Rise of Impact Investing in Africa: Charting a Course for Sustainable Development

By Renew Capital Marketing and Communications Team | Mon Jan 15 2024

Though Africa is home to many of the world’s fastest-growing economies, it has nearly 422 million people living in poverty. The rise of impact investing offers opportunities to make investments that can generate financial returns and deliver social impact in Africa.

Impact investment has gained traction in Africa as a way to address the continent’s pressing needs and create sustainable solutions to poverty, inequality and climate change. When done strategically, sustainable investment can positively impact both the economy and the environment of African nations.

In this article, we discuss the rise of impact investing in Africa. We'll also answer some of the most commonly asked questions about sustainable impact investing in Africa, including:

What is sustainable impact investing?
What's going on in Africa and what do impact investing statistics say about the current landscape?
How can sustainable investment firms get involved in African markets?

Let’s delve into the vast world of impact investing in Africa.

What Is Impact Investing?

Impact investing is a type of investment that seeks to generate positive social and environmental change alongside financial returns. Most impact investments work by investing in companies, organizations or projects trying to address specific problems. Sustainable impact investment can be an attractive option for investors looking to make a difference while working toward their financial objectives.

Growing Impact Investing Research

Ongoing research on Impact investing is exploring how this investment approach can lead to significant positive outcomes. The current size of the global impact investing market is estimated to be $1.164T USD by the GIIN 2022 market sizing report.

The Rise of Impact Investing in Africa

The public and private sectors can offer the social impact Africa needs. Impact investments in Africa are becoming more attractive as investors turn toward sustainable ESG solutions to address the continent’s development challenges.

Here are just a few of the areas for sustainable impact investments.

Natural Resources and Energy Supply

With its vast natural resources and energy supply, Africa has the potential to become a major player in the global economy. However, this potential has yet to be fully realized due to a lack of access to capital and investment opportunities. Sustainable investment firms can help bridge this gap by providing private capital to finance projects and infrastructure that can help Africa benefit from its resources.

Green Energy and Global Climate Change

With impact investment, Africa has the potential to become an energy hub, thanks to its abundance of renewable energy sources. But rather than simply creating more energy sources, sustainable impact investment can help ensure that the energy produced is green and used responsibly to combat climate change. By getting in on the ground floor of the renewable energy sector, impact investment can help create a greener future for both Africa and the world.

Sustainable Solutions

As a continent facing poverty, inequality, and conflict, Africa requires sustainable solutions to address its challenges. Impact investing can drive social change while supporting environmental sustainability through investments in healthcare, education, infrastructure, and renewable energy.

Private Equity Firms Investing in Africa

The African Private Equity and Venture Capital Association estimates 2022 was the highest year on record for deal volumes in Africa in the past 10 years, surpassing the record levels achieved in 2021 and representing a 46% year-over-year increase.

Private equity firms often invest in "essential" or "emergency services" – those that provide essential services like healthcare, education, agriculture, water and sanitation. By injecting needed capital into these sectors, private equity firms can help create more efficient and cost-effective services.

Private equity investors have also been investing in Africa’s technology sector. This form of impact investing involves creating tech infrastructure to support sustainable development. These investments often involve backing early-stage startups and helping them scale their operations to reach wider audiences.

Explore Sustainable Impact Investment Opportunities in Africa

As one of the world’s most rapidly growing regions, Africa is an attractive destination for private equity and impact investing.

The continent offers a wealth of resources and has the potential for significant economic growth, but it needs sustainable impact investments. By providing private capital to businesses and projects tackling social and environmental issues, impact investments can make a real difference in Africa’s future.

At Renew Capital, we’re focused on connecting investors with sustainable investment opportunities across Africa to help create a better future for the continent. If you’re an accredited investor seeking sustainable social impact in Africa alongside financial returns, consider applying to the Renew Capital Angels™ network.

Disclaimer

This blog should not be viewed as investment advice, or as a solicitation of an offer to buy or sell securities or to adopt any particular investment strategy. Impact investing, and investing in frontier markets specifically, is speculative in nature and involves a high degree of risk. The Renew Capital Angels invest in companies located and doing business in sub-Saharan Africa. Investors should understand and be willing and able to handle the risks of investing in such frontier markets, which are more significant than the risks associated with investing in securities of U.S. companies or in other developed countries. Risks include the risk of total loss of an investor’s entire investment. Investors should fully understand all risks and consult with their independent financial, legal and tax advisors to determine whether any particular investment or investment strategy is appropriate for them. Renew Capital does not make any recommendation regarding the appropriateness of any specific investment opportunity for any specific investor.