ImpactAlpha, March 4 – The theme of the Sankalp Africa Summit in Nairobi was “igniting Africa’s potential for a just transition.” As always, financing for small and medium-sized enterprises, or SMEs, was a key focus.
The “missing middle” – referring to the gap between microfinance for very small enterprises and commercial bank loans for larger businesses – means that SMEs often lack operational financing and technical support. Tech-focused investors have not been keen on the sector; there’s only so much that development finance institutions, impact funds and high net worth individuals can do.
Other hot topics: Cost and emission reductions from “circular” consumption and production, and investments in women-led companies and female entrepreneurs.
Tapping public markets
Luni Libes heads Africa Eats, a food ventures investor with a portfolio of 21 companies. He is seeking to list some of the companies on the stock exchange of Mauritius as a way to attract investments by tapping capital from public markets and creating exit opportunities for investors.
“More funds show up and they talk about funding smaller companies but they don’t, not on any big scale. There’s more money moving, but nowhere near enough,” Libes said.
Africa Eats is in talks with the Mauritius exchange to list eight of the fast growing SMEs in its portfolio that can go public and meet certain criteria; the ventures must have recorded at least 25% compounded growth over the last five years, must be profitable and must have minimal debt.
Libes says high net worth individuals hold half their wealth in public equities, and half in bonds and fixed-income vehicles; only a sliver goes to other investments.
“With this plan we’re looking at this half that goes into public stocks instead of the tiny sliver that remains,” he said. If enough people buy into the idea, “We now have 10,000 or 100,000 times more potential capital. That’s the breakthrough here.”
Circular route to a just transition
Sustainable consumption and production in Africa could cut GHG emissions by 60% by 2050. Resource repurposing and efficient management is creating a circular economy in Africa worth an annual $8 billion.
The circular economy industry in Africa is exciting since it’s on a growth curve but fairly nascent in terms of policy, market linkage opportunities and funding opportunities, according to Intellecap’s Siddharth Lulla. The opportunities include companies offering solutions in dry and wet waste management, reusable packaging, textile upcycling, plastic upcycling to synthetic fuel, among others.
“Because of the complexities of the business models and route to market of companies in the circular economy, we see that there’s a wide range of support that they need to crack different nuts,” said Ada Marmion of the Africa Enterprise Challenge Fund, which has provided catalytic funding to over 400 businesses across Africa.
“We partner with experts on specific issues like supply chain strengthening, establishing partnerships across sectors, and access to technical data,” Marmion said. “We will work with the business for six to nine months on their business models, unit economics, value proposition to their different customers all the way to marketing strategy, sales and product design.”
“Being homegrown investors really helps because we understand this market,” Marimon added.
Women-focused financing
African women-founded businesses raised $200 million in 2023, a 7% jump in funding. But women still get far less investor support compared to their male counterparts, who raised $2.7 billion. A Boston Consulting Group study found that female-founded ventures post higher returns, “more than twice as much per dollar invested than those founded by men.”
More funds are cropping up and raising to invest in women. Afrishela, the gender lens investment fund of the Graça Machel Trust, is currently raising funds to support early women-founded and -led businesses providing solutions for women.
Cherahani Africa is also raising capital to extend credit to women-owned businesses; it has a track record of support for 30,000 women-owned enterprises.
On our radar
Échale International, which provides affordable and sustainable housing for low-income earners in emerging markets in Latin America, is transposing the model and concept to Africa, starting in Uganda.
Ziweto is a network of agrovets catering predominantly to rural-based Malawian farmers.
Uganda’s Takataka ni Mali, which is Swahilii for “waste is wealth” is upcycling plastic waste to household goods and tiles.
Kenya’s Powerhive produces electric motorbikes – and develops and operates mini-grids in rural western Kenya.
Overheard at Sankalp: Public equity for African small businesses, accelerating circular enterprises, financing women-led ventures
The theme of the Sankalp Africa Summit in Nairobi was “igniting Africa’s potential for a just transition.”
As always, financing for small and medium-sized enterprises, or SMEs, was a key concern at Sankalp. The “missing middle” – referring to the gap between microfinance for very small enterprises and commercial bank loans for larger businesses – means that SMEs often lack operational financing and technical support. Tech-focused investors have not been keen on the sector; there’s only so much that development finance institutions, impact funds and high net worth individuals can do.
Other hot topics: Cost and emission reductions from “circular” consumption and production, and investments in women-led companies and female entrepreneurs.
Tapping public markets
Luni Libes heads Africa Eats, a food ventures investor with a portfolio of 21 companies. He is seeking to list some of the companies on the stock exchange of Mauritius as a way to attract investments by tapping capital from public markets and creating exit opportunities for investors.
“More funds show up and they talk about funding smaller companies but they don’t, not on any big scale. There’s more money moving, but nowhere near enough,” Libes said.
Africa Eats is in talks with the Mauritius exchange to list eight of the fast growing SMEs in its portfolio that can go public and meet certain criteria; the ventures must have recorded at least 25% compounded growth over the last five years, must be profitable and must have minimal debt.
Libes says high net worth individuals hold half their wealth in public equities, and half in bonds and fixed-income vehicles; only a sliver goes to other investments.
“With this plan we’re looking at this half that goes into public stocks instead of the tiny sliver that remains,” he said. If enough people buy into the idea, “We now have 10,000 or 100,000 times more potential capital. That’s the breakthrough here.”
Circular route to a just transition
Sustainable consumption and production in Africa could cut GHG emissions by 60% by 2050. Resource repurposing and efficient management is creating a circular economy in Africa worth an annual $8 billion.
The circular economy industry in Africa is exciting since it’s on a growth curve but fairly nascent in terms of policy, market linkage opportunities and funding opportunities, according to Intellecap’s Siddharth Lulla. The opportunities include companies offering solutions in dry and wet waste management, reusable packaging, textile upcycling, plastic upcycling to synthetic fuel, among others.
“Because of the complexities of the business models and route to market of companies in the circular economy, we see that there’s a wide range of support that they need to crack different nuts,” said Ada Marmion of the Africa Enterprise Challenge Fund, which has provided catalytic funding to over 400 businesses across Africa.
“We partner with experts on specific issues like supply chain strengthening, establishing partnerships across sectors, and access to technical data,” Marmion said. “We will work with the business for six to nine months on their business models, unit economics, value proposition to their different customers all the way to marketing strategy, sales and product design.”
“Being homegrown investors really helps because we understand this market,” Marimon added.
Women-focused financing
African women-founded businesses raised $200 million in 2023, a 7% jump in funding. But women still get far less investor support compared to their male counterparts, who raised $2.7 billion. A Boston Consulting Group study found that female-founded ventures post higher returns, “more than twice as much per dollar invested than those founded by men.”
More funds are cropping up and raising to invest in women. Afrishela, the gender lens investment fund of the Graça Machel Trust, is currently raising funds to support early women-founded and -led businesses providing solutions for women.
Cherahani Africa is also raising capital to extend credit to women-owned businesses; it has a track record of support for 30,000 women-owned enterprises.
On our radar
Échale International, which provides affordable and sustainable housing for low-income earners in emerging markets in Latin America, is transposing the model and concept to Africa, starting in Uganda.
Ziweto is a network of agrovets catering predominantly to rural-based Malawian farmers.
Uganda’s Takataka ni Mali, which is Swahilii for “waste is wealth” is upcycling plastic waste to household goods and tiles.
Kenya’s Powerhive produces electric motorbikes – and develops and operates mini-grids in rural western Kenya.
