The Bright Continent by Dayo Olopade

Author:Dayo Olopade
Language: eng
Format: epub
Publisher: Houghton Mifflin Harcourt

Taking the Commercial Map seriously means changing the way African ideas are financed. A number of innovative models have emerged to close the funding gap for job creators in Africa. Most prominent are organizations committed to “impact investing,” or the deployment of capital to achieve not just financial but also social returns. The Rockefeller Foundation, with J. P. Morgan, has tried to define impact investing as a “new asset class.” In Africa, there have been promising follow-on effects. Gogo’s company received an investment of $1.8 million—squarely in the missing middle—from the Acumen Fund, an investment vehicle that calculates social benefits as part of its traditional return on investment.

Impact investing certainly has its pitfalls. If you’re just trying to keep a business afloat, a requirement to measure impact—whether tons of carbon sequestered or children kept free from disease—can be burdensome. Measuring impact has generated superfluous meta-bureaucracies. And, of course, “impact” can vary wildly: Lonmin, the South African mining company thrust into global headlines for brutal conditions and unfair wages in its mines, is listed both on the Johannesburg Stock Exchange and at the Financial Times as a socially conscious investment. Other mangled incentives exist as well. But generally, the advent of social entrepreneurship and social investment is a good fit for African markets. Most entrepreneurship in Africa is inherently “social” in its downstream effects. For every job, several family or extended family members benefit.

The Gates Foundation and other huge philanthropies could spend their war chests on private enterprise far more frequently. In the United States, a funding mechanism known as a program-related investment (PRI) allows a nonprofit to invest its endowment as a loan or equity stake—and to earn a return. Few do so, however. For many philanthropies, and Gates in particular, the reluctance to support businesses is ironic, given the market-based success that fed the foundation itself.

But pure giving is not going away—in fact, it’s a common way for African start-ups to get off the ground. A small grant can cover costs until “real” capital is available. Of the cases we’ve looked at, Baobab Health, FACE Africa, Solar Sister, KickStart, and others have been funded with grant capital. But it remains a fickle instrument. Regina Kamau joined KickStart over a decade ago, after working with an international NGO that provided heavily subsidized health care to poor women in Nairobi. It’s part of why she believes in their for-profit, for-sale solution. “One of the questions I asked myself is that if these people leave, what next? When there is donor fatigue, what is going to happen to these poor urban women?” To her mind, selling tools and offering modest business advice are far more sustainable.

More troubling, aid money can have a chilling effect on private capital. “There’s a lot of donor money, NGO money, and, less so, African government money,” says Barbara James, who now runs Henshaw Capital Partners, a private equity fund of funds. “And sometimes these types of financing do not come and support what’s already happening in Africa. They come and crowd it out.

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