Inside the Africa Impact Summit.

Earlier this month, I attended the second annual Africa Impact Summit in Nairobi. Organised by Impact Investing Kenya and other groups, it focused on "Scaling Impact: Accelerating Action for the Africa We Want," and highlighted the important role of impact investors like GIF. 

During a panel moderated by the Africa Venture Philanthropy Alliance (AVPA), we discussed catalytic capital, emphasising not just funding but also capacity building and technical assistance. We also explored innovative financing mechanisms to bridge funding gaps.

As part of the conversation around the balancing act between social impact and financial returns, I voiced one of our core beliefs here at GIF: that financial returns and social impact do not have to be mutually exclusive. Rather, in certain contexts, social impact can be a harbinger of financial success. Mr. Green Africa is an example of this: offering fair and transparent pricing to waste pickers as well as better traceability of its supply chain has enabled the company to attract more customers who value ethical sourcing. This has lead to higher revenues and generally improved financial performance.

GIF’s flexible, patient capital approach is designed to support the dual aims of financial returns and social impact. Patient capital allows investees to grow sustainably without the pressure of short term ‘hockey stick’ financial return expectations, recognising that it takes time for social impact to materialise. Additionally, flexibility in structuring allows GIF to tailor financial instruments to the needs of different innovations while aiming for both social impact and financial returns.

I also echoed the sentiments of fellow panellists for the need for more creativity, especially with regards to the structuring of financial instruments with impact-linked incentives. For example, in the case of debt investments, this could be in the form of the downward ratcheting of the interest rate should an investee achieve certain milestones. In the case of equity investments, explorations can be made into impact-linked clawback provisions, where investors agree to return a portion of their ownership if the company meets predefined impact targets.

Within the context of providing catalytic capital, and as we continue to map out the landscape of climate investments, there is a need to think critically about conversations happening on the margins of mainstream climate discourse – for example, at the intersection of climate and health. As the impacts of climate change intensify, the healthcare sector must adapt to ensure the resilience of essential services, particularly in the delivery and management of medications. For example, an innovation that offers an interoperable data solution that seamlessly connects healthcare facilities with the national drug delivery system is crucial for building this resilience. 

As part of my conversations on the sidelines of the event, I discussed an emergent approach for scaling innovations in a ‘less mature’ ecosystem like climate adaptation and resilience: venture building. Venture building recognises the importance of nurturing innovations from the ground up - investing the time, effort, and resources needed to cultivate them from their earliest stages.

A challenge to capital providers was presented by a panellist who said, “everyone wants to pick the fruit, but first you must plant the tree”. The takeaway is that more needs to be done. In the past, GIF has adopted a light-touch version of venture building, internally referred to as venture support. Previously, venture support across our portfolio has seen a third-party impact evaluation of Babban Gona, the facilitation of training at the peak of the Covid-19 pandemic for pharmacy professionals with SwipeRx, and the facilitation of external consulting to develop scaling plans for new markets for Lively Minds.

The venture building model is still nascent in Africa despite its numerous advantages, which include higher start-up survival rate, faster market entry and exits, and better capital efficiency for investors. However, there are some notable venture builders and studios on the continent, like Pyramidia Ventures, Haskè Ventures, Delta40 and Enviu, who operate as a one-stop shop for all the resources and expertise needed for venture building – from software development to finance and HR.

As we navigate the ever-evolving African startup ecosystem, I hope that all involved will embrace the ethos that true success comes from accepting the struggle and committing to the foundational work necessary for long-term growth.