Growing impact investing capacity in Africa could unlock the continent’s potential

‘Impact investing’ – which refers to investments made with the specific objective of achieving positive social or environmental impact alongside a financial return – has been identified as an effective approach to address socio-economic challenges, such as poverty, inequality, and environmental degradation.

In the African context, there has been some notable progress; South Africa leads with the largest amount of assets dedicated to one or more Investing for Impact (IFI) strategies, followed by Nigeria and Kenya*. Despite these promising developments, the impact investing market across the continent remains fragmented and is at various stages of development. However, these endeavors encounter challenges such as unpredictability, capacity limitations, and market volatility.

In terms of upskilling and capacity-building for finance professionals, there is a scarcity of locally accredited courses in the field of impact investing. One notable exception is the Africa-focused Impact Investing course offered by the globally renowned University of Cape Town Graduate School of Business in partnership with the specialized Bertha Centre for Social Innovation and Entrepreneurship since 2016. The “Impact Investing in Africa” Executive Development Course has been successfully conducted annually in South Africa, primarily in person, with some online iterations during the COVID-19 lockdowns.

To extend its outreach to relevant industry stakeholders across the continent, including wealth managers, consultants, funders, and other financial intermediaries, this course will be hosted in Kenya for the first time in July 2024. The course co-convenors are Shiluba Mawela CA (SA), Managing Partner at Tshiamo Impact Partners, alongside Daniel Steenkamp and Jason Van Staden from the Bertha Centre Innovative Finance team.

“To increase impact investment, and ultimately impact, requires a multipronged approach – such as training, collaboration, knowledge sharing and innovation. The potential of impact investing is powerful, and we’d like to see more ecosystem development for different stakeholders to collaborate to solve Africa’s social and environmental problems,” says Van Staden. “The Bertha Centre for Social Innovation and Entrepreneurship is at the forefront at building this ecosystem by equipping investors with knowledge, tools and networks to scale their impact. “

‘The Impact Investing in Africa’ course covers training on catalytic capital, blended finance and social impact bonds – all examples of innovation in the finance sector for scaling social and environmental impact on the African continent. With East Africa being recognised as one of the centres of global impact investing on the continent, there is a lot to be said for cross-regional learning and knowledge-sharing opportunities as well.

“In the context of some developmental constraints and the many opportunities for investment the African market presents, increasing the footprint for education on impact investing to a major financial capital city like Nairobi couldn’t have come at a more pertinent time. Our end goal here is simple; to reach and equip more investors from across the continent with the skills and knowledge to grow impact investing,” says Mawela. 

In order to best leverage this investing approach for the continent, education and increased awareness on the topic in the finance sector is crucial. It is therefore imperative that across the financial services spectrum, everyone from seasoned investors to burgeoning entrepreneurs comprehend the foundational principles and advantages of impact investing. 

“Typically, impact investing course offerings are all from the global North. Being rooted in Africa in the work we do in this space lends the course a unique perspective from an “in the trenches” experience. It drives the agenda from the perspective of what is really needed and working in our African context,” says Steenkamp. “We also hope to clear up some of the common misconceptions about impact investing, which includes this idea that impact comes at a cost of fair returns.”

The emerging trends suggest a significant increase in funding earmarked for impact investing in the continent. According to a 2023 report by the Global Impact Investor Network (GIIN), one-third of investors surveyed expressed intentions to boost allocations to sub-Saharan Africa over the next five years.

With such funds directed toward investments aiming for positive social and environmental impacts alongside financial returns, it appears that impact investing holds the potential to positively transform Africa’s future.