Impact Investment in Africa: Trends, Constraints and Opportunities

In 2013, the United Nations Development Programme (UNDP), through its regional private sector unit African Facility for Inclusive Markets (AFIM), produced a flagship report on “Realizing Africa’s Wealth – Building Inclusive Businesses for Shared Prosperity”. This flagship report looked specifically at inclusive businesses in sub-Saharan Africa and introduced the ‘Inclusive Business Sector ecosystem Diamond’ framework. One of the key findings of this report was the need for impact investment – the allocation of capital into enterprises, funds and/or organizations with the expectation of a financial return and a positive environmental and/or social impact – to spur the growth of inclusive businesses in sub-Saharan Africa.

To understand the potential for impact investment in Africa, this ‘Impact Investment in Africa: Trends, Constraints and Opportunities’ report reviews the current overall state of impact investing in Africa, highlighting key challenges to the sector and proposes strategies to increase the flows and quality of impact investment on the continent, especially those that are African led and mobilized.

The ‘Impact Investment in Africa: Trends, Constraints and Opportunities’ report seeks to support the development of the African impact investment sector by exploring the trends, challenges and opportunities for impact investment in Africa. Impact investment today constitutes one of the more proactive and promising approaches on the responsible investment continuum, representing a huge opportunity to contribute to the implementation of the Sustainable Development Goals (SDGs), as well as the funding of inclusive and green businesses. This report therefore aims to contribute to UNDP’s growing body of knowledge products and solutions and in this case, to highlight innovative finance vehicles that contribute to inclusive growth in Africa as discussed in our 2013 “Realizing Africa’s Wealth – Building Inclusive Businesses for Shared Prosperity” Report 3.

The African Impact Investment Landscape
Impact Investments are defined as investments that are made to generate a measurable social and environmental impact alongside financial returns. Since the term was coined at the Rockefeller Foundation’s 2007 Bellagio Conference, the impact investment industry has steadily grown. The Global Impact Investing Network (GIIN) estimated that in 2012 an approximate US$8 billion of assets were committed to impact investments by 99 surveyed investors. In 2015, 146 investors reported that they had approximately $60 billion worth of assets under management in the impact investment sector - $10.6 billion of which they had committed in 2014. Fund managers invested 63 percent of the assets considered in the 2015 report. This report highlights key trends in the global impact investment industry illustrating that while there has been progress in the overall development of the impact investment market, the support sector ecosystem continues to be systemically under-developed, and features particular challenges and opportunities unique to the African context.