Pillar: FSD Africa Investments

Kenya to pilot Africa’s first data hub for real estate investors

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Kenya will be the first country to benefit from an initiative by players in Africa’s housing sector seeking to make critical data available for developers, financiers and the public.

Through the Open Access Initiative, data on the cost of construction, time taken to complete projects, and specific challenges arising in the housing sector will be made public across the continent.

The initiative which will cover the continent is being piloted in Kenya.

The Open Access Initiative is being spearheaded by the Centre for Affordable Housing Finance in Africa (CAHF), Financial Sector Deepening (FSD) Africa Investments, Financial Sector Deepening (FSD) Kenya, and Reall and International Housing Solutions (IHS).

Together, these market facilitators have formed the Affordable Housing Investment Alliance (AHIA) which will in turn drive the Open Access Initiative.

The anticipation is that this data will guide investors in affordable housing on what units are profitable, areas that are underserved, and how to navigate the challenges and returns on investments.

Ultimately, this information is expected to save investors money and time.

Smart investment decisions

The initiative comes a few months after the Centre for Affordable Housing Finance (CAHF) and the Africa Union for Housing Finance (AHF) pointed out in a report on the lack of good data which should inform investors in the sector. As such, investing in the sector is risky and expensive.

This new initiative will then be the guiding torch in these murky waters for investors.

According to the vision of this initiative, the plan is to have affordable housing practitioners – developers, financiers and investors – share data and delivery experiences in a central repository.

This repository will then become the full database of all investments into affordable housing in Africa, Kenya being the pioneer.

“Data and information sharing between the parties and collaboration in the advocacy and engagement processes will leverage the individual efforts of the parties to realise economies of scale in improving the enabling environment for affordable housing,” reads the vision board of the alliance.

The alliance notes that although data is fundamental to the investment decision, there is limited good quality and focused data.

“Investors and developers all highlight the difficulty of accessing data that gives an accurate picture of the affordable housing investment opportunity and its risks,” said the alliance.

Open platform

The data is limited in composition and associated costs, clarity of the process followed when development was being put up (including steps, time and costs) – the blockages that arise, impact on affordability, details relating to people, target market and their affordability.

In addition, the data does not include other financial pressures, housing needs, the performance of the investment – whether it is a worthwhile venture or not – and how improvements can be done.

The solution to this problem as the document proposes is to have this information public. The Open Access Initiative approach, according to the document, asserts that when money is invested into a development, it should have a twin objective – achieve the immediate development output (housing units) and support the broader market development.

“In order to achieve the latter, the sharing of data and information related to the investment experience becomes a condition of investment. Over the course of the investment, this data and information will be collected and then developed into useful outputs for sharing in the public domain,” the document says.

Outputs will be produced on various levels, some will target participating developers, other development finance institutions (DFIs) and the general public. To amplify the usage of information at hand AHIA will produce a wide range of outputs, such as project fact sheets, investment fact sheets, action briefs and case studies as well as a data dashboard.

“It is anticipated that these outputs will support actors along the housing value chain to support investments in overcoming blockages they face and develop tools, frameworks, and baseline research to support both the investee and other market players in addressing the challenges that they confront in delivering affordable housing.”

Showcase activities

Additionally, the output will showcase the activities of market players engaging in affordable housing, demonstrating their focused attention on both opportunities and risks and encouraging greater investment into the affordable housing sector, given the clear attention to delivery risks, and the identification of niche market opportunities enabled through this effort.

“The Open Access Initiative is about market development. The intention is to build and support a more competitive environment in which a range of market players see (and can act on) opportunities to invest while raising the bar on quality and long-term sustainability,” the alliance says in the document.

“Ultimately, it can contribute towards an overall cost saving in the actual product and the time taken to achieve its delivery, benefiting the original data sharer, the investor, and the market as a whole,” it adds.

In a nutshell, the alliance says, the Open Access Initiative asserts that sector players should not compete on how to access information but on how it is used to optimise resources.

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Venture funds flowing into Africa’s climate change businesses

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Summary

  • Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.

Nairobi. Startups working to mitigate climate change in Africa have caught the eye of investors as venture funds flow into technology that could shape the future of energy on the continent.

Investment into African tech startups that focus on mitigating climate change is beginning to rise, following a global trend – albeit at much lower valuations than elsewhere.

