Thousands of small businesses and agricultural cooperatives across sub-Saharan Africa are facing uncertainty after the U.S. African Development Foundation (USADF) slashed $51 million in funding previously earmarked for startups and small enterprises. The budget cut threatens to disrupt promising initiatives in countries like Nigeria, Kenya, Benin, and Burkina Faso, where U.S. funding has historically supported grassroots economic development.
The decision to reduce USADF’s budget was announced by the Department of Government Efficiency (DOGE), a controversial U.S. agency created under former President Donald Trump and reportedly now led by Elon Musk. DOGE claims its mission is to reduce waste and streamline federal spending, and it says it has already saved taxpayers over $140 billion—partly by eliminating programs deemed inefficient, including those run by USAID and USADF.
Among the casualties of this latest round of cuts are small, impact-focused projects such as a WhatsApp chatbot to support small business marketing in Kenya (budgeted at $48,406) and a wellness incubator in Nigeria (allocated $84,059). More significant initiatives have also been affected, such as nearly $230,000 for a shea butter cooperative in Burkina Faso, $240,000 for pineapple juice processing in Benin, and over $246,000 for mango drying facilities in Côte d’Ivoire.
Major Beneficiaries, Now at Risk
Since its inception, the USADF program has supported over 1,000 businesses across 22 African nations, with Nigeria and Kenya as top beneficiaries. Nigeria has received $20.4 million in grants, while Kenya has secured $16.9 million—funding used to empower over 397 SMEs and startups, many of them women-led and based in rural areas.
Unlike traditional aid models, USADF offers direct-to-business funding, bypassing government intermediaries and empowering entrepreneurs to build solutions tailored to their communities. These grants provide critical non-dilutive capital to startups that often lack access to loans or equity investment.
The removal of USADF funding comes on the heels of another setback: in recent months, USAID halted its Development Innovation Ventures (DIV) program, cutting over $100 million in support to early-stage companies. DIV had backed over 30 Kenyan startups, offering grants ranging from $500,000 to $6 million to help them prove their models and scale operations.
Bigger Questions Loom
While DOGE insists the cuts are part of broader efforts to streamline U.S. foreign spending, the impact on African innovation ecosystems could be severe. Many startups depend on early-stage grants to validate their business models, build supply chains, and support local employment.
Critics argue that such sweeping cuts—without robust local alternatives—leave Africa’s development vulnerable to political changes in Washington. The growing reliance on U.S. seed funding, especially among rural cooperatives and women entrepreneurs, highlights the urgent need for domestic and regional funding mechanisms to reduce dependency.
As Africa grapples with the fallout, the conversation is shifting toward building self-reliant ecosystems that are insulated from external political volatility and better equipped to sustain grassroots innovation.
