In a move shaking Africa’s startup and small business ecosystem, the U.S. African Development Foundation (USADF) has pulled the plug on $51 million in funding meant for cooperatives, women-led startups, and rural enterprises across sub-Saharan Africa.
The sweeping budget cut, announced by the Department of Government Efficiency (DOGE), an agency created under former U.S. President Donald Trump and now headed by billionaire entrepreneur Elon Musk, affects over 1,000 active projects in 22 African countries, with Nigeria and Kenya among the hardest hit.
What Was Lost?
Among the abruptly cancelled grants were
- $48,406 for a WhatsApp-based marketing chatbot for Kenyan micro-enterprises
- $84,059 for a wellness incubator in Nigeria
- $230,000+ for a shea butter cooperative in Burkina Faso
- $240,000 to promote pineapple juice in Benin
- $246,000 for mango drying facilities in Côte d’Ivoire
Though small by venture capital standards, these USADF grants serve as critical lifelines for SMEs in early stages, especially in regions where commercial banks and institutional investors are reluctant to take risks.
Nigeria and Kenya: The Biggest Casualties
Since its inception, Nigeria and Kenya have collectively received over $37 million through the USADF initiative:
- Nigeria: $20.4 million across 211 startups and SMEs
- Kenya: $16.9 million across 186 businesses
Most beneficiaries are women-led, rural, or first-time entrepreneurs whose ideas often fall outside the scope of traditional financing models.
Ripple Effects on Value Chains
Beyond individual ventures, these cuts threaten entire agricultural and cooperative value chains in Africa. For instance, processing infrastructure in Benin and Côte d’Ivoire will now be left incomplete. These projects often serve as community anchors, providing jobs, improving food preservation, and boosting export readiness for local produce.
Why the Cuts?
According to DOGE, the cuts are part of a broader strategy to “optimise the federal government” by eliminating what it deems inefficient or non-essential spending. In its announcement, DOGE claimed that the move has already saved American taxpayers $140 billion, which includes the termination of USAID initiatives like the Development Innovation Ventures (DIV) program.
DIV alone had provided between $500,000 and $6 million to over 30 Kenyan startups, enabling them to scale and test the commercial viability of their innovations.
A Model That Worked—Now Gone
Unlike traditional foreign aid, the USADF model bypasses governments and gives direct-to-founder support, providing grants and technical assistance straight to entrepreneurs. For many African businesses, especially in undercapitalised regions, this approach was seen as a gold standard—supportive, flexible, and impactful.
The foundation’s sudden retreat leaves a dangerous funding vacuum, especially in underserved markets where such risk-tolerant capital is almost nonexistent.
What Next for African Startups?
This funding withdrawal comes at a time when African startups were just beginning to rebound from the global investment slowdown of 2023–2024. With Washington turning inward under the Trump administration’s recalibration of international aid, many in Africa’s innovation scene are left wondering whether it’s time to build greater resilience and self-reliance.
The impact of this cut may not be immediate, but it will be deep. As founders scramble for alternative capital, policymakers and ecosystem builders may need to reconsider the long-term implications of foreign aid dependency for Africa’s innovation-driven future.
