While global investment is expected to rise sharply this year as a result of the pandemic, impact investment – the funding of projects that generate social or environmental impact, as well as a financial return – is tipped to hold relatively steady, and could play a key role in the recovery of African economies and other emerging markets.
The rise in technology adaptation and the dynamic youth of a continent with an average age of 19 and a growing population will likely be a catalyst for further changes in the African impact investment landscape that was underway prior to Covid-19 and will inevitably drive long term economic growth that private equity investors will find attractive.
This could birth the implementation of certain projects, some impact investors are increasingly looking to collaborate with like-minded entrepreneurs and funds to better streamline and accelerate investment.
DFIs ‘THINK’ AFRICA
Unlike many foreign direct investors (FDIs), Development Finance Institutions (DFIs) are willing to invest in Africa and other developing countries if the investment case is strong enough.
IFC and the IFC Financial Institutions Growth Fund is helping to increase access to digital payment solutions for small and medium-sized businesses in several countries in Africa with its investment in Adumo.
The investments will help to make digital payments more affordable and accessible to smaller businesses in Africa, many of which currently rely on cash transactions. Adumo, South Africa’s largest independent payment provider with a presence in 13 African countries, owns merchant acquirers Sureswipe, Ikhokha, and payment processor Innervation Pan African Payments.
French Proparco invested €50 million in the first fund for green bonds issued by companies in emerging countries. This investment in the US$538 million HSBC Real Economy Green Investment Opportunity (“REGIO”) fund makes Proparco one of its three founding investors. REGIO will invest in green bonds issued by private companies based in emerging countries in Asia, Africa, and Latin America.
The Green Bond market today still mainly an active market for investors and issuers in developed countries, but rarely in emerging countries, despite the huge financing needs in these countries and the demand for green assets from investors in OECD countries. REGIO is the second fund dedicated to green and sustainable bonds in emerging markets, after Amundi Planet, the first dedicated to the private sector in emerging countries.
REGIO will thereby contribute to filling this gap by mobilizing financial flows from private investors in developed countries, which have invested over 60% of the funds in REGIO for “green” projects implemented by private companies in emerging countries. REGIO will thereby promote access to capital markets for local issuers by providing a new range of financing for private projects that contribute to the achievement of the Sustainable Development Goals.
Over the next seven years, the fund will target projects that will support the ecological transition and develop new sustainable networks and infrastructure (energy, transport, water and sanitation), while promoting the transfer of technologies in these countries.
FMO forms partnership to accelerate universal health coverage in Africa
Philips and FMO announced last March, on the occasion of the AHAIC 2021 conference, that they have signed a wider partnership agreement aimed at improving access to quality primary care in Africa. The partnership is built on the shared belief that private-sector innovations and partnerships result in better and affordable care underpinned by investable business models for underserved communities.
Under the agreement, Philips and FMO will work together on primary healthcare projects in low- to medium-income countries in Sub-Saharan Africa to develop projects from ideation to proof of concept – testing innovations in real-life settings to validate clinical and financial assumptions and making improvements so that investment decisions on scaling can be made more confidently. The initial scope of the project is to provide development financing for around ten projects over the next five years. Each project receives approximately €1 million in catalytic funding for proof of concept.
“With this partnership we want to leverage more resources to benefit the African population,” said Janet Nieboer, Director NL Business at FMO.
“Strengthening the primary healthcare system is essential for economic development and reducing inequalities in a country. Investments in primary healthcare benefit the entire health chain. To be able to achieve these impacts at scale, we develop innovative business models where the public and private sector cooperate. Together with Philips and other partners like Amref and UNFPA, we already create real change momentum.”
Despite the race and speculation for commodities-driven natural resources, the future of sub-Saharan Africa economies is looking increasingly green for those paying close attention.