Impact Investing in Africa, Verdant Capital @AFSIC

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Investing in Africa, one of Europe’s leading Africa investment events will host its annual conference in London on October 7, 8 and 9th at the Park Plaza Westminster Hotel. Over 1500 of the most senior and influential people within the African Investment world are expected to attend including 350+ investors. Investors include Development Finance Institutions (DFI’s), Sovereign Wealth Funds, Pension Funds, Private and Listed Equity funds, Private and Listed Credit Funds, Trade Funds, Infrastructure Funds, Impact Funds,Venture Capital Funds, Family Offices, Foundations and Fund of Funds.

The conference will see 350+ speakers providing perspectives on the current investment climate andindustry sector highlights discussing opportunities that are arising across Africa. They will assess thelatest economic trends and fundraising environment and through lively panel discussions, interactivepanels, exceptional networking sessions and punchy project pitching the event will deep dive intoinvestment strategies and opportunities across many industry sectors.

One of our 2023 sponsors was Verdant Capital who has supported AFSIC over the past 10 years. Wesat down with Verdant Capital and asked them about the trends they are seeing in impact investingin Africa, the current investment landscape in Africa as well as the importance of balancing socialand environmental impacts and collaborative partnerships to drive sustainable investment in Africa.

What are the trends Verdant Capital is seeing in impact investing in Africa?We are an impact investor, but we are looking to achieve a “commercial return” at an acceptablerisk, while ensuring a strong developmental impact. I do believe the market’s understanding of“impact investor” is becoming more nuanced, with an understanding of the objectives of investorssuch as Verdant Capital who have a clear developmental mission but are not intending to sacrificereturns or take excess risks versus those of quite different impact investors with a less balancedapproach, e.g. certain investor backed by a single endowment or a single foundation.

How does Verdant Capital see the current investment landscape in Africa, and what opportunities do you find most compelling?We believe that financial inclusion is the most attractive opportunity for impact in Africa, given boththe ability to help people to improve their lives, and the significant technological change that hasenabled financial services at the bottom of the pyramid to be profitable.

Can you provide examples of successful impact investments you’ve made in Africa and the positive outcomes they have generated?We invested in USD 7 million of junior debt of Watu Uganda, which strengthened the balance sheetand crowded in more senior debt. Since our investment, Watu Uganda has expanded its loan bookby 35,000 clients, thereby providing 35,000 young people the opportunity to earn a livelihood bydriving a boda boda (motor bike taxi).
How do you balance financial returns with social or environmental impact when evaluating potential investment opportunities in Africa?We do not see a trade between impact and returns in the financial inclusion space. We invest in thebest operators who are highly profitable businesses models addressing an underservedmarketplace. We have the highest standards of environmental and social due diligence.

What are some common misconceptions about impact investing in Africa, and how do you address them in your work?We are addressing underserved opportunities and making money for the end-clients, our investees,and our investors. With each year of successful outcome, we address any misconceptions about ourstrategy.

Can you discuss the importance of collaboration and partnerships in driving meaningful impact through investments in Africa?We partner with our investors, which is where it all starts. We partner with our investee companies,who in many ways are doing the hardest work, providing loans to and collecting from the end client,in such a way to enable the end client to improve his or her life.

What motivated Verdant Capital to become a sponsor of this particular investment event focused on Africa?We have supported AFSIC for nearly 10 years. We believe it is an excellent meeting place forcompanies and investors from across the African continent.

As a sponsor for AFSIC 2024, what specific value do you hope to derive from your participation in this investment event?At AFSIC we are keen to meet new investors for our Fund, and new prospective investees. It alsoprovides an opportunity to share our prospectives on developing a sustainable and profitablefinancial inclusion ecosystem in Africa.

Considering the evolving global economic landscape, how does your organization plan to adapt its investment strategy in Africa in the coming years?Two years ago, we changed our strategy to be 100% floating rate in expectation of the sharpest raterises in the global economy in the post-Breton Woods era. This prediction materialised, and whilewe believe higher interest rates globally are bad for Africa, we have the compensation for ourinvestors of “money in the bank” in terms of higher yields. The higher rate world has negativeimpacts on Africa, including with a lag effect, and we are focused on maintaining strict underwritingstandards for new investments in general, as well as strong focus on macro-economic risk. Threequarters of our portfolio today benefits from guarantees from outside Africa or natural hedges fromoutside Africa. Over the past decade AFSIC has driven investment into the continent and worked with a variety ofhigh-level investors to raise project profiles providing an excellent forum for real deals to be done bythe most senior of executives from Africa and the rest of the world.
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