The state of play
While the African impact investment market provides many examples of innovation and substantial impact, it faces some challenges and constraints, not least of which is the poor visibility and credibility of interventions seeking investment, which can struggle to meet international best practice standards for “labelling”. In addition, while capital availability may not be a major challenge, the appropriateness of this financing – specifically risk capital – is not always in sync. A lack of clarity in regulatory environments across African markets as well as poorly developed ecosystems for impact investment mean that domestic markets develop slowly and in a haphazard manner. This is exacerbated by underdeveloped practices for monitoring and evaluation and impact measurement, which is critical for attracting and deploying impact capital (Thompson, 2023; UNDP, 2023)
The African impact investment market has grown over time, seeing a total of ~$38bn invested in East, West and Southern African countries between 2005 and 2015. In 2022, this figure was reported by GSG Impact as being closer to $65.2bn. Development finance institutions (DFIs) are responsible for the vast majority of impact capital across the continent (GSG Impact, 2022).
Historically, the greatest proportion of impact capital (roughly 58% of the continent’s total) has flowed to the Southern African region. Between 2005 and 2015, almost two-thirds of this capital (about $14.7bn) was received by South Africa, with Zambia and Mozambique the next most popular destinations among impact investors. In 2022, Southern Africa retained its leading position, with impact investment AUM totalling roughly $44bn (Riscura, 2022).
The East African region received about 24% ($9.3bn) of total impact capital deployed in East, West and Southern African regions between 2005 and 2015, with Kenya, followed by Uganda, the two largest recipients. By 2022 this figure had fallen to just below $7bn.
West Africa absorbed 17% ($6.7bn) of total impact capital deployed to sub-Saharan Africa between 2005 and 2015, with more than half of this investment channelled to Nigeria and Ghana. In 2022, impact investment assets were estimated to be 55% of sustainability-linked finance in the region, measuring around $13bn. Impact investment in Nigeria reached almost $5bn in 2019, from less than $2bn in 2014 – in no small part as a result of the country’s work to improve its ease of doing business and to offer more support for small, micro and medium enterprises (SMMEs). The impact investment focus for the country has been largely on renewable energy and financial inclusion (Riscura, 2022; Thompson, 2023).
According to a recent report by GSG Impact, impact investment priorities across the continent remain steadfast and include decent work and economic growth (SDG8), climate action (SDG13), good health and well-being (SDG3), and reduced inequalities (SDG5 and SDG1). The need for enabling policy and regulation and for investment in education and capacity building across the impact investment ecosystem are also noted as critical to growth of the market (GSG Impact, 2023b).
It is in this context that the Krutham Impact Investment Awards (KAIIA) were developed in an effort to support growth of the African impact investment market. We find that the nominee pool for the 2024 awards largely reflect the trends identified across the continent and we believe these examples of impactful projects, programmes and investors can serve as references of best practice for replication across the continent.
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