities are truly additional. In other words, activities that would otherwise not have happened at the same scale, degree, quality, speed, or at all. Whilst capital may be required for investments, non-returnable project contributions of a challenge fund are not always the right instrument to finance promising projects. Sometimes the grant amount is not sufficient, or the activities could have been financed by the companies themselves or their financiers. At the same time, companies often face cash flow challenges when scaling up and/or struggle to find financiers with the longer-term horizon and risk appetite that is sometimes needed to see the financial returns alongside the higher social returns. This is where the Y@W Fund comes in.

YouthAtWork Fund

Therefore, CFYE, in collaboration with GroFin, co-created an investment fund: the YouthAtWork (Y@W) Fund. The right mix of instruments will enable CFYE to scale successful employment models and companies enabling us to reach our target to let 200,000 youth benefit from decent jobs. The mix of instruments is mutually reinforcing and will enable SGBs to grow.

While CFYE will anchor the Y@W Fund with junior equity and function as technical assistance and pipeline partner, GroFin, a specialist SGB fund manager with an 18-year track record, will manage the Y@W Fund based on its local presence in several African countries and its intensive knowledge of the SGB sector.

Where will the YouthAtWork Fund invest in?

The Fund will invest in 130 companies in sectors with a clear potential to create, improve and match jobs for the youth. Loan sizes will vary between USD 50k and USD 2m, with an average loan size of around USD 450k. We target SGBs that we deem to be the bedrock of local economies and main providers of jobs, employing between 5 and 250 employees. We will prioritise SGBS with potential and ambition to grow but are underserved by traditional financers.

What makes YouthAtWork Fund unique?

Triple Impact Challenge

Unique focus on SGBs, youth and gender employment by investing in SGBs operating in labour-intensive sectors in Africa.

Finance to Meet SGB Needs

Flexible instruments meeting the needs of investees. Focus on self-liquidating debt instruments but also including mezzanine.

Support to Meet SGB Needs

Important non-financial support: Providing integrated risk-mitigating business support and technical assistance targeting SGB viability and deep youth and gender impact practices.

Catalytic Blended Finance

Significant subordinated capital support: Anchor “first loss” tranche (including a ~USD 12m by the sponsor), offering adequate risk mitigation buffers to mobilise capital across the risk-return-impact spectrum.

Positioned for Scale

An evergreen structure that enables the Fund to back its investee enterprises in the long-term, facilitates recycling of capital to build scale and optimise long-term impact.

Capital Structure

The Y@W Fund will make SGB risk debt capital investments with high youth and gender employment impact potential, in select countries across Africa.

A blended finance structure with three capital layers:

  • anchored by a first-loss layer to mobilise more commercial investors to support investment in the SGB segment in local currency in Africa.
  • senior equity and debt allow different tenors, liquidity and risk profiles for impact-oriented investors.

CFYE has committed EUR 10m to the first-loss layer and fund set up costs as well as up to EUR 1m in TA funding.

Invest in the Youth at Work Fund

Create a Better Future for our Youth in Africa

The Y@W Fund is currently raising additional capital. Contact our fundraising team to find out more about the Y@W Fund or how you can join us in creating a brighter future for Africa’s youth. 

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