Since the start of the year, green tech startups offering solutions that help countries keep to the Paris Agreement’s goal of limiting global warming to below 1.5 degrees Celsius have attracted growing investor interest.

Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.

The recent acquisition of Ghana-based solar energy startup, PEG Africa, by UK-based power company, Bboxx is among the most significant deals in this vertical, so far.

PEG, with a pay-as-you-go solar home system, has a customer reach of one million. The company, already present in Senegal, Ghana, Mali and Ivory Coast, is served by over 500 employees in 100 centres. Reports value the deal at US$ 200 million.

“The agreement was closed on 6th September 2022. Financials have not been disclosed,” said Bboxx in a statement.

Following the deal, the two became the fastest-growing clean energy firms on the continent, with a combined customer base of 3.5 million across 10 African countries.

Canadian investor FinDev Canada pumped US$ 13 million into the Energy Entrepreneurs Growth Fund (EEGF) in January. EEGF invests in early and growth-stage energy startups in sub-Saharan Africa.

The fund – founded by oil marketer Shell – seeks to increase access to clean energy for households and off-grid businesses in the region.

Two months ago, Africa’s Climate Venture Builder, Persistent Energy, closed a $10 million series C funding round to strengthen its team and scale climate activities in Africa. It said the funding has the potential to improve 2 million lives, create 6,000 green jobs and cut 700,000 tonnes of carbon emission.

“By leveraging powerful partnerships, we will be able to accelerate our most pioneering venture building investments, driving the transition to clean energy, promoting e-mobility and finding innovative business models and technological developments across the continent,” said Persistent Managing Partner, Tobias Ruckstuhl.

Over the last two decades, Persistent has engaged in 22 early-stage investments in pay-as-you-go- solar home systems, commercial and industrial solar, as well as e-mobility players including Kenya’s e-mobility startup, Ecobodaa.

Boston-based venture accelerator, Catalyst Fund has announced plans to begin funding Fintech and climate resilience startups in Africa starting October 2022.

“We are actively looking for early-stage startups that improve the resilience of underserved and climate-vulnerable communities in emerging markets. Our next cohort will kick off in October 2022,” announced the venture firm.

It is looking for startups offering solutions in recycling, sustainable agriculture, carbon credits and sustainable utilities like water management and clean energy. Already, the fund has received $3.5 million from FSD Africa to support these initiatives.

Research firm Magnitt, shows energy startups raised hundreds of millions of dollars in the first half of 2022. Africa energy startups drove 67 percent of this capital.

A comparative report, State of Climate Tech 2021 by advisory firm PwC also highlights the growing attractiveness of the sector across the globe.

According to the report, investments in climate tech surged in the first half of 2021, to US$ 87.5 billion globally, from a low of US$ 28 billion in the second half of 2020.

“Though this area presents a major commercial opportunity, due to the inherent value associated with reducing emissions, there is still much work to be done to channel this investment appropriately,” said PwC researchers.

US climate tech firms raised the largest share (US$ 56.6billion), followed by Europe and China (US$ 18.3 billion and US$ 9 billion respectively). Most of this capital funding growth targetted electric vehicles.

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Green tech startups in Africa are attracting investor interest

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This article was submitted to TechCabal by Conrad Onyango, bird story agency*

Investment into African tech startups that focus on mitigating climbing change is beginning to rise, following a global trend – albeit at much lower valuations than elsewhere.

Since the start of the year, green tech startups offering solutions that help countries keep to the Paris Agreement’s goal of limiting global warming to below 1.5 degrees Celsius have attracted growing investor interest.

Several venture capital firms are actively hunting startups while others are building up their war chests to capitalise on existing opportunities – including the take-over of successful and promising energy startups.

The recent acquisition of Ghana-based solar energy startup, PEG Africa, by UK-based power company, Bboxx is among the most significant deals in this vertical, so far.

PEG, with a pay-as-you-go solar home system, has a customer reach of one million. The company, already present in Senegal, Ghana, Mali and Ivory Coast, is served by over 500 employees in 100 centres. Reports value the deal at US$ 200 million.

“The agreement was closed on 6th September 2022. Financials have not been disclosed,” said Bboxx in a statement.

Following the deal, the two became the fastest-growing clean energy firms on the continent, with a combined customer base of 3.5 million across 10 African countries.

