THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA Africa/Namibia...IMPACT INVESTING IN SOUTHERN AFRICA ... (Netherlands Development Finance Company) ... 4 • THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA

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<ul><li><p>NAMIBIA</p><p>THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA</p><p>WITH SUPPORT FROM</p></li><li><p>ACKNOWLEDGMENTSThis project was funded with UK aid from the UK Government though the Department for International Developments Impact Programme. The Impact Programme (www.theimpactprogramme.org.uk) aims to catalyze the market for impact investment in sub-Saharan Africa and South Asia. </p><p>The Bertha Center at the University of Cape Town contributed to this report by providing access to their database of active impact investors operating across sub-Saharan Africa. </p><p>We would also like to thank Susan Balloch and Giselle Leung from the GIIN for their guidance throughout the research process and contributions to this report. We would further like to thank the tireless Open Capital Advisors (OCA) research teamNeal Desai, David Loew, Rodney Carew, Holden Bonwit, Katie Bach, Sarah Ndegwa, Elijah Ndarua, Joel Muli, Getrude Okoth, and Charles Njugunahfor their work interviewing impact investors, ecosystem players, and entrepreneurs, conducting rigorous data collection under tight timelines. </p><p>We would especially like to thank our interview participants. Without their key insights this report would not have been possible. We include a full list of interviewees in the Appendix. </p><p>For any questions or comments about this report, please email Rachel Bass at rbass@thegiin.org.</p><p>GIIN Advisory TeamAbhilash Mudaliar, Research ManagerKimberly Moynihan, Senior Associate, CommunicationsRachel Bass, Associate, Research</p><p>Open Capital AdvisorsAnnie Roberts, PartnerNicole DeMarsh, Principal </p><p> FEBRUARY 2016</p><p>WITH SUPPORT FROM</p></li><li><p>COMMON ACRONYMSAFD Agence Franaise de Dveloppement (French </p><p>Development Agency)</p><p>AfDB African Development Bank</p><p>BIO Belgian Investment Company for Developing Countries</p><p>BoP Base of the Pyramid</p><p>CEPGL Communaut conomique des Pays des Grand Lacs (Economic Community of the Great Lakes Countries) </p><p>COMESA The Common Market for Eastern and Southern Africa</p><p>CSR Corporate Social Responsibility </p><p>DFI Development Finance Institution</p><p>DFID The Department for International Development (United Kingdom)</p><p>EIB European Investment Bank</p><p>ESG Environmental, Social, and Governance</p><p>FDI Foreign Direct Investment</p><p>FMCG Fast-Moving Consumer Goods</p><p>FMO Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (Netherlands Development Finance Company)</p><p>GDP Gross Domestic Product</p><p>GIIRS Global Impact Investing Ratings System</p><p>GIZ Gesellschaft fr Internationale Zusammenarbeit (German Agency for International Cooperation)</p><p>HDI Human Development Index</p><p>ICT Information and Communication Technology</p><p>IFAD International Fund for Agricultural Development</p><p>IFC International Finance Corporation</p><p>IMF International Monetary Fund</p><p>LP Limited Partner</p><p>MDG Millennium Development Goal</p><p>MFI Microfinance Institution</p><p>MSME Micro, Small, and Medium-Sized Enterprises</p><p>NGO Non-Governmental Organization </p><p>OFID OPEC Fund for International Development</p><p>OPIC Overseas Private Investment Corporation (United States)</p><p>PE Private Equity</p><p>PPA Power Purchasing Agreement</p><p>PPP Purchasing Power Parity</p><p>PTA Preferential Trade Area Bank</p><p>RFP Request for Proposal</p><p>SACCO Savings and Credit Co-operative</p><p>SGB Small and Growing Business</p><p>SME Small and Medium-Sized Enterprises</p><p>SOE State-Owned Enterprises </p><p>TA Technical Assistance</p><p>UN DESA United Nations, Department of Economic and Social Affairs</p><p>UNCTAD United Nations Conference on Trade and Development </p><p>USAID The United States Agency for International Development</p><p>VAT Value-Added Tax</p><p>VC Venture Capital</p><p>WASH Water, Sanitation, and Hygiene</p><p>WHO World Health Organization</p><p>COMMON TERMSEarly-stage business Business that has begun operations but has most likely not begun commercial manufacture and sales</p><p>Focus countries Countries under study wherein non-DFI impact investors are most active, namely Madagascar, Malawi, Mozambique, South Africa, Zambia, and Zimbabwe</p><p>Growth-stage business Company has a functioning business model, and its current focus is developing new products / services or expanding into new markets</p><p>Mature business Profitable company with a developed and recognizable brand</p><p>Non-focus countries Countries covered by the study but that have limited non-DFI impact investor activity, namely Angola, Botswana, Lesotho, Mauritius, Namibia, and Swaziland</p><p>Venture-stage business Sales have begun but cannot sustain the companys operations. The business model is still being aligned with the realities on the ground</p></li><li><p>IV THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA</p><p>NAMIBIADIAMOND MINING IN THE DESERT</p></li><li><p>NAMIBIA 1</p><p>TABLE OF CONTENTSAbout this Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2</p><p>Country Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3</p><p>Supply and Demand of Impact Investing Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5</p><p>Challenges and Opportunities for Impact Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8</p></li><li><p>2 THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA</p><p>ABOUT THIS REPORTMOTIVATION</p><p>The impact investing industry has grown in prominence over the last decade, and impact investors globally have developed substantial and particular interest in sub-Saharan Africa, given the regions strong potential for investments to drive positive social and environmental impact. Despite strong interest, relatively little research has examined impact investing markets at the country level within the continent. This type of granular information is essential to investors currently operating in the region or considering investments there in the future.</p><p>This study provides detailed information on impact investing activity across 12 countries in Southern Africa. For each country, the report examines impact investing capital disbursed at the time of data collection in mid-2015 (by sector, size, and instrument), analyzes key trends in the industry, and describes the challenges and opportunities available for social enterprises and impact investors. Political and/or economic circumstances may have changed since initial data collection.</p><p>SCOPE</p><p>As defined by the GIIN, impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. A commitment to measuring social or environmental performance is considered a hallmark of impact investing. Investors who do not meet this definition have not been included in this reports analysis. </p><p>Development finance institutions (DFIs) are important actors in the impact investing landscape, providing large amounts of capital both through direct impact investments and through indirect investments through other impact capital vehicles. Because of their large size and unique nature, this report analyzes DFI activity separately from the activity of other types of impact investors. </p><p>METHODOLOGY</p><p>This report relies heavily on primary research, including more than 60 interviews with local and international impact investors, social enterprises, ecosystem players, and government institutions. The research team also examined publicly available primary information, including analyzing investor documents and reviewing organizational websites and press releases to compile a comprehensive database of impact investing activity across all 12 countries in Southern Africa. Overall, this report includes data regarding the activities of 25 DFIs and 81 non-DFI impact investors, totaling over 8,600 transactions including substantial activity from DFIs based in South Africa. </p><p>More detailed information on methodology and scope is provided in the Introduction &amp; Methodology chapter. All chapters of this report can be found at www.thegiin.org.</p><p>2 THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA</p></li><li><p>NAMIBIA 3</p><p>COUNTRY OVERVIEWNamibia (formerly South-West Africa) gained independence from South Africa in 1990, making it the last country in Africa to do so.1 The country has a population of just 2.3 million and one of the lowest population densities globally, with only 2.7 people per square kilometer.2 The Namib Desert runs along the west side of the country and is largely uninhabited; the majority of economic activity is accordingly concentrated in the central and eastern areas of the country (see map in Figure 1).</p><p>FIGURE 1. MAP OF NAMIBIA</p><p>ANGOLA</p><p>NAMIBIA</p><p>SOUTH AFRICA</p><p>LESOTHO</p><p>MADAGASCAR</p><p>SWAZILAND</p><p>BOTSWANA</p><p>ZIMBABWE</p><p>MOZAMBIQUEMALAWI</p><p>ZAMBIA</p><p>Namibias gross domestic product (GDP) was estimated at USD 23.6 billion at purchasing power parity (PPP) in 2014,3 having grown at an average of 6.4 percent annually over the past decade.4 With GDP per capita of USD 10,800 (PPP), Namibia is categorized as an upper-middle-income country; however, the country faces extreme inequality, with the worlds highest ratio between the average income of the richest 10 percent and the poorest 10 percent and high unemployment at 17%.5</p><p>1 The World Factbook, s.v. Namibia (Washington, DC: Central Intelligence Agency), https://www.cia.gov/library/publications/the-world-factbook/.</p><p>2 United Nations Statistics Division, s.v. Namibia, https://data.un.org/CountryProfile.aspx?crName=Namibia.</p><p>3 World Economic Outlook Database, s.v. Namibia (Washington, DC: International Monetary Fund, 2015), https://www.imf.org/external/pubs/ft/weo/2015/01/weodata/index.aspx. </p><p>4 Ibid.5 Jeni Klugman et al., Human Development Report (New York: United Nations Development </p><p>Programme, 2009), http://hdr.undp.org/sites/default/files/reports/269/hdr_2009_en_complete.pdf.