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Competitive financial returns and social benefits don’t have to be mutually exclusive.
Impact investing – which seeks to effect beneficial change to the environment and communities, alongside generating financial returns – is entering the mainstream investment arena as a growing number of African private equity and venture capital stakeholders recognise the importance of doing business sustainably, according to the Southern African Venture Capital and Private Equity Association (SAVCA), 2018.
A recent survey by the Global Impact Investing Network shows that globally the total assets under management by impact funds doubled in the last year to $228bn, up from an estimated $114bn since mid-2017. Looking to the future, the greatest share of respondents plan to increase their allocations to sub-Saharan Africa and Southeast Asia in the coming year.
According to Charles Buchanan, managing director of SGG Group South Africa, this kind of investment trend has significant capacity to effect meaningful economic change on the continent, particularly in areas such as education, housing, energy and financial services.
“If we consider the definition of impact investing… it is possibly better suited to a landscape where patient financial capital is not only a virtue but a necessity,” he says.
Industry information service, Africa Private Equity News, reported a considerable amount of impact investment activity in the month of November. Below are some of the most notable deals.
Fund manager Equator Capital Partners announced the first investment by its new ShoreCap III fund in MFS Africa, a fintech company operating one of the largest digital payments hubs in sub-Saharan Africa. The MFS Hub is connected to over 170 million mobile wallets, offering significant reach for financial services providers. Investment terms were not disclosed.
The Overseas Private Investment Corporation (OPIC), the US government’s development finance institution, signed two impact investment commitment letters. OPIC and Africell Holdings Limited agreed on a $100m investment to expand access to telecommunications in Africa. The project is expected to be highly developmental, particularly in Uganda and the Democratic Republic of the Congo, by increasing the availability and quality of affordable mobile telephone and internet services. Furthermore, OPIC and Global Partnerships committed $50m to support the Impact-First Development Fund, which seeks to create tangible social returns by providing a range of products and services to bottom-of-the-pyramid consumers.
Investment firm Capria reached the first close of its $100m fund of funds that will invest in emerging market-focused funds. While the first-close amount was not disclosed, Vulcan Capital, the investment arm of the late Microsoft co-founder Paul Allen, has committed $20m to Capria’s fund. Other key investors include Omidyar Network, Ford Foundation and Resonance Impact Fund. In addition, Capria has already secured commitments from Bill Gates and the International Finance Corporation.
In West Africa, Burkina Faso-based cashew processor Anatrans welcomed Dutch social investor Oikocredit as a new shareholder in a transaction that saw Oikocredit inject €2m ($2.3m) into the company. Anatrans sources nuts from local communities and supplies them to international markets.
In the healthcare sector, XSML, a fund manager active in Central and East Africa, announced its third investment in Ecopharm Uganda to finance further expansion of its outlets and acquire a pharmaceutical wholesaler. And GMC coLABS, the gender lens (investing for financial returns while also considering the benefits to women) investment portfolio of US-based Gray Matters Capital, announced its backing of SonoCare, a Nigerian tech-enabled startup. SonoCare provides services spanning the spectrum of women’s health, such as on-demand mobile 3D/4D diagnostic imaging and cardiac monitoring, among others.
Africa Private Equity News also reported that the African Development Bank (AfDB) and FinDev Canada – the Canadian government’s development finance institution – have agreed to collaborate in joint transaction opportunities, external partnerships and best practice to achieve the Sustainable Development Goals in Africa.