First extensive study on Social Investment in Africa reveals financial trends and gaps

The African Venture Philanthropy Alliance (AVPA) launched ‘The Landscape for Social Investments in Africa’ high-level inaugural report on the state of social investment financing in Africa.

“Africa needs an estimated $500 billion - $1.2 trillion annually between now and 2030 to meet its financing gap for delivering on the United Nations Sustainable Development Goals targets.

With traditional sources of social investment like aid and government funding unlikely to fill this gap. Therefore, we need to turn to the global financial and capital markets for the requisite investments, “ says Dr. Frank Aswani, CEO of AVPA.

The report presents findings of an eight-month study across 18 African countries - six each in West, East, and Southern Africa.

The study was commissioned by AVPA with support from the United States African Development Foundation (USADF), Social Capital Foundation, The Rockefeller Foundation, and an anonymous donor.

AVPA conducted the study in partnership with Intellecap, the advisory arm of The Aavishkaar Group, which works to build businesses that can benefit the underserved segments across Asia and Africa. It mapped providers of social capital - financial, human and intellectual, their investment strategies, and opportunities for collaboration amongst the various investors.

The findings highlight, among other things, what is currently happening, who are the key players, what are their current approaches to investing, what challenges they are facing, and the opportunities they are seeing. It also identifies additional areas of future research while making recommendations of opportunities to create a more vital ecosystem for increased capital flow and social impact on the continent.

Many social investors in sub-Saharan Africa operate in silos, necessitating strategic interventions to bridge gaps across the different types of capital and investment strategies.

Key findings of the report:

• Over 820 social investors are operating in the sub-Saharan African (SSA) region; 39% in East Africa, 31% in West Africa and 30% in Southern Africa.
• The majority of social investment capital deployed across the regions continues to come from international sources with a growing number of active regionally-based social investors.

• Donors, development finance institutions, and sustainability aligned fund managers are the largest providers of social capital across the SSA regions, deploying billions of dollars annually, mainly through long term projects.
• Corporates and corporate foundations are emerging as strong drivers of regional social investment ecosystems.
• While Southern Africa has the highest number of regional-based family foundations, a high level of activity was also recorded for regional family foundations in West Africa who are relatively public with information on their giving and the causes they support.
• Regional Corporate Social Investors (CSIs) across sub-Saharan Africa largely support basic services (health and education) provision, while North American CSIs mostly focus on economic empowerment and entrepreneurship initiatives.
• Development finance institutions and sustainability aligned fund managers investments across the regions are highly concentrated by geography and sector, following similar trends in sector preference with financial services, agriculture and energy.
• Across the regions, tech-based enterprises focused on solving challenges in the financial services, agriculture, energy and healthcare challenges have received the highest focus from social investors.
• Large pools of social investment capital deployed by African diaspora communities, faith-based organisations and other local capital providers represent a significant opportunity for collaboration with other social investors to make progress in key social sectors such as health care, education and affordable housing.
• The supply of social investment capital in the SSA region remains significantly mismatched with demand from social enterprises and impact businesses.
• With declining funding from donors and international foundations, non-profits are exploring alternative and more sustainable funding models.

The study includes an in-depth report for each of the three regions - East, West, and Southern Africa to provide detailed regional analyses.

AVPA plans to repeat this study every 2-3 years to track trends and improve the knowledge base within the ecosystem.