SME growth key to Africa’s future, says African Guarantee Fund
Enabling access to investment finance for micro, small and medium-sized enterprises is essential for economic growth to continue in Africa
Small and medium-sized enterprises (SMEs) are widely recognised as big drivers of economic growth, innovation, regional development and job creation. A strong and vibrant SME sector provides a strong foundation to increase standards of living and to reduce poverty. Indeed, Africa’s small enterprises, from trading to farming, contribute more than 80 percent of output and jobs in most African nations. They also offer the best opportunities for growth, diversi?cation and job creation. But SMEs are constrained by limited access to stable energy services, business management, skilled labour and especially ?nance for investment.
Successful developing countries have seen their SMEs ?ourish, moving from informal to formal production and becoming the backbone of growth in production and employment. Such processes of development support the creation of a strong middle class and also tend to strengthen democratisation and the rule of law.
Despite the internationally recognised importance of SMEs, African small businesses often have difficulties accessing financing from the formal financial sector. Almost 50 percent of African companies identify lack of access to finance as a major constraint to doing business. The cost of ?nance, including investment ?nance, is higher in Africa than any other part of the world, and the access for SMEs is particularly limited. Very few commercial banks do small-enterprise banking in Africa. Furthermore, SME financing is often considered by many financial sector players in Africa to be a risky activity as promoters quite more often than not, fail to come up with the collateral levels required to secure bank facilities.
The Global Rise of Impact Investing and How it Can Specifically Boost the African Economy
While we often think of investing as a personal practice with the objective of benefiting an individual or a family, the word “investment,” at its core, is defined as “a devoting, using, or giving of time, talent, emotional energy, as for a purpose or to achieve something.” As such, Impact investing addresses some of the most demanding challenges worldwide across a host of sectors including education, agriculture, housing, green technology and healthcare, thus refuting the notion that the world’s most pressing issues can only be tackled by philanthropic donations alone. Many philanthropists and other non-for-profit entities are already spread thin, and impact investments fill a critical funding gap.
The good news is that impact investing – investments in entities and funds with the goal of generating quantifiable, positive social or environmental impact — is on an upswing. The market had an estimated worth of $60 billion worldwide in 2014, and is expected to jump to between $400 billion and $1 trillion over the next five years. What’s more, 22% of global-impact enterprises are located in Sub-Saharan Africa, and much of the opportunity lies throughout the continent.
In East Africa, for example, economic growth within the region has been stable in the last decade and during this time, the region has seen the rise of wealthy individuals. According to Forbes, six of the ten new millionaires to watch in 2014 have emerged from the East African region (three from Kenya and three from Tanzania). In addition, Tanzania has the fastest-growing number of millionaires in the region, and the country takes the lead for the most newcomers (three) to the Forbes’s “Africa’s Richest 50 2013” list.
Many of these individuals – as well as investors, foundations and trust managers – are eager to tackle the substantial challenges that Africa faces, including poverty, infrastructure development and transport by making sizeable investments in companies dealing with such issues.
Impact Investing in Africa: Call to HNWIs, Financial Advisors, Institutitonal Investors & Entrepreneurs.
Sustaining Africa’s current economic growth rate will require financing and scaling innovative solutions that addresses its development challenges. According to a recent UNDP Report, total development financing gap in Africa is estimated to be at least US$100 billion annually until 2030, and as governments cannot achieve these goals alone, a multifaceted approach that includes public and private, domestic and international finance becomes necessary to meet the continent’s vast financing needs.
Currently, foundations and DFIs are playing the leading roles financing the region’s development, and as they shift their approach to more innovative financing models that delivers both financial returns as well as social and/or environment impacts, there is a need and growing demand by key actors for more private sector investors especially High-Net-Worth Individuals, Ultra High-Net-Worth Individuals (HNWIs & UHNWIs) and Institutional Investors to be more committed to impact investing.
Inside the minds of investors attracted to the region’s high growth opportunities and the concept of doing well by doing good, are concerns about accessing sustainable investment opportunities, how to exit their investments and finding reliable asset managers especially financial advisors with the relevant skills, experience and proven track record to advise and guide them in investing for impact.
