Monday, 24 June 2024

Unblocking the bottlenecks of impact investment in West Africa

5 min read

By Chris Georgiou

The Wealth and Society West Africa 2019 Roundtable Dialogue consisting of leading impact investment institutions discussed a range of solutions to the bottlenecks of impact investing in West Africa

  • The pace of inclusion is outweighed by the growth of exclusion making it hard to measure average impact investments.
  • Market building is limited at an institutional level by shallow financial markets making it difficult to find exits for investments.
  • Philanthropy and charity can undermine sustainable development in West Africa

How is philanthropy and charity undermining sustainable development in West Africa? What financial tools are most appropriate for impact investing in the local environment and what lessons have been learnt from other developing nations? How can we encourage investors to include impact in their portfolio and what regulations are holding them back?

These were some of hot topics discussed during The Wealth and Society West Africa 2019 Roundtable Dialogue by leading impact investment institutions and investors including executives from Acumen, Alitheia Capital, Dalberg and Emerging Capital.

Toyin F. Sanni, Chief Executive Officer of Emerging Africa Group, a Nigerian-based financial services provider, set out the current and future trends in wealth across Africa as well as the challenges. Although Nigeria is ranked the largest economy in Africa, in terms of per captita GDP it is not even in the top ten. Fluctuating commodity prices and a depreciating currency have negatively contributed to GDP between 2010-17.

Africa stalling


Figure 1: Average annual wealth growth by region.

Four key steps needed to change the African narrative according to Sanni are infrastructure funding through capital markets, better tax collection and redistribution, human capital development and changing the continent’s mindset from a consumer based to a production minded industrial economy with a savings culture.


Panel members listen to Toyin F. Sanni’s opening speech.

Temilade Denton of Alitheia Capital, a fund manager that makes private equity investments in businesses that create access and inclusion for underserved markets, explained what Impact Investing is not. An investment in Africa is not impact investing; neither is charity or philanthropy. Impact investing is a result of ‘Intentionality plus Additionality.’[CG1] 

An example of this is Alitheia Capital’s Munthu fund which supports local entrepreneurs and institutions by providing underserved groups with access to affordable, better quality basic goods and services with a focus on financial inclusion, agri-business and other impact sectors.

Typically, Alitheia Capital invests enough to have a board seat, yet remains a minority shareholder to keep the project ‘people-centred.’ When it comes to exiting the project Denton stated that they always endeavour to exit responsibly. However, in terms of measuring impact, with the pace of inclusion outweighed by the growth of exclusion - it hard to measure average impact investments.

Mobile payments platform Pagatech was a deal that yielded both financial and social returns for Alitheia Capital. With 32% of Nigerians financially excluded, high transaction costs, insufficient financial touch points and prohibitive KYC requirements for opening bank accounts, Pagatech with 11.7 million users and 20,000 agents (financial touch points) is driving access to financial inclusion.


Temilade Denton, Social Impact and ESG Manager, Alitheia Capital

The micro and macroeconomic as well as the meso-level barriers to impact investment were detailed by Ayomide Akindolie, senior consultant, at Dalberg.

In addition to the policy and regulatory uncertainties in West Africa, meso-level barriers include a poor perception of impact investing among both foreign and local fund managers, whom consider it not financially viable, and in the same category as philanthropy.

Further limiting market building at an institutional level are shallow local financial markets which make it difficult to find exits for investments. For example, stock market capiltization as a percentage of GDP is only 1% in Nigeria, compared to 28% in Sub-Saharan Africa, and 69% globally.

At the micro-level Akindolie pointed out the demand-side challenges such as the limited awareness of financing options other than commercial banks which often have onerous collateral requirements as well as capacity gaps in the corporate governance of enterprises mean that businesses are too often not ready to be invested in.

“Without the first ‘leg-up’ it’s hard to get the follow up investment.” Akindolie said. Enterprises’ unfamiliarity with the concepts of venture capital and private equity investing is holding back enterprises from releasing equity stakes.

Blended capital, which crowds in private investments by reducing associated investment risks was cited by Akindolie as a vehicle to unblock the supply bottlenecks in West Africa.


This experience in the field was echoed by Meghan Curran, West Africa Director of Acumen, who explained how Acumen’s ‘Patient Capital’ approach better ensures that an impact is made due to its longer investment cycle which shields enterprises from short term venture capitalists.

Acumen utilises capital markets to bring sustainable solutions to low-income consumers. Patient capital takes many forms and in Acumen’s model, with capital coming from philanthropists, it is possible to have a longer time horizon on investment returns, that can be limited to only recouping the initial investment. Any surplus can be re-invested back into other projects.

Recycling investment returns for sustainability


Figure 2: Acumen’s Patient Capital approach to impact investment.

As a facilitator of sustainable philanthropy, Acumen works to de-risk projects so that they can get off the ground, stabilize them and keep a project going as well as to raise equity for projects. The solar manufacturing company D.Light was a successful case highlighted by Curran of patient capital in practice. How to make a solar panel cost $5 was the business objective.

With a $212K initial investment and $3.7 million in follow up investments, board and advisory support, between 2017-2013 the company reached a cumulative sales volume of over 20 million products sold, 82 million customers impacted and $98 million of capital leveraged. While commercial investors were pushing the company to move up the value chain, Acumen’s use of patient capital allowed the company space and time to build its core business.

In the latest developments in impact investing, Curran discerned how the investment landscape is shifting from a centralised system supported by DFIs and HNWI funding to a decentralised system where corporate foundations are now major players.


Meghan Curran, West Africa Director, Acumen

Reflecting on sources of investment Denton replied that Alitheia Capital has the opposite problems to Acumen. With no HNWI investors, Alitheia Capital must hit targets set by institutional investors, explaining how it is difficult to align interests among a syndicate of institutional investors – even taking three years to agree terms in one instance. The solution therefore, according to Denton, is to receive local funding as local investors understand the situation better.

“Everyone is waiting on who moves first,” said Sanni, in response to Denton, adding that HNWIs are looking for higher returns while very large funds are not sure where/how to apply their funds.

A noteworthy point picked up by all impact investors was how the ‘wrong’ use of grants can spoil the market. Well-meaning charity and philanthropy is sometimes counter-productive in West Africa, instilling a reliance on free or cheap money that is making it difficult for impact investors to ensure partners are incentivised to meet expectations and make a return on investments. 


Speakers and Panelists:

Toyin F Sanni, Chief Executive Officer, Emerging Africa Group

Attahiru Mohammed Maccido, Director, Buraq Capital

Kabir Kabo Usman, Director General, Centre for Management Development

Temitayo Ade-Peters, CEO, WeForGood

Meghan Curran, West Africa Director, Acumen

Temilade Denton, Social Impact and ESG Manager, Alitheia Capital

Ayomide Akindolie, Senior Consultant, Dalberg


Gordian Gaeta, Chairman, Wealth & Society Programme

Urs Bolt, Advisor, Wealth & Society Programme


Keywords: Impact Investment, Sustainable Development In West Africa
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