Impact Investing In West Africa, Dalberg, 2011

Download Impact Investing In West Africa, Dalberg, 2011

Post on 06-Apr-2016

219 views

Category:

Documents

6 download

DESCRIPTION

 

TRANSCRIPT

  • COPENHAGEN | DAKAR | GENEVA | JOHANNESBURG | MUMBAI | NAIROBI | NEW YORK | SANTIAGO | SAN FRANCISCO | WASHINGTON DC

    Impact investing in West Africa

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten TextApril 2011

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

    Afua SarkodieTypewritten Text

  • Supported by

  • AcknowledgementsThisreportwasmadepossiblethankstothegenerouscontributionsoftimeandexpertknowledgefrommanyindividualsandorganisations.TheAdvisoryTeamprovidedinvaluableinsights,guidanceand support throughout thepreparationof this report. Inaddition, special thanksgoes toall theindividualsthattookpartintheinterviewsandattendedtheimpactinvestingworkshopsinSenegal,Ghana and Nigeria in March 2011. Through the interviews and the workshops, a wealth ofexperience,understandinganddatawas sharedon impact investingactivities inWestAfrica.WewouldalsoliketothankJennyEverettoftheAspenNetworkofDevelopmentEntrepreneurs,OliverKariusofLGTVenturePhilanthropy,andourcolleaguesatDalberg,PeterTynanandAndrewStern,who also contributed their time and energy. Any errors or omissions in the report are theresponsibilityoftheEditorialTeam.AdvisoryTeamMargotBrandenburg,TheRockefellerFoundation,NewYorkJustinaLai,TheRockefellerFoundation,NewYorkWiebeBoer,TheTonyElumeluFoundation,LagosAmitBouri,TheGlobalImpactInvestingNetwork,NewYorkSapnaShah,TheGlobalImpactInvestingNetwork,NewYork

    GiselleLeung,TheGlobalImpactInvestingNetwork,NewYorkJacobSamuelson,TheGlobalImpactInvestingNetwork,NewYorkLaurieRud,TheGlobalImpactInvestingNetwork,NewYorkStephenNairne,LundinforAfrica,Vancouver

    DalbergEditorialTeamMadjigueneSock,DakarAngelaHansen,JohannesburgLiesbetPeeters,LondonSusanneNormarkChristensen,Copenhagen

    AfuaSarkodieKupka,DakarDanielaNwaobasi,DakarAbdourahmaneDiop,Dakar

  • TableofcontentsExecutivesummary......................................................................................................................1Chapter1Introduction..............................................................................................................71.1 Objectivesofthereport....................................................................................................................71.2 TheheterogeneityofWestAfrica.....................................................................................................71.3 Datagatheringandstakeholderoutreach........................................................................................91.4 Definingimpactinvesting................................................................................................................101.5 Structureofthereport....................................................................................................................12

    Chapter2Theneedandopportunity:demandside.................................................................142.1 Characteristicsandneedsofimpactinvestingsectors...................................................................142.2 Sectorswitheconomicimpact:theexampleofagriculture............................................................162.3 Sectorswithsocialimpact:theexampleofwatersupplyandsanitation.......................................182.4 Sectorswithenvironmentalimpact:theexampleofrenewableenergy........................................20

    Chapter3ImpactinvestinginWestAfrica:supplyside............................................................243.1 TheimpactinvestorecosysteminWestAfrica...............................................................................243.2 Privateequityandventurecapital..................................................................................................293.3 DevelopmentFinanceInstitutions..................................................................................................333.4 Foundations,highnetworthindividualsandprivatefamilyoffices...............................................363.5 Institutionalinvestors......................................................................................................................383.6 Microfinanceinstitutions................................................................................................................403.7 Otherimpactinvestments...............................................................................................................42

    Chapter4Barrierstoenablingmoreimpactinvestments........................................................444.1 Matchofsupplyanddemand..........................................................................................................444.2 Investmentinfrastructure...............................................................................................................464.3 Generalbusinessenvironment........................................................................................................484.4 Addressingthechallenges...............................................................................................................49

    Chapter5RecommendedactionstodevelopWestAfricasimpactinvestingindustry.............515.1 Actionsspecifictotheimpactinvestingindustry............................................................................525.2 Conclusion.......................................................................................................................................59

    AppendixAListofimpactinvestorsinWestAfrica..................................................................A1AppendixBListofinstitutionsinterviewed.............................................................................B1AppendixCCasestudies..........................................................................................................C1Endnotes..................................................................................................................................D1

