Investing for Impact: A strategy of choice for African policy makers

Over the last decade, the main driver of economic progress across the African continent has arguably not been Official Development Assistance flows but growth, underpinned by private sector activity. This trend is set to continue, with private capital forecast to be the most important source of long-term finance. At the same time, an increase in the levels of social inequality and environmental degradation in many African countries has underscored the importance of a more inclusive model of progress.

Impact investment is a strategy to align the power of private markets to the social and environmental development needs of society at-large. From 2012-13, The Rockefeller Foundation, through its Impact Investing initiative, funded research in five Sub-Saharan African countries with the aim of understanding the barriers for impact investing across Africa, as well as recommending national policies to encourage the growth of the industry.

This report synthesises the findings of that work and, through numerous case studies drawn from across Africa, aims to show how impact investing can be a powerful tool for tackling societal challenges, and can be complementary to the more traditional tools of public funding and philanthropy.

The report offers 10 actionable recommendations to guide African policymakers to maximise the societal potential of investment in their respective countries. These are:

1. TASK FORCE: government to establish an impact investing taskforce to explore country-specific potential of impact investing

2. CATALYTIC CAPITAL: government investment to stimulate the growth of domestic impact investment funds

3. REGIONAL SME EXCHANGE: government sponsorship for the development of a regional SME exchange to provide liquidity for exits

4. DO OR EXPLAIN: government to expect institutional investors to articulate social and environmental impacts, as this is an area of importance

5. FLEXIBLE REGULATION: government regulation to allow institutional investors to invest in impact-driven enterprises

6. CASE BY CASE ANAYSIS: government review of fiscal frameworks and fiscal incentives to promote investment in high-impact enterprises and ensure policy coherence.

7. PRIORITY PROCURMENT: create a competitive advantage for high-impact enterprises

8. INVESTMENT READINESS FUNDING: provide government funding for investment-readiness.

9. GUARANTEE PROGRAMME: enable impactful enterprises to demonstrate their creditworthiness

10.  NEW CORPORATE FORMS: ensure legal forms are suited to impact-driven enterprises’ requirements.

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