With a market value of US$2.75 trillion, Africa's dynamic small and medium-sized enterprises (SMEs) offer unique potential for early-stage investors. How, then, can we best increase the amount and help drive these investments to scale? This was the focus of the recent Africa Early Stage Investor Summit (AESIS). The event, co-convened by VC4A and ABAN, and in partnership with UNDP through its Africa Sustainable Finance Hub (ASFH) and South Africa country office, was held from 30 November to 2 December 2023 in Cape Town.
In honour of AESIS’s 10th anniversary, the boldly themed "10x-Ing Early-Stage Investing in Africa" Summit drew nearly 700 representatives – from angel investors and venture capital fund managers, to family offices, foundations, and entrepreneurship support organisations (ESOs), and even development finance institutions. This was the event’s first in-person gathering since the COVID-19 pandemic.
In Sub-Saharan Africa, SMEs account for 95% of all registered businesses and contribute about 50% to the region’s total GDP. With their focus on smaller ticket sizes, their significant risk appetite, and their ability to target high growth enterprises, early-stage investors, are well-positioned to support critical innovations that can address the continent’s most pressing development challenges and provide financing solutions at scale.
As a Knowledge Partner, for the second time in a row, UNDP provided their sustainable finance expertise to help bridge the divide between development interventions and access to capital, while at the same time ensuring the sustainability and scale of entrepreneurial enterprises through access to capital. To strengthen investor-focused discussions, UNDP led sessions that focused on the impact perspective of capital, as well as the creation of both financial as well as social and environmental value in the early-stage investment ecosystem. Founders like Baridi offering solar-powered cooling in East Africa’s Livestock value chain or Vendy providing offline payments across the continent, exemplified the power that businesses have to advance Africa’s economies and development.
Throughout the Summit, UNDP and their partners, including Social Value International (SVI), African Venture Philanthropy Alliance (AVPA) and Embedding Impact, highlighted the importance of placing sustainability at the heart of investor and enterprise decision-making. In the “AESIS2023 Partner Series: Prioritizing Africa: Whose Impact Is It Anyway?” session that UNDP curated, practitioners shared their experiences with measuring and managing impact. The discussion highlighted the critical role of data in order to go beyond simply reporting current impact, to inform decision making that speaks to the priorities of all groups of shareholders. The session emphasized the value of stakeholder feedback in understanding their view of economic, social and environmental value creation. Participants also discussed how global impact management and measurement frameworks can be adapted to fit local contexts and the role UNDP’s SDG Impact Standards can serve as an overarching practice framework, which investors can use to measure and manage their impact.
As part of the session’s keynote speech, Gabriel Dava, UNDP’s acting Resident Representative for South Africa, emphasised the critical role start-ups play in Africa’s sustainable development progress: “We must foster closer collaboration between governments and the private sector to pursue a paradigm shift – from funding to financing – to turn the continent’s needs and growth potential into significant business opportunities. The role of UNDP and ASFH is to support these investors and SMEs to be intentional about the impact they strive to achieve, and assist them to continuously improve the positive contributions they have on people and planet”.
UNDP also convened the “Investing in Nature – The Next Wave of Investment Assets” session, which shed a spotlight on the critical theme of biodiversity finance. More than 50% of the global economy relies on biodiversity, and about US$44 trillion of capital is moderately or highly dependent on nature and its services. The discussion highlighted the importance of nature-based solutions as a new class of investment assets to accomplish financial returns and achieve sustainable development progress. It also emphasized the role of public-private partnerships not just in setting a more favourable investment environment, but in creating new business models in sectors such as tourism that can provide good incomes to those working in the sector while also benefitting communities and the environment.
Furthermore, UNDP showcased the timbuktoo tech start-up support initiative and invited investors and academics to join and create an innovation space for young African entrepreneurs. timbuktoo is bold and fresh, aiming to invest US$1 billion in catalytic and commercial capital over 10 years to build a distributed innovation network of eight pan-African hubs, located in key ecosystems from Cairo to Cape Town, Dakar to Nairobi.
Finally, the AESIS Ecosystem Side Event allowed UNDP to showcase some of the core services it provides to governments and the private sector designed to create enabling environments for SDG investment. Examples included pilot initiatives in Nigeria, Kenya, Rwanda, Mauritius and the Seychelles, all of which used UNDP’s SDG Investor Maps to identify both policy and business drivers for impactful investing. Also discussed was UNDP’s Africa Investment Insights Report, 2022 Edition, which details continent-wide investment opportunities that offer significant development impact potential that generate positive outcomes for otherwise underserved stakeholders, while at the same time offer the potential to generate returns of between 15-20%. The report further emphasizes the importance of partnerships, as almost two-thirds of these investment opportunities require risk-sharing arrangements and public financing, especially for last mile populations and marginalized communities, to be successful.
The UNDP partnership with AESIS 2023 took place in the lead up of the Global Entrepreneurship Congress (GEC+ Africa), scheduled for 13 – 14 March 2024 in South Africa, wherein UNDP is part of the local organizing committee, and together with ASFH will be technical partner, supporting engagements on the development and scale of innovators and entrepreneurs across thematic areas such as food, energy, water, the ocean and digital economy. Through this support, entrepreneurs are enabled to contribute to economic growth, job creation, poverty alleviation, as well as multiple other SDG targets.
For more information on how governments, enterprises and investors can ensure their investments deliver development while generating double digit investment returns, please explore UNDP’s 10 foundational e-learning courses: https://sdgfinance.undp.org/courses. A dedicated online course on impact measurement and management explains how enterprises and investors can deliver impact for the SDGs: http://immforsdgs.com.