  • TableoffiguresFigure1.1:Geographicalscopeoftheresearch................................................................................................8Figure1.2:FrameworkusedtoidentifyimpactinvestorsinWestAfricaandsetresearchboundaries........11Figure2.1:Sectorsthatlendthemselvestoeconomic,social,andenvironmentalimpact............................14Figure2.2:Useofimprovedsanitationfacilities............................................................................................18 Figure2.3:Useofimproveddrinkingwatersources......................................................................................18Figure2.4:Availablehydropotential(MW)inWestAfrica(2006).................................................................20Figure3.1:Mappingofimpactinvestorsbasedonrisktoleranceanddealsize............................................28Figure3.2:IFCcumulativegrosscommitmentsforWestAfricaasoftheendofFY2010(US$millions).......35Figure4.1:Challengesforexpansionandgrowthoftheimpactinvestingindustry.......................................44Figure5.1:ActionsrequiredtoincreasethescaleoftheimpactinvestingindustryinWestAfrica..............51

    TableoftablesTable1.1:OverviewofkeymacroeconomicindicatorsinWestAfricancountries...........................................9Table2.1:Overviewofenterprisefinanceneedsintheagriculturesector....................................................17Table2.2:Overviewofenterprisefinanceneedsinthewatersupplyandsanitationsector.........................19Table2.3:Overviewofenterprisefinanceneedsintherenewableenergysector........................................21Table3.1:Type,numberandsizeofimpactinvestorsinWestAfrica............................................................25Table3.2:Highlevelsummaryofthedifferencesbetweenimpactinvestortypes.......................................26Table3.3:ExamplesoffundsinvestingforimpactinWestAfrica..................................................................30Table3.4:PE/VCfundcountryfocusinWestAfrica.......................................................................................32Table3.5:ExamplesofDFIactivitiesintheregion..........................................................................................34Table3.6:FoundationsandprivatefamilyofficeswithinvestmentactivitiesinWestAfrica........................37Table3.7:ActivemicrofinancefundersinWestAfrica...................................................................................41Table3.8:MicrofinanceinvestmentvehiclesinGhanaandNigeria...............................................................41TableofboxesBoxA:ExamplesofinvestmentapproachesGrofinandE+Co......................................................................31BoxB:Impactinvestingtools..........................................................................................................................33BoxC:IndianAngelNetwork...........................................................................................................................53BoxD:TheGlobalImpactInvestingNetwork(GIIN).......................................................................................55BoxE:NigeriaIncentiveBasedRiskSharingSystemforAgriculturalLending(NIRSAL).................................56BoxF:PerusMultiFondosscheme................................................................................................................58

  • ListofacronymsADEPME lAgencedeDveloppementet

    dEncadrementdesPetitesetMoyennesEntreprises

    AfDB AfricanDevelopmentBankAFIG AdvancedFinanceandInvestment

    GroupAGRA AllianceforaGreenRevolutionin

    AfricaANDE AspenNetworkofDevelopment

    EntrepreneursBCEAO CentralBankofWestAfricaStatesBIO BelgianGovernment'sDevelopment

    FinanceInstitutionBOAD WestAfricanDevelopmentBankCAADP ComprehensiveAfricanAgriculture

    DevelopmentProgrammeCADF ChinaAfricaDevelopmentFundCDC UnitedKingdomGovernment's

    DevelopmentFinanceInstitutionCEO ChiefExecutiveOfficerCFA WestAfricanFrancCTF CleanTechnologyFundDEG GermanGovernment's

    DevelopmentFinanceInstitutionDFI DevelopmentFinanceInstitutionDOTS DevelopmentOutcomeTracking

    SystemECOWAS EconomicCommunityofWest

    AfricanStatesESG Economic,SocialandGovernanceFAST FinanceAllianceforSustainable

    TradeFCPL FidelityCapitalPartnersLimitedFinnFund FinnishGovernment'sDevelopment

    FinanceInstitutionFMO EntrepreneurialDevelopmentBank

    oftheNetherlandsGDP GrossDomesticProduct

    GIIN GlobalImpactInvestingNetworkGIIRS GlobalImpactInvestingRating

    SystemGVEP GlobalVillageEnergyPartnershipIFC InternationalFinanceCorporationIFU IndustrialFundforDeveloping

    Countries(Denmark)ILO InternationalLabourOrganisationIPO InitialPublicOfferingIRIS ImpactReportingandInvestment

    StandardsLFA LundinforAfricaMFI MicrofinanceInstitutionNGO NonGovernmentalOrganisationNIRSAL NigerianIncentiveBasedRisk

    SharingSystemforAgriculturalLending

    PE/VC PrivateEquity/VentureCapitalROE ReturnonEquityS&L SavingsandLoansSIFEM SwissInvestmentFundforEmerging