</p></li><li><p>4 THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA</p><p>TABLE 1. SELECTED NAMIBIA DEVELOPMENT INDICATORS</p><p>DEVELOPMENT INDICATOR Namibia Regional AverageGlobal </p><p>Average</p><p>HDI SCORE (RANKS 127TH OF 187 COUNTRIES) 0.62 0.55 0.69</p><p>GDP PER CAPITA (USD) 10,800 6,874 17,975</p><p>UNEMPLOYMENT RATE (%) 17 13 6</p><p>POPULATION BELOW USD 1.25 / DAY (%) 32 51 25</p><p>UNDER-FIVE MORTALITY (PER THOUSAND BIRTHS) 39 75 47</p><p>POPULATION WITH SOME SECONDARY EDUCATION (%) 34 41 59</p><p>Extraction and mineral processing comprise roughly 30 percent of GDP, with diamonds and uranium the two major subsectors.6 Foreign direct investment (FDI), accounting for approximately five percent of GDP and dominated by South Africa and China, is highly concentrated in the mining sector.7 </p><p>Namibia is a member of the Common Monetary Area (CMA) along with Lesotho, Swaziland, and South Africa.8 Across this currency union, currencies are pegged one-to-one to the South African Rand, which also circulates within the country. As a CMA member, then, Namibia follows the monetary and exchange rate policies of South Africa.9 Nevertheless, the government has a strong macroeconomic record, relying on fiscal policy to influence the economy; it spent heavily in 2008 and 2009 to stimulate the economy during the global economic crisis.10</p><p>6 The World Factbook, s.v. Namibia (Washington, DC: Central Intelligence Agency), https://www.cia.gov/library/publications/the-world-factbook/.</p><p>7 US Department of State, Namibia Investment Climate Statement (Washington, DC: US Department of State, 2015), http://www.state.gov/documents/organization/241886.pdf.</p><p>8 KPMG, Namibia Country Profile (Johannesburg: KPMG, 2012), http://www.kpmg.com/Africa/en/KPMG-in-Africa/Documents/Namibia.pdf.</p><p>9 Bank of Namibia, Namibias Monetary Policy Framework (Windhoek: Bank of Namibia, 2008), https://www.bon.com.na/CMSTemplates/Bon/Files/bon.com.na/12/12253e03-31d8-4a91-882a-35833faec548.pdf.</p><p>10 African Development Bank, Namibia 20142018 Country Strategy Paper (Abidjan: African Development Bank Group, 2014), http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/2014-2018_-_Namibia_Country_Strategy_Paper.pdf; Martha Phiri and Ojijo Odhiambo, Namibia (OECD Development Centre: African Economic Outlook, 2015), http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2015/CN_data/CN_Long_EN/Namibia_GB_2015.pdf. </p></li><li><p>NAMIBIA 5</p><p>The private sector in Namibia benefits from a stable political environment. Namibia has a constitutional democracy, with the same party, SWAPO, in power since independence; nevertheless, Freedom House scores Namibia very well in the areas of freedom, civil liberties, and political rights.11 SWAPO has led Namibia to a strong regional ranking on business-environment indicators, scoring 98th out of 189 countries (and eighth in Africa) on the World Banks Ease of Doing Business index.12 To achieve this, Namibia has focused on reducing corruption and driving policies for private-sector development. </p><p>Education is a top priority for the Namibian government. Almost a quarter of Namibias national budget is directed toward education.13 This investment has created a highly literate population, with literacy rates for 15-to-24-year-olds and adults estimated at 94 percent and 89 percent, respectively.14 </p><p>SUPPLY AND DEMAND OF IMPACT INVESTING CAPITAL The formal financial sector in Namibia is small, with only four commercial banks and one microfinance institution.15 Despite its size, its financial sector is one of the most sophisticated in Africa, and private sector access to credit is growing. In recent years, total credit provided to the private sector has risen by more than 13 percent annually,16 with only 31 percent financially excluded in 2012 (as compared with 52 percent in 2007).17 In this credit expansion, individuals and businesses are looking to take advantage of single-digit interest rates, which are significantly lower than the regional average and comparable to those in South Africa.18</p><p>11 Namibia, Freedom House, https://freedomhouse.org/report/freedom-world/2015/namibia - .VeBvM_mqqko.</p><p>12 The World Bank, Economy Rankings, in Doing Business 2015 (Washington, DC: The World Bank, 2015), http://doingbusiness.org/rankings. </p><p>13 Martha Phiri and Ojijo Odhiambo, Namibia (OECD Development Centre: African Economic Outlook, 2015), http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2015/CN_data/CN_Long_EN/Namibia_GB_2015.pdf.</p><p>14 Ibid. 15 KPMG, Namibia Country Profile (Johannesburg: KPMG, 2012), http://www.kpmg.com/Africa/en/</p><p>KPMG-in-Africa/Documents/Namibia.pdf.16 African Development Bank, Namibia 20142018 Country Strategy Paper (Abidjan: African </p><p>Development Bank Group, 2014), http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/2014-2018_-_Namibia_Country_Strategy_Paper.pdf.</p><p>17 Martha Phiri and Ojijo Odhiambo, Namibia (OECD Development Centre: African Economic Outlook, 2015), http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2015/CN_data/CN_Long_EN/Namibia_GB_2015.pdf.</p><p>18 Bank of Namibia, https://www.bon.com.na/.</p></li><li><p>6 THE LANDSCAPE FOR IMPACT INVESTING IN SOUTHERN AFRICA</p><p>Still, challenges around access to credit persist. Only 64 percent of adults are covered by the existing private credit bureau.19 Similarly, small- and medium-sized enterprises (SMEs) and start-ups re...</p></li></ul>

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