New report calls for African policymakers to maximise the societal potential of investment
African governments can play an incredibly important role in stimulating investments that generate positive societal impact alongside investor returns, according to a new report by Bridges IMPACT +, the advisory arm of Bridges Ventures, and the African Private Equity and Venture Capital Association (AVCA).
The report, Investing for Impact: A strategy of choice for African policy makers supported by The Rockefeller Foundation, was presented in Lagos, Nigeria, last week at the 11th Annual AVCA Conference. It aims to provide a lens through which politicians can assess the potential of investment to support their development agendas.
Over the last decade, the main driver of economic progress across the African continent has arguably not been Official Development Assistance flows but growth, underpinned by private sector activity. This trend is set to continue, with private capital forecast to be the most important source of long-term finance. At the same time, an increase in the levels of social inequality and environmental degradation in many African countries has underscored the importance of a more inclusive model of progress.
Impact investment is a strategy to align the power of private markets to the social and environmental development needs of society at-large. From 2012-13, The Rockefeller Foundation, through its Impact Investing initiative, funded research in five Sub-Saharan African countries with the aim of understanding the barriers for impact investing across Africa, as well as recommending national policies to encourage the growth of the industry.
This report synthesises the findings of that work and, through numerous case studies drawn from across Africa, aims to show how impact investing can be a powerful tool for tackling societal challenges, and can be complementary to the more traditional tools of public funding and philanthropy.
The report offers 10 actionable recommendations to guide African policymakers to maximise the societal potential of investment in their respective countries. These are:
1- TASK FORCE: government to establish an impact investing taskforce to explore country-specific potential of impact investing
2- CATALYTIC CAPITAL: government investment to stimulate the growth of domestic impact investment funds
3- REGIONAL SME EXCHANGE: government sponsorship for the development of a regional SME exchange to provide liquidity for exits
4- DO OR EXPLAIN: government to expect institutional investors to articulate social and environmental impacts, as this is an area of importance
5- FLEXIBLE REGULATION: government regulation to allow institutional investors to invest in impact-driven enterprises
6- CASE BY CASE ANAYSIS: government review of fiscal frameworks and fiscal incentives to promote investment in high-impact enterprises and ensure policy coherence.
7- PRIORITY PROCURMENT: create a competitive advantage for high-impact enterprises
8- INVESTMENT READINESS FUNDING: provide government funding for investment-readiness.
9- GUARANTEE PROGRAMME: enable impactful enterprises to demonstrate their creditworthiness
10- NEW CORPORATE FORMS: ensure legal forms are suited to impact-driven enterprises’ requirements.
Clara Barby, Head of IMPACT+ at Bridges Ventures, said: “Notably, each recommendation in this report is drawn from a real-world example of innovative policymaking already at work in an African country. It is hoped that individual countries can learn from each other’s successes and build on this momentum.”
Michelle Kathryn Essomé, Chief Executive of the African Private Equity and Venture Capital Association, said: “Part of AVCA’s role as an association is to support the private capital ecosystem, by advocating to policymakers and regulators to encourage enabling business environments for private capital investment across the continent. In Africa, the private equity fund manager’s role has long been lauded as supporting portfolio company management to focus on corporate social, governance and environmental responsibility in addition to planning for growth, leading to more sustainable businesses that are better equipped to develop the communities in which they operate. We hope this report helps governments in Africa to understand and utilise the potential catalytic power of private sector investment.”
Eme Essien Lore, Senior Associate Director at The Rockefeller Foundation, said: “This research comes at an important time in Africa. Even though the continent is experiencing record economic growth, it has not been matched with economic progress for most Africans. Impact investing offers one solution to correcting this imbalance. Policymakers in Africa now have guidance on how to use impact investing as a tool to deliver on their development agendas. Private equity investors in Africa now have a way in which to engage with policymakers to create a set of holistic investment solutions that ultimately improve the lives of poor and vulnerable people across the continent. The Rockefeller Foundation is pleased to have seeded this effort which builds the thought leadership and the potential for impact investing in Africa.”
A copy of the report can be accessed here.
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Notes to Editors
Bridges Ventures (www.bridgesventures.com)
Bridges Ventures LLP (“Bridges Ventures”) is a specialist fund manager dedicated to using an impact-driven investment approach to create superior returns for both investors and society at large. Bridges Ventures has raised seven funds to date which total £340m: Sustainable Growth Funds I, II and III, the Bridges Sustainable Property Fund, the CarePlaces Fund, the Bridges Social Entrepreneurs Fund and the Bridges Social Impact Bond Fund.
Bridges IMPACT + is the advisory arm of Bridges Ventures. It seeks to promote the growth of the sustainable and impact investment sector by offering practitioner-led advisory services, based on Bridges Ventures’ twelve years’ experience of investing for financial returns and positive societal impact.
African Private Equity and Venture Capital Association
The African Private Equity and Venture Capital Association’s (AVCA) mission is to promote and catalyze the private equity and venture capital industry in Africa.
AVCA is a member-supported organization, with members spanning private equity and venture capital firms, institutional investors, foundations and endowments, international development finance institutions, professional service firms and academia. They are all united by a common purpose: to be part of the African growth story.
AVCA endeavours to deliver its mission through four key pillars: building a Knowledge Centre of independent research for members and the industry; facilitating Networking Opportunities and thought leadership events; Advocating on behalf of the industry to policymakers, regulators and global investors; and by providing Training to investors and emerging fund managers on the asset class and best practice.
Together with a network of experts and collaborators across Africa and beyond, AVCA represents the voice of the pan-African industry in discussions with governments, regulators, lawmakers and the media.
For more information about AVCA, please visit www.avca-africa.org.
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