The Brief | January 9, 2020

The Brief: Big opportunities in small businesses in Africa, soil restoration REIT, social housing in France, greenhouse lettuce, Opportunity Zone impact

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Small businesses, big opportunities: Where to hunt for impact investments in Africa this year. The World Bankforecasts economic growth in sub-Saharan Africa to pick up to 2.9% (from an estimated 2.5% in 2019). But global investors watching indicators like oil and commodity exports may be missing the real story, according to local and regional impact investors. For example? Financial inclusion, logistics and smallholder agriculture. “There are so many more investment opportunities in Africa than people will see from afar,” Goodwell Investments’ Wim van der Beek tells ImpactAlpha. “If you only fly in and out, you won’t find them.” Goodwell, with offices in Amsterdam, Nairobi and Cape Town, recently invested in Nigeria’s MAX.NG, a motorcycle taxi hailing and finance startup, and Nomanini in South Africa, which has a digital payments platform designed for informal business owners. Different approaches in different sectors, van der Beek says, “all add up to the same thing, which is improving small business infrastructure” – the key to inclusive economic growth. Nigeria-based Aruwa Capital’s Adesuwa Okunbo Rhodes agrees, “This segment of the market is the bread and butter of the African economy.”

A focus on small businesses doesn’t mean only small deals. Goodlife Pharmacy, in Kenya, grew from six pharmacies to 60 under two private equity owners. Many of its stores have become broader health hubs that provide nutrition advice and telemedicine consultations. “This is the future of healthcare in resource-constrained environments, not just for Africa but for emerging and developed markets, too,” LeapFrog’s Andrew Kuper tells ImpactAlpha. LeapFrog also invested in digital remittance company WorldRemit’s $175 million round of funding as well as JUMO’s $70 million raise, led by Goldman Sachs in 2018. Proceed with caution: Ever-larger volumes of capital and sometimes inadequate due diligence could signal a market bubble. “There’s a lot of herd behavior throwing money at a few initiatives,” cautions van der Beek. “It’s a scenario we’ve seen in emerging markets investing before. There will be some train smashes in the next few years.”

Keep reading, “Small businesses, big opportunities: Where to hunt for impact investments in Africa this year,” by Jessica Pothering on ImpactAlpha.

Dealflow: Follow the Money

Iroquois Valley Farmland REIT raises $6 million for soil restoration funding. The Evanston, Ill.-based real estate investment trust manager offered its soil restoration notes via a direct public offering in September (see, “Iroquois Valley Farmland’s direct public offering lets smaller investors get a share of soil wealth). The $10,000-minimum notes drew individuals, non-profits, family offices and ImpactAssets’ donor-advised Giving Fund to help convert conventional farmland to organic. Iroquois Valley was also awarded a $700,000 innovation grant from the USDA‘s Natural Resources Conservation Services to establish up to $25 million in credit lines for its farmers. Dig in

French social housing fund Immobilier Impact Investing tops €100 million. The fund aims to re-house up to 2,000 people over the next 10 years with a “two pocket” approach to offset what it says are declining donations and public subsidies for social housing. Immobilier Impact Investing was launched by Cedrus & Partners and Swiss Life Asset Managers last April. One-fifth of the assets will buy residential properties and rent them to nonprofit housing partners at zero-rent; the rest will invest in yield-producing office assets and senior and student residences, for a combined target return of 3.5%. The fund is supported by the French government and the Ministry of Ecological and Inclusive Transition’s impact initiative. Share this.

Equilibrium Capital recruits Revol Greens for southern California greenhouse. The Portland-based real assets investment manager is developing a 64-acre high-tech greenhouse in Tehachapi. Minnesota-based Revol will use a quarter of the facility to grow lettuce and leafy greens in California, where climate change, water shortages and disease outbreaks challenge outdoor growers. “Scalability is now the biggest challenge in the controlled environment agriculture space,” said Equilibrium’s Dave Chen (see “Equilibrium closes greenhouse food fund at $336 million). 

Signals: Ahead of the Curve

Assessing the community impact of Opportunity Zone projects. The capital gains tax breaks available in Opportunity Zones have spurred investments that are potentially transformative for low-income neighborhoods – and ripe for abuse. New federal regulations don’t include rigorous impact safeguards, so industry leaders are attempting to fill the gap. The Urban Institute’s Opportunity Zone Community Impact Assessment Tool starts by asking investors, project sponsors and others to rank community needs across six impact areas, including quality jobs, community wealth building, and affordable housing. Projects are scored on their alignment with community needs. That can help impact investors evaluate potential investments, project sponsors improve their projects, and local governments and foundations determine the best use of public subsidies or other project support. The tool, now open for beta testing, will help “shephard, guide, winnow and target investments toward projects of greater community benefit,” Urban Institute’s Brett Theodos tells ImpactAlpha.

Agents of Impact: Follow the Talent

Sharon Alpert steps down as president and CEO of the Nathan Cummings Foundation. The board will conduct a national search… Richard Woo, ex- of the Russell Family Foundation, joins Tiedemann Advisors’ Impact Advisory Council… Quona Capital is looking for a platform and cross-border investment associate in Washington D.C… Accion Venture Lab seeks an India investment officer in India or Washington D.C… The 24th Wharton India Economic Forum takes place Jan. 10 in Mumbai.

Thank you for reading. 

– Jan. 9, 2020