    MarketsSME SmallandMediumEnterpriseSSA SubSaharanAfricaSSNIT SocialSecurityandNational

    InsuranceTrustSwedfund SwedishGovernment's

    DevelopmentFinanceInstitutionTIPA TechnoAgriculturePoverty

    AlleviationUBA UnitedBankforAfricaUNFCCC UnitedNationsFramework

    ConventiononClimateChangeVCTF VentureCapitalTrustFund(Ghana)WAEMU WestAfricanEconomicand

    MonetaryUnionWHO WorldHealthOrganisation

  • 1

    ExecutivesummaryImpact investingcanhelpsolvemajorsocialandenvironmentalproblems inWestAfrica1, leveragingnewsources of capital in places that lack sufficient government resources and development aid to addressdevelopmentchallenges.ArecentreportbytheRockefellerFoundationandJPMorgan(2010)suggeststhatimpactinvestmentsareemergingasanalternativeassetclassthatcouldgrowtorepresentaglobalmarketofUS$500billiona in five to tenyears.The implications forWestAfricaareexciting.Now is the time todeepenourunderstanding,increaseawareness,andfosterdialogueonimpactinvestingintheregion.ImpactinvestingmakinginvestmentstogeneratepositiveimpactbeyondfinancialreturnisnotnewtoWestAfrica.However, few investors in theregion identify themselvesas impact investorsorare familiarwiththeconcept inthoseterms.This lackofawareness,coupledwithothersubstantivechallenges,couldslow the development of the impact investment industry in the region. This report is the firstcomprehensiveanalysiseverconductedontheimpactinvestingindustryinWestAfrica.Itaimsto:(1)mapthelandscapeofimpactinvestingsupplyanddemandinWestAfrica;(2)identifythesubstantivechallengesthathamperthegrowthoftheindustryandrecommendsolutionsforovercomingthem;and(3)serveasastartingpointforregionaldialogueandlocalnetworkdevelopmentactivitiesamongimpactinvestors.Theneedandopportunity:demandsideThescopeoftheanalysisincludedinvestmentintoanyenterprisedesignedwithintenttogeneratepositivesocial, economic, or environmental impact, without harming society or the environment. While mostenterprisesintheregioncouldconceivablybeincludedinthisscope,somesectorswereseenasmorelikelytohavesignificantimpact.Ataminimum,companiescreatejobs,createsocialimpactbyimprovingemployeeslivelihoods,andcreateeconomicimpactthroughincreasedtaxrevenuesandthemultipliereffectfromincreasedconsumptionbytheemployee.Enterprisesinsomesectorsalsogeneratesocialimpactthroughthegoodsandservicestheyproduce, suchashealthcare,education,andagriculture.Enterprises inother sectors, suchas renewableenergyandenergyefficiency,produceapositiveenvironmentalimpactinadditiontoaneconomicone.Asaproxyfortotaldemandforimpactinvestmentsintheregion,itisinstructivetoestimatethedemandforinvestments insectors likely tohavesignificant impact.Thisshowsaneed forUS$65billionof investedcapitaloverthenextfiveyears2.TheneedsofindividualenterprisesinWestAfricavarysignificantlydependingontheirbusinessmodel,sizeandmaturity stage, human resource capacity, and other factors.While larger enterprisesmay requirefinanceofUS$2millionandabove,smalltomediumsizeenterprisestendtohaveneedsintheUS$25,000to$2million range,andmicroenterprises require less thanUS$25,000.However, theneedsgobeyondaccessing finance;manyenterprisesalsoneedbusinessdevelopmentservices todevelop their ideasandcreatewellmanaged,financiallysustainableoperations.ImpactinvestinginWestAfrica:supplysideImpact investments in West Africa are primarily made by private equity and venture capital funds,DevelopmentFinanceInstitutions(DFIs),foundations,institutionalinvestors,andmicrofinanceinstitutions(MFIs). In the course of the research, 207 impact investors were identified with combined annualinvestments/commitmentsofatleastUS$3.2billion3.1WestAfricareferstothefifteenECOWASmemberstates:Benin,BurkinaFaso,CapeVerde,CtedIvoire,Gambia,Ghana,Guinea,GuineaBissau,Liberia,Mali,Niger,Nigeria,Senegal,SierraLeone,andTogo2Excludingtheminingindustryandpublicadministrationsectors,thecombinedGDPwasUS$227billionin2010andisexpectedtogrowby4.7%peryear,i.e.,thecombinedoutputshallincreasebyapproximatelyUS$90billionoverthenext5years.Investorbenchmarksofaverageenterpriseprofitmarginsof15%ofrevenuesan...

Recommended

View more >