January 23, 2018

Impact investment: Africa’s saving grace

editor:	Bob Koigi

Millions of people in developing countries still grapple with the absence of cheaper and sustainable energy, adverse impacts of weather changes, lack of employment, housing and decent livelihoods. While international aid hasn’t been effective in uplifting the recipients out of poverty and giving them a shot at a better life.

As the jury is still out on the efficacy of international aid in poverty alleviation, a growing population and emerging issues are putting more pressure on developing countries to find resources to address the 21st century needs.

Africa for example, home to over 1.2 billion people, requires billions of dollars each year to actualise the United Nations Sustainable Development Goals and the African Union Agenda 2063, with a view to ending poverty and inequality. Yet what has been sorely missed out in the planning of this utopian goal, is that Africa doesn’t currently have the requisite domestic resources to meet these goals.

Luckily, as the continent moves from an aid reliant economic model and gravitates towards capitalism, a new form of investment is quickly taking shape, providing a win-win situation to investors and locals.

Impact investment, the idea of balancing between profits and social and environmental good has been delivering impressive payoffs to the number of investors across healthcare, sanitation, ecotourism, renewable energy, financial services and ICT. African countries are leading in the number of such investors around the globe, currently standing at 47%, followed by North America with 44%. By 2015, an estimated $10 billion had been invested in various projects in Africa through this model according to the United Nations Development Programme.

This departure from traditional philanthropy is informed by a new crop of young business leaders who are changing the art of giving from that of a company's byproduct to a fundamental part and parcel of the business. The financial rewards for businesses who have made a positive impact together with the tangible change in the livelihoods of millions is proof to the important role impact investing could play in helping the international community meet all the targets of the global goals.

The next phase in this nascent model is to have the correct metrics that quantify impact on even minute levels, while ensuring this momentum remains vibrant if we are to achieve a fairer and more equitable world.