Canadian investor FinDev Canada pumped US$ 13 million into the Energy Entrepreneurs Growth Fund (EEGF) in January. EEGF invests in early and growth-stage energy startups in sub-Saharan Africa.

The fund – founded by oil marketer Shell – seeks to increase access to clean energy for households and off-grid businesses in the region.

Two months ago, Africa’s Climate Venture Builder, Persistent Energy, closed a US $ 10 million series C funding round to strengthen its team and scale climate activities in Africa. It said the funding has the potential to improve 2 million lives, create 6,000 green jobs and cut 700,000 tonnes of carbon emission.

“By leveraging powerful partnerships, we will be able to accelerate our most pioneering venture building investments, driving the transition to clean energy, promoting e-mobility and finding innovative business models and technological developments across the continent,” said Persistent Managing Partner, Tobias Ruckstuhl.

Over the last two decades, Persistent has engaged in 22 early-stage investments in pay-as-you-go- solar home systems, commercial and industrial solar, as well as e-mobility players including Kenya’s e-mobility startup, Ecobodaa.

Boston-based venture accelerator, Catalyst Fund has announced plans to begin funding Fintech and climate resilience startups in Africa starting October 2022.

“We are actively looking for early-stage startups that improve the resilience of underserved and climate-vulnerable communities in emerging markets. Our next cohort will kick off in October 2022,” announced the venture firm.

It is looking for startups offering solutions in recycling, sustainable agriculture, carbon credits and sustainable utilities like water management and clean energy. Already, the fund has received US $ 3.5 million from FSD Africa to support these initiatives.

Research firm Magnitt, shows energy startups raised hundreds of millions of dollars in the first half of 2022. Africa energy startups drove 67 percent of this capital.

A comparative report, State of Climate Tech 2021 by advisory firm PwC also highlights the growing attractiveness of the sector across the globe.

According to the report, investments in climate tech surged in the first half of 2021, to US$ 87.5 billion globally, from a low of US$ 28 billion in the second half of 2020.

“Though this area presents a major commercial opportunity, due to the inherent value associated with reducing emissions, there is still much work to be done to channel this investment appropriately,” said PwC researchers.

US climate tech firms raised the largest share (US$ 56.6billion), followed by Europe and China (US$ 18.3 billion and US$ 9 billion respectively). Most of this capital funding growth targetted electric vehicles.

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Climate finance innovation for Africa

The African continent presents a massive investment opportunity for investors to advance climate solutions in the coming decade, however, a set of barriers to finance have stifled requisite investment to date. In this new report, in collaboration with Climate Finance Innovation for Africa and Climate Policy Initiative, we provide a framework for how innovation in financing structures can leverage strategic deployment of public capital to ‘crowd-in’ private investment at levels not yet seen.

This paper focuses primarily on climate mitigation, which represents the largest investment opportunity for private investors. We refer audiences focused specifically on adaptation to the work done by the Global Center on Adaptation and Climate Policy Initiative on Financial Innovation for Climate Adaptation in Africa.

Diago Dièye joins the Nyala Venture team as Managing Director

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Amsterdam, 11 October 2022 Diago Dièye has today joined Nyala Venture as Managing Director. She combines robust finance and investment experience with a strong network in the SGB (small and growing businesses) and LCP (Local Capital Providers) ecosystem. Diago’s previous position was Chief Operating Officer and Program Director of an impact investment fund that finances SGBs. She most recently co-structured and deployed a USD 30 million Access to Finance Program, which led to the financing of more than 600 SGBs and 11,000 micro-entrepreneurs through 15 LCPs.

Diago is a seasoned professional with over 15 years of experience spent between the US, the UK and Senegal in the financial services industry. As a specialist in Corporate Finance, particularly for SGBs in frontier markets, she has been focusing on delivering capital to SGBs for the past 10 years.

FSDAi hopes to accelerate capital flows into SGBs especially those focused on closing the gender gap. We are excited to have Diago join Nyala Venture team to drive this important work and look forward to seeing this nascent asset class grow.
Anne-Marie Chidzero, Chief Investment Officer, FSD Africa Investments

Financial Inclusion for Refugees (FI4R) – Results of Round 4 Diaries

Project background

The Financial Inclusion for Refugees Project (FI4R) project was launched in 2019 by FSD Uganda and FSD Africa to support financial service providers (FSPs) to offer financial services to refugees and host communities.

