INV INVESTI ESTING NG FOR FOR SOC SOCIAL IAL IM IMPACT CT IN AFRIC IN AF RICA IDA A Global al Devel evelop opmen ent t 24 Janu nuar ary 201 018. 8.
AGENDA • Nordic Impact Funds – who we are and what we want to achieve? • The opportunity – growth and market perspectives • The solutions – trends and challenges • The cases – examples from East Africa • Discussion
NORDIC IMPACT FUNDS IN BRIEF Creating a positive impact for more than a m a million on lives ves in East Africa by leveraging the be best t of the e Nordi dics cs - governance, capital, technology, and expertise and combining it with Africa can n presenc esence, deal experience and local network
Who WHO ARE WE - PARTNERS LISBETH STAUSHOLM ZACHO HUMPHREY WATTANGA THIRD PARTNER FOUNDER/CEO PARTNER PARTNER/CIO 10 years experience in international Our third partner is currently working for • 15 years experience in structuring private • • development from IMF, WB and NGO another organization equity and impact investment deals in East 10 years financial experience from >15 years experience in investment • Africa • the Danish central bank transactions and project finance in developing • Expert in innovative social finance and • Experience in health, education and countries • public private partnerships development programs +USD 3 billion deal flow – all with positive Structured social impact bond on early • • Expertise in anticorruption, compliance, returns • childhood education risk and financial management Long track record from international • Lead advisor in the development of a • • MSc Economics, MBA development banks • pioneering government retail bond mobile Experience from a pension fund as an platform • investor in private equity funds BSc Harvard, MBA Wharton •
What at OUR MISSION MIS ISSIO ION >$60/da day High-income To improve the quality of life for low-income people in East Africa by capitalizing enterprises <$60/da day that have a scalable and economically viable Middle-income model for IMP MPACT CT - A dual bottom line of positive societal and <$5/day financial returns! Low-income/subsistence <$1/day Extrem eme e pove verty y
THE OPPORTUNITY Fastes est growin owing g region on in the World. d. Current and projected real GDP growth rates exceeding 5% in the region. EIU projects Kenya to be 7 times its current size in 2050. Fairly stable ble politic itical l and d macr cro-ec economi onomic envir nvironm nmen ents Ethiopia Fast growing work force from a co comb mbine ined d popula ulation ion of ove over r 250 million lion of which majority lives for less than 5$ a day Uganda Kenya The low ow income ome segmen ment co compr mprises ises the mass ss mark rket et in East Africa Rwanda Broad indus ustry y diver versif ificat ication on and low dependency on commodities Tanzania Improvin ing g envir nvironm nmen ent for doing business and investment
GROWING WORKFORCE IN AN AGING WORLD BY 2034, AFRICA’S WORKFORCE WILL BE LARGER THAN THAT OF CHINA AND INDIA AT 1.1 BILLION WORKING-AGE POPULATION IN LARGEST A RISING WORKING-AGE POPULATION SHARE IS POSITIVELY COUNTRIES AND REGIONS CORRELATED WITH GDP PER CAPITA GROWTH MILLION PEOPLE AGED 15-64 1.600 Average annual percentage point change 8 in real GDP per capita, 2960-2014 1.400 6 1.200 4 1.000 2 800 600 0 -10 0 10 20 30 400 -2 200 -4 2000 2010 2020 2030 2040 2050 Percentage point change in the share of the working-age population, Europe NAFTA Africa India China 1960-2014 Source: McKinsey Global Institute, 2016 Source: World Bank Group, 2016
LOW CORRELATION WITH INTERNATIONAL MARKETS African markets are weakly correlated with Europe and the US as well as internally amongst other African markets MSCI I South th Monthly correlation USA Europe pe Kenya Ke ya Niger eria Rwand nda Tanz nzan ania ia Ugand nda Zambia bia FM FM Africa ica 2014-17 USA 1 Europe pe 0.665 65 1 MSCI I FM 0.538 38 0.388 88 1 South th Africa ica 0.57 0.532 32 0.686 86 1 Ke Kenya ya 0.216 16 0.275 75 0.362 62 0.17 1 Niger eria 0.165 65 -0.046 046 0.46 0.189 89 0.36 1 Rwand nda 0.005 05 0.057 57 0.259 0.057 57 0.225 25 0.161 61 1 Tanz nzan ania ia 0.055 55 0.029 29 0.226 26 -0.042 042 0.433 33 0.009 09 0.395 395 1 Ugand nda 0.074 0.182 82 0.224 24 0.126 26 0.751 51 0.16 0.252 52 0.498 98 1 Zambia bia 0.117 17 0.175 75 0.129 29 0.054 54 0.345 45 0.141 41 0.233 33 0.187 0.322 22 1 Sources: Investment Frontier (2017)
