SOCIALLY RESPONSIBLE INVESTING; CAN IT PROPEL AFRICAN ECONOMIES?
By Mensah Charles
Impact investing, which seeks to provide funding for social enterprises and organisations established for social impact cannot be underestimated as far as the development of the sub-region is concerned. Since its inception in 2008 after the global financial crisis, there was the need to address the needs of the needs of NGOs, foundations and organisations who are committed and dedicated to embarking on projects which will have a social impact in the society. According the Global Impact Investing Network (GIIN), impact investing are the ”investments made into companies, organisations and funds with the intention to generate social and environmental impact alongside a financial return”.
In order to properly analyse the future impact, needs and challenges of impact investing, there is the need to look at the demand and supply side. According to the report by Rockefeller Foundation and JP Morgan in 2010 suggested that impact investing is an emerging industry and could grow to represent a global market of $500 billion in the next five to ten years. This indicates a growth trajectory which looks exciting and thus a great level of awareness has to be sent across the region.
The analysis of the demand side of impact investing in Africa also considers the needs and opportunities of it. Education, health, water, agriculture, climate and sanitation are among other problems confronting the region. When they are tackled by intensive impact investing strategies, sub-Sahara Africa will enjoy progress in development.
Education is one of the most powerful instruments for socio-economic development and reduction in poverty and gender inequality, sadly, education in Africa is not up to expectation and poorly managed. According to UNESCO’s regional overview on sub-Sahara education in 2000, 52% of school children are receiving primary education out of the 40 million children in Africa; and this figure has appreciated since. Also there is an imbalance as a result of gender inequality which reduces the overall level of education in the region.
In healthcare system, Africa lags behind majorly in terms of infrastructure and human resource, and this has been a huge blow to the overall proper delivery of healthcare in sub-Sahara Africa. Critically thinking, the basic unit of good life and welfare in every space is inherent in good health and proper delivery of healthcare. In his presentation at the TEDXHamburg 2010, Bright Simmons, founder of Mpedigree Goldkeys, stated that, in many parts of our world today where healthcare and good health is a problem, one of the ways people have tried to address the issue of healthcare is to make available essential medicines. Unfortunately, this has been challenged by the above mentioned problems and also counterfeiting of drugs which even worsens the existing plight of health in sub-Sahara Africa. As far as healthcare is concerned, rural Africa does not provide good conditions of livelihood to ensure the human capital needed to make it possible for proper dispensation of health. This prevents the overall progress of health in the region.
Agriculture has been one of the most significant consistent sectors of any sub-Saharan country and its contribution to their economy has been enormous as it presents diverse opportunities for the country including employment. In Ghana last year, the sector recorded 22.6% of total GDP which represent a considerable amount of development. This is a sector which has a lot to offer in terms of alleviating poverty at the basic level. Impact investing in agriculture will be of great importance in alleviating poverty in the continent.
The supply side makes it possible for impact investment to thrive in this part of our world. The future of impact investing is a very bright one and as an emerging trend it has made great strides in creating social benefits around Africa. Primarily, impact investment are made by private equity firms, foundations, institutional investors, venture capital funds and micro-finance institutions. In a research by J.P Morgan and Rockefeller foundation, there already exist in the space with $10 trillion dollars capital worth of investment opportunities being identified and having an expected profit potential between $200 billion and $700 billion in ten years time. It showed that $8 billion impact investment were made in 2012 and are expected to grow by another billion in 2013 with a third going to Africa. The Global Impact Investing Network (GIIN) presented research also showed that, 34% of investors say sub-Saharan Africa is an area of interest and the most selected as having opportunities ahead of Europe, Asia and other emerging markets. What does this mean? This implies that, capital investments made for social benefits can help the development of the continent. Africa is challenged in many aspect of development; governments performance have been insignificant for a real development. The growth of impact investment is then seen as a developing factor for the region. As sub-Saharan Africa’s population rise annually, there is the expectation of pressure on the spatial distribution of infrastructure which will consequently result in a rise in the social problems. Therefore, there is a positive relationship between sub-Sahara Africa’s problems and impact investment in the region; a growth in the latter helps solve the ever- growing challenges. However, it is possible impact investing can provide sustainable solutions which will halt the challenges of the region in the long run.
Institutional investors and retail investors should see Africa as a region which presents many opportunities in social return. Education, sanitation, healthcare and agriculture among other sectors makes sub-Sahara a potential impact investment destination. Development in Africa may be seen as a cliche that which is short-lived, considering the political unrest and poor leadership which continually leaves the continent in a downward spiral of abjection. However, with a persistent and unquenchable thirst for empowerment, that development may move at a fast pace. Collective efforts from stakeholders of investors and proponents of progress can cause real sustained development.