On the demand-side, a growing number of African and non-African entrepreneurs and project owners with sustainable and innovative businesses that solves the region’s local challenges need growth capital from investors, co-investors and new partners to scale their projects.
What Challenges Do Microfinance and Crowdfunding Face?
Microfinance and donation-based crowdfunding have transformative potential in the developing world. The latter is currently growing at a rate of well over 100% annually in all but a small part of the world, can generate hundreds of millions in donations quickly in the aftermath of a natural disaster, and is seen as “an innovation in entrepreneurial finance that can fuel ‘the Rise of the Rest’ globally,” a World Bank report says.
We’re following these developing market issues on our Market Integrity Insights blog, as well as our European Investment Conference blog. They are also issues we’re bringing to our members, live, at events like the most recent EIC in London, where Josina Kamerling, head of regulatory outreach at CFA Institute for EMEA, moderated a talk with Lars Kroijer, founder and managing director of AlliedCrowds, on “Crowdfunding: An Alternative Funding Source for Developing Markets?”
Crowdfunding: ‘How I Got Hooked,’ Hurdles, and Blockchain
While at the conference, Kamerling also did a video interview with Kroijer. Introducing him, she draws parallels between what Idowu Koyenikan, author of Wealth for All Africans, says: “When money realizes that it is in good hands, it wants to stay and multiply in those hands,” and what Kroijer does.
Investment Opportunities Flow from Water Initiatives
Large parts of the world are running short on water — even experiencing “desertification” — at an alarming rate. Innovative solutions being implemented by the public and the private sectors may offer interesting opportunities for investors.
Several factors are driving water shortages. Climate change could have the greatest global impact. Some projections have temperatures around the globe warming by three to four degrees (Fahrenheit) over the next century, which would affect water in many ways. Some areas would stay the same, but many others would be either flooded or stricken with drought.
Population growth is also putting pressure on clean surface freshwater resources in lakes and rivers. Brackish water must be treated before it is used for human consumption, and groundwater is harder to use because it must be pumped.
According to Julie Gorte, senior vice president for sustainable investing at PAX World Management, 96.5% of all the water on Earth is brackish and 1% is saline. Only the remaining 2.5% is fresh, and of that, 1.2% (0.03% of all water) is surface fresh water. Of the surface fresh water, 30% is groundwater, and 69% is currently locked up in glaciers and icecaps.
The more fresh surface water is used, the more it becomes contaminated. Industrial use is a major issue. For example, hydraulic fracturing, or “fracking,” takes about 5 million gallons of water to frack a well once. The water becomes highly contaminated, and treating it is extremely expensive.
Some countries with large populations are experiencing drought conditions, yet much of their water is contaminated. About 60% of China’s groundwater — which makes up about one-third of the country’s water resources — was rated unfit for human consumption by China’s Ministry of Land and Resources. In India, 80% of sewage flows into rivers without being treated, according to a 2013 study by the Centre for Science and Environment.
Why mobile money is big business in Africa
Another week and another bank in Africa is entering the mobile money space.
Pan-African Ecobank is partnering with Orange Cameroon to allow the telco’s customers with accounts at the bank to transfer cash between the two services. The two firms are already working together in Mali and plan to introduce the service in four other African countries.
Banks partnering with mobile companies is the latest attempt by financial firms to tap into the continent’s large populace of the “unbanked.”
In sub-Saharan Africa, only a third of adults have access to bank accounts. Compare this to Latin America, another emerging market, the figure stands at 51%, according to the World Bank. There are a lot of people whose money simply never touches the region’s financial systems.
The mobile phone revolution and the rise of mobile money, especially in east Africa with platforms such as M-Pesa, has changed this.
Mobile money is now big business in Africa. Last year, the market generated $656m in revenue and in the next four years this is expected to double to $1.3 billion, analysts say.
Until recently, financial firms ceded this space to telecom companies. But the clear growth of the sector has compelled a re-evaluation. Now banks are not only trying to compete in this space but also offer new products that promise access to banking services to those who up until this point were excluded.
So in Nigeria, for example, GT Bank are getting in business with Etisalat Nigeria, the country’s third biggest mobile operator, to create GTEasySavers, a savings account that can be opened via mobile phones. For the 57% of the country with no access to formal financial services, that’s a small step in the right direction.
