The U.S. Africa Development Foundation (USADF) has cut $51 million in funding, impacting small and medium-sized enterprises (SMEs) and startups across sub-Saharan Africa, with Kenya and Nigeria—previously the program’s largest beneficiaries—bearing significant impacts.
The cuts, announced by the Department of Government Efficiency (DOGE), an agency established by President Donald Trump and led by Elon Musk, aim to “optimise the federal government” by eliminating perceived inefficiencies.
Among the hardest-hit initiatives are a $48,406 WhatsApp marketing chatbot designed to assist Kenyan small businesses and an $84,059 wellness incubator in Nigeria.
Other affected projects include nearly $230,000 allocated for a shea butter project in Burkina Faso, approximately $240,000 intended to promote pineapple juice in Benin, and $246,000 for mango drying facilities in Côte d’Ivoire.
These cuts expose a critical vulnerability within the African startup landscape: a heavy reliance on foreign aid. While external funding has historically provided essential risk capital—often unavailable through local banks or venture capitalists—the abrupt withdrawal of such support underscores the precarious position of startups dependent on international donors.
This development serves as a clarion call for African entrepreneurs and policymakers to prioritise self-reliance and sustainable funding mechanisms. Diversifying funding sources can mitigate the risks associated with overdependence on foreign aid.
For instance, fostering relationships with local angel investors, venture capitalists, and corporate partners can provide more stable financial backing. Additionally, exploring revenue-sharing models, crowdfunding, and public-private partnerships can offer alternative avenues for capital.
The current funding landscape in Africa is evolving. Between 2019 and 2021, venture capital investments surged from $1.3 billion to $4 billion. However, by 2024, this figure had receded to $2.2 billion, reflecting a more cautious investment climate.
This fluctuation highlights the necessity for startups to demonstrate robust business models and clear paths to profitability to attract and retain investment. Both founders and investors must now make a compelling case for their existence in a more discerning market.
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Moreover, the rise of local funding initiatives presents a promising shift towards self-sufficiency. For example, Yango Ventures recently launched a $20 million fund to support African startups, focusing on early-stage companies in sectors like fintech and B2B SaaS. Such initiatives provide not only capital but also mentorship and access to broader networks, fostering a more resilient entrepreneurial ecosystem.
In light of the USADF cuts, there is an urgent need for African startups to reassess their funding strategies. Building self-reliance involves not only securing diverse funding sources but also strengthening internal capacities, such as financial management and strategic planning. By doing so, startups can better navigate the uncertainties of external funding and position themselves for sustainable growth.
The withdrawal of USADF funding serves as a pivotal moment for African startups to pivot towards self-reliance. While foreign aid has played a significant role in nurturing the continent’s entrepreneurial landscape, the future hinges on developing robust, locally-supported ecosystems that can withstand external shocks and drive sustainable development.