FINANCIAL RETURN EXPECTED RETURN PAST PERFORMANCE IMPACT FUNDS (N=209) IMPACT FUNDS (N=202) 2% 100% 9% 16% 80% 60% 79% 76% 18% 40% 20% 66% 20% 15% 0% Impact performance Financiel performance relative to expectations relative to expectations Outperforming 66% Risk-adjusted market rate returns In line 18% Close to market rate return Underperforming 16% Close to capital preservation Gross return expectations for survey funds were on average 16,5 5 % (on equity) and 91% are on or above target Source: GIIN Impact Investor Survey, 2017
SOLUTIONS – TRENDS AND CHALLENGES TRENDS: • Mobile – accessibility, payment, credit, info, communication, USSD • PAYG – Pay-as-you-go • Solar – home solar, off grid, mini grid, on grid …for light, cooling, water pumps, storage, processing, kiosks etc. • Data driven – multiple information sources, uniting fragmented markets, using data to improve productivity, machine learning algorithms • Blockchain – for cross border payments, land rights, identity, legal contracts … • Wallets - digital wallets for education, health, insurance, savings, inputs etc CHALLENGES: • Need for physical structures, networks, distribution, partners • Many solutions to same problems – who is the winner or is the market big enough? Will some of the solutions be taken over by government? • Many start-ups – few mature businesses
Why ENEZA EDUCATION A MOBILE EDUCATION PLATFORM 3.2 2 milli llion on KE, TZ, , GH Growth owth Educat cation ion USD 3 & CI stage milli llion on Eneza Education is a comprehensive virtual tutor, that provides universal • BUSINESS MODEL access to affordable, quality, lifelong learning through ubiquitous mobile technology. As a social enterprise, Eneza reinvest its resources to educate Eneza aims to reach the masses low income earners at scale, 70% of them living in rural areas • through accessible and affordable With over 3.2 million unique users, Eneza Education is undoubtedly • products, and is thus considered a Africa’s #1 Mobile Learning Platform for 10 – 25-year-old learners in “base of the pyramid” business model rural Africa Eneza offers a virtual tutor and teacher’s assistant – a way for both • All products are extremely low cost • students and teachers to access courses and assessments while for the end user (students, teachers interacting with live instructors – all through low-cost mobile phones or parents) and range between Students can access locally-aligned tutorials, tips, and assessments, as well • $1.20-$7.20 a month as a leaderboard, Wikipedia text and live teacher chat, an online web Eneza furthermore sells web-based • app, an offline desktop app, and an Android app school accounts, SMS data reports Individual parents, students or teachers can buy a subscription to courses • and tips for parents and teachers for a low weekly or monthly fee
Why SUNCULTURE HELPING FARMERS GROW MORE WHILE >1500 500 Kenya ya Growth owth Agri- 3 m custom omers s stage busine siness ss SPENDING LESS PRODUCTS Combin bining ng the ener ergy y effic ficienc iency y of solar ar power wer with th the effec ecti tiveness eness of drip ip irrig igatio ation RAINMAKER SYSTEM DRIP IRRIGATION MIST IRRIGATION 60% of land in Africa is suitable for farming, but only 6% is currently • Starting from 50,000 KES* for capacity Starting from 8,900 KES for a standard Starting from 39,000 KES for a under irrigation, leaving 2 billion acres without irrigation of 7000L of water/day 1 Acre Kit standard 1 Acre Kit SunCulture’s RainMaker solar water pump system is a transformative • Developing a “pay as you grow” - Price dependent on farm layout, Price dependent on farm layout, internet connected system designed to help smallholder farmers in solution design and acreage design and acreage underserved communities improve agricultural productivity and profitability The RainMaker provides a long- lasting, low cost solution in low rainfall. • The solar panels provide the pumps’ power directly without the need for expensive batteries or inverters SunCulture offers a price point low enough that a Kenyan farmer can • afford it and can save a farmer over $10,000 per year and using the RainMaker can help boost a farmer’s income to 1.2 million Kenyan Shillings ($11,538) annually compared to less than 300,000 Kenyan Shillings ($2,884) relying on rainfall Currently, SunCulture has had an impact on >1500 customers across • East Africa
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