And in Kenya, in 2011, only 42% of people had bank accounts. That has risen dramatically, driven by mobile money platforms.
Meet Dr. Henrietta Onwuegbuzie – one of Africa’s leading Impact Investing Practitioners Training Impact Entrepreneurs in Africa
Dr. Henrietta Onwuegbuzie is an Associate Director at the Lagos Business School and one of Africa’s leading Impact Investing Practitioners . She has been training and guiding Impact Entrepreneurs in the continent for several years now.
It was a great pleasure for the CEO of Alliance 54, Ernest Okwudike to engage with her in a discussion recently to gain some insight and learn her views on the trends and development in the industry in Africa.
la diaspora africaine en Suisse : quelles dynamiques ? Quel rôle pour le Programme de développement 2030 de l’ONU ?
Quelques soient les sources, la notion de diaspora tourne toujours autour des mêmes éléments, à savoir l’ensemble des membres d’un peuple dispersés à travers le monde mais restant en relation. Certains élargissent ce groupe également aux descendants des migrants. La notion de mémoire collective ou de culture du pays d’origine est un autre aspect important de cette définition.
Si on l’applique au contexte africain, et selon les critères de l’Union africaine, il s’agit des « personnes d’origine africaine vivant hors du continent africain, qui sont désireuses de contribuer à son développement et à la construction de l’Union africaine, quelles que soient leur citoyenneté et leur nationalité ».
C’est ce lien spécifique entre la personne établit à l’étranger et son pays d’origine qui rend la diaspora comme un élément déterminant pour le développement (durable) du continent. De par son importance à travers le monde, la diaspora africaine joue un rôle primordial pour nombre de pays du continent, notamment à travers ses apports financiers, matériels et humains. C’est dans cette optique, que la diaspora africaine est devenue un acteur de premier plan dans la mise en œuvre à la fois de l’Agenda 2030 de développement durable de l’ONU, mais aussi pour l’Agenda 2063 de l’Union africaine.
Dynamiques mondiales
L’étude des flux migratoires ne peut se faire sans lien avec le phénomène de mondialisation. Cette dernière n’est pas sans incidence dans les dynamiques migratoires à l’échelle internationale tant dans ses causes que ses formes. Elle rend ainsi ce phénomène difficile à appréhender.
Is Africa Leading the Innovation Revolution?
Necessity is the mother of invention, and in Africa it has been the mother of innovation. While the continent is vastly different, the level of innovation has been interesting to watch, largely fuelled by the equalizing nature of technology and mobile telephony.
Over the last 15 years, African economies have enjoyed growth above the global average. This has largely been fuelled by mineral agriculture, with growth linked to China’s demand for raw materials. While this demand from China is now slowing down, the rise of African countries is a new story.
It is estimated that in 2016, the African population will reach 1,069 billion people, the majority of whom are under 30. Africa has the highest rates of urbanisation; its poor infrastructure, which has previously hampered growth and development, is now a catalyst for innovation. The mobile phone in Africa has become a game-changer for the continent. According to Ericsson, the technology company, by 2019 there will be 930 million mobile phones in Africa, almost one for every person on the continent. There is greater mobile penetration than electricity penetration. Now, people are able to connect, get news, trade, get access to healthcare and even transfer money.
View a larger version of this graphic here.
One of the biggest innovations to come out of Africa is mobile money transfer, which has disrupted traditional financial models. The technology behind it has now been exported to the West. The continent is starting to see the rise of e-healthcare solutions and online education solutions, two of the biggest challenges on the continent.
For the first time, we are seeing a trend of being technology generators rather than just adopters, and we are seeing more innovators from the west move to the continent due to an easier, and in some cases non-existent, regulatory environment, which enables greater experimentation in the market with few competitors. These include new drone technology for the delivery of goods to leapfrog the infrastructure divide.
Overall, there seems to be good news for the continent, as Africa looks to technology to catalyse new areas of growth, a good example being East Africa, with Rwanda and Kenya in particular championing the need for an enabling environment.
“We need to ensure women are part of this revolution”
