What Do Impact Investors Need to Know About Africa?

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Impact Investing

Emerging markets like those in Africa are increasingly bypassing landline phone technology, and heading straight to cellular.

 

By  Vincent Molinari

The intersection of social media, technology, and financial services is creating a global paradigm shift, signaling that the democratization of capital formation is underway. Redefining the ‘rate of return’ to include societal, environmental, and cause-related benefits will soon create unprecedented investor engagement globally. With the consumerization of the web, social media is creating tremendous awareness as well as efficient distribution capabilities to engage investors to deploy capital to for-profit companies and projects that are also delivering a positive impact.

Turning challenges into opportunities

In terms of impact investing, Africa is an evolving development canvas due to the lack of infrastructure support for technology. Currently, the continent has an extraordinarily low amount of infrastructure, which has strengthened the digital divide and created a high barrier to economic growth. Emerging markets like those in Africa are increasingly bypassing landline phone technology, and heading straight to cellular. Today’s digital leap is much more promising and vital than 25 years ago.

Opportunities abound, creating standardization and best practices around global need, will drive for-profit companies and projects to create systemic change. This same level of engagement, tied to the United Nations Sustainable Development Goals (SDGs), will increase the likelihood of success by moving capital in new and innovative ways. From closing the digital divide to increasing access to education, with access to capital, the development and ideas that will come out of Africa will be astounding. For impact investors, it’s extraordinary arena to have tremendous returns while also delivering social good.

A young continent on the move

One in three people living in sub-Saharan Africa 297 million, is between the ages of 10-24 — making Sub-Saharan Africa the youngest region in the world And this youth population is eager for opportunitie. Innovative access to capital for this intelligent and eager segment of the population can transform the continent and lead to better jobs prospects, education.

Africa’s resources and young population have caught the eye of global impact investors ready to jump-start the continent’s economies. By creating opportunities for full-time employment and entrepreneurship Investing in impact opportunities in Africa can give its young, massive, and capable workforce the skills needed to build businesses and grow sectors.

Investing in women

Another massive, untapped investible asset class for impact investing is women owned or women controlled businesses.  As investors look for untapped market opportunity, why not focus on 50.4 percent of the population. Today, women are the largest emerging investible class across the globe. Only 2.7 percent of venture capital-funded companies have a female CEO.  Women-owned businesses tend to perform better and typically reinvest more back into their communities. In Africa, 63 percent of women are self-employed in the informal sector. Because of this, these companies are under-profiled and lack visibility to traditional and impact investors. They rarely see the investments they deserve. However, women owned businesses do represent high quality, motivated, businesses that are ready for investment.

Tapping into millennials and diasporas’ investment

Millennials are another area that warrant discussion. They represent a critical demographic that are seeking investments that do more than just give them a traditional rate of return. Millennials are eager to benefit people and planet by virtue of their consumption patterns and investment philosophy. As such, this demographic of millennials must be engaged in the deployment of capital. As the millennial generation grows to dominate the U.S. adult population, this category is only going to expand. Additionally, the engagement of diaspora communities into common funding causes, in the form of securities, will accelerate investing for good.  Diaspora communities as well as millennials converging and aggregating investible capital through impact investing that will greatly benefit Africa.

Access to capital to transform impact investment

As innovative technologies continue to become integrated with regulatory frameworks, access to capital has forever changed. This evolving investment landscape reflects the increasing desire for investors to benefit people and planet through their investment practices. Armed with a robust, young labor force and progressive groups of women business leaders, Africa is ripe with opportunities. In the coming months, we’ll explore each of the segments of society and how their access to capital will become a catalyst for transformative change on the continent.

 

IGD Frontier Leader Vincent Molinari is the co-founder & CEO of GATE Global Impact.