Expanding interest encompasses more than just financial aid and impact investments towards Africa.
In the dynamic world of impact investments, Development Alternatives Incorporated (DAI) and its associated entity, DAI Magister, are making significant strides to support companies in Africa.
DAI, an organisation with a rich history dating back to 1970, has been providing advisory support and grants to organisations driving sustainable change in over 150 countries. In recent years, DAI has shifted its focus to deploying impact-oriented funds into companies, setting them up to be better positioned to access future commercial investments.
One such company is Twiga Foods, a Kenyan fresh fruit and vegetable tech-driven distribution company that DAI funded in 2014. Last year, Twiga Foods raised $30 million to expand its operations, a testament to the potential of impact investments in Africa.
The need for impact investments in Africa is evident. According to estimates, there's still a gap of $100 billion annually needed to support Africa's much-needed growth. Impact investments aim to improve the quality of lives, address challenges like job creation, income inequality, youth unemployment, and climate change.
Victor, a speaker discussing the landscape of impact investments, emphasised the challenges of scaling businesses in Africa, requiring more capital than many imagine due to the need for infrastructure like trucks and warehouses. DAI expects that if 10-15 companies in Sub-Saharan Africa raise rounds of around $25 million in a year, it would be satisfactory.
In 2020, approximately 100 companies in Sub-Saharan Africa raised at least $1 million, a number that was around 10-20 three or four years ago. This growth is compounding, with DAI Magister expecting that half of all the capital raises and advisory deals from DAI Magister would be Africa-focused in a few years.
The speaker's strategy is a bet on the market and startups that raised $1-2 million recently, expecting them to raise $25 million or more in the next few years. This strategy is not without challenges, as impact investments face a broad and sometimes difficult definition, with different players adopting various understandings of social impact, financial return, and measurement methods.
In a strategic partnership with Magister Advisors, DAI Magister was formed to amplify efforts to attract commercial capital into Africa. Magister has also partnered with Investment bank Clermont to help drive its expansion as they double down on Europe and Africa.
Victor hints at the possibility of DAI Magister providing different types of assistance to interesting companies while making a financial return. This approach could potentially bridge the gap between impact investments and commercial capital, accelerating Africa's growth and development.
The speaker believes that the ecosystem in Sub-Saharan Africa is just getting started and growth is compounding. With the right support, companies like Twiga Foods could become the norm, driving economic growth and improving lives across the continent. Africa's growth, as Victor believes, will outstrip expectations, making it an exciting frontier for impact investments.
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