The project is supporting three financial service providers (FSPs) Equity Bank Uganda Limited (EBUL), Vision Fund Uganda (VFU) and Rural Finance Initiative (RUFI) to offer financial services to refugees and host communities.

As the learning partner, BFA Global is conducting refugee financial diaries in Uganda to provide insights into the financial strategies employed by refugees over time to build their livelihoods and manage their finances. The research covers refugees in Bidi Bidi, Palorinya and Nakivale refugee settlements.

The insights from this study aim to build the evidence base for financial service providers, humanitarian agencies and telcos to understand the financial lives of refugees in Uganda and to inform stakeholders of the opportunities available in serving refugees across different contexts

CAHF’s African housing investment landscapes report series

The rising urban middle class, increasingly localised construction materials industry and innovations in housing finance, including the emergence of Real Estate Investment Trusts and mortgage liquidity facilities, are seeing increasing interest in investment in housing across Africa.

However the lack of credible, updated data on breadth and nature of funding flows for infrastructure continues to create barriers for increased investment. This is particularly true for the housing sector as stimulating targeted investments requires highly differentiated data that unpacks market segmentation for varying household income levels.

By providing clear market intelligence that quantifies, tracks and analyses investment in underserved housing markets, we can support a better policy environment & increased private sector activity in affordable housing. Improved data can thus catalyse scale interventions.

In the current environment, there is little information on housing investment activities and trends in Africa. Specific information gaps include:

  • Market overview data on who is investing in housing delivery, where, and at what level.
  • Market performance data segmented by target market, housing type or investment intervention and geography, in order to understand which are the top performing investment instruments, and why.
  • Competitive market horizon, including historical data on the mortgage, home equity, personal loan, consumer loan, microfinance and housing microfinance sectors—to enable credible modelling of investment horizons.

The Housing Investment Landscapes report series forms part of the Centre for Affordable Housing Finance’s Investor Programme which aims at plugging in some of the above-mentioned gaps, with the intention of identifying and championing increased investment in affordable housing across the African continent.

The overall goal of this project is to quantify the breadth of investment activity with respect to housing and housing finance across Africa and to establish a mechanism to track this on an ongoing basis. This project has collected data and highlights gaps and opportunities in the investment landscape in 26 countries to date, across all five sub-regions in Africa. The country and regional reports profile investors and investment instruments with the greatest impact on the housing finance market within Africa.

Access the reports here.

Using development capital to finance sustainable growth in Africa

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There is much talk lately about blended finance, the use of capital from public or philanthropic sources to increase private sector investment for sustainable development. I was on a panel earlier this year when one of the speakers described it as ‘the trampoline that can give you the bounce needed to launch.’

Smart deployment of blended finance not only provides early capital to sustainable solution but can guarantee long-term financing by attracting private and institutional investors.

FSD Africa Investment’s form of blended finance, development capital, is designed to invest in untested, breakthrough ideas that we believe can have a transformative impact on the continent’s sustainable growth. Our investment works to take early stage risk, allowing other sources of risk capital to invest in high-impact financial sector intermediaries and business, alongside us. Why is this important?

Africa needs investment capital with different risk/return profiles

Reaching the S require private and institutional capital to invest in structures that achieve development outcomes in a financially sustainable way.

We invest in high-potential businesses that are often deemed too risky for commercial investment.  The ‘trampoline effect’ makes it easier for commercial capital to flow to ventures that now match their risk/return profiles.  For example, our investment in <a”https://fsdafrica.org/programme/mfs-africa/”>MFS Africa, a remittance payments provider, enabled them to close their Series B round, and grow to raise capital in future funding rounds.

African SMEs need early stage risk capital

For investors seeking returns, Africa is a continent of opportunity, but also high risk.  Medium and SMEs account for 90%1 of Africa’s businesses and contribute to 40% of GDP, as well as creating 80% of the continent’s employment. The reality, however, is that the majority of African SMEs are in the early stages of their development, with investment needs between USD 50,000 and USD 500,000, but struggling to access capital to expand and grow into larger and more sustainable companies as they are deemed to high risk.

Our mandate is to change this perception, by testing new and alternative financing structures that can make investing in Africa’s SMEs more attractive to investors.

Africa needs investments in businesses that will increase access to basic services

The majority of people in Afrnot have access to affordable health services, opportunities to save for old age, safe water and clean energy or housing. With a projected population of 2.4 billion by 2050, the need has already surpassed the ability of governments and development finance institutions to address this crisis.

FSD Africa Investments development capital is critical to engaging the private sector, as well as institutional and impact investors, to fund businesses and products that can expand access to basic services for everyone. For example, we are already investing in an affordable housing finance company and a micro-pensions start-up.

Africa needs more private sector solutions for climate change

Millions of vulnerable people are falling into poverty as a direct consequence of climate change. Extreme climate conditions are affecting livelihoods – with loss of property, income, access to clean water and a safe environment. Trillions of dollars of investment are needed to combat climate change. We need to move quickly towards renewables, sustainable agriculture and energy efficiency.

We deploy development capital to mobilize financial resources into financial platforms and solutions to mitigate the causes of climate change and to adapt to its effects, reducing its impact.

Africa’s needs to harness its own sources of capital

Foreign Direct Investments to Africa have been on a downward trend over the last five years, falling from USD 74 billion in 2013 to 42 billion in 2017. Yet, Africa has large pools of its own capital through savings, insurance, pensions contributions but very little of thisoney finds its way back to the real sector or into alternative asset classes, such as private equity funds.  Finding investment platforms that use blended finance structures to manage the risk/return profiles would support a better allocation of this capital to the real economy.

Unlike many development finance institutions, we have a primary mandate to drive impact, which is secondary to the need to create return on our investments. We invest in order to drive impact and create solutions to the most pressing challenges facing Africa’s financial markets.

By stimulating and increasing the flow of commercial and institutional capital into financial firms and funds, we’re ensuring that Africa’s financial sector can serve its local communities and economies in the long-term, reducing the need for development funding in the future.

 

<cite”blockquote-source”>1The Challenges and Opportunities of SME financing in Africa, London Stock Exchange Group,

CAHF 2019 housing finance in Africa yearbook (10th edition)

Our partner, the Centre for Affordable Housing Finance has launched the 10th Edition of its Housing in Finance Yearbook, which now contains 55 country and five regional profiles.

Targeting housing finance practitioners, investors, developers, researchers and government officials, the 2019 Yearbook provides an up-to-date review of practice and developments in housing finance and delivery in Africa, reflecting the dynamic change and growth evident in the market of each country over the past year.

The intention of this publication is to build a community of practice of housing finance experts in-country. Throughout its ten-year span, the Yearbook has retained a focus on the lower end of the market. What makes this publication unique is its overt emphasis on affordable housing. The profiles focus on the critical need for housing and housing finance solutions that are explicitly targeted at the income profiles of the majority of the population, for whom most commercially-developed residential property is out of reach.

Download the yearbook here.

Catalysing investment finance for SMEs

This case study looks at FSD Tanzania’s (FSDT) initiative to establish an effective alternative investment channel of the Dar es Salaam Stock Exchange (DSE) for micro, small and medium enterprises (MSME), the Enterprise Growth Market (EGM). The EGM aims to supply long-term equity capital for growth oriented SMEs in various areas such as agribusiness, agro processing, mining, tourism, manufacturing, banking and financial services.

FSDT sought to catalyse investment finance in MSMEs through the DSE’s EGM. Providing approximately USD1,360,000 to CMSA and DSE in 2011, FSDT supported the operationalisation of the EGM and stimulated take up by firms and investors. This work included public awareness campaigns, providing technical support to MSMEs and nominated advisers and building the regulator’s ability to supervise the EGM segment.

The establishment of the EGM has demonstrated that the stock exchange can provide an investment finance channel that’s relevant to medium-sized companies that do not meet the requirements to list on the main market segment. The potential for growth remains huge due to the large number of MSMEs in Tanzania but will rely on ongoing information dissemination, awareness raising and support to firms, in order to increase both the number and type of companies listing, and attract more investors.

All stakeholders in the EGM have stated that MSMEs and ‘well-researched start-ups’ are worthy of, and able to handle, increased investment, so long as they receive additional technical assistance. The CMSA and DSE have shown support for the EGM by changing regulations and practices. Members of both agencies report that “we have more capacity and increased confidence to supervise and run the EGM. But it’s a nascent market and we will continue to need technical and financial support”.