CIM's Investment Manager based in Freetown, Archibald Shodeke, talks about biases surrounding investments in Africa, opportunities of investing in Sierra Leone and how we realize them in the newly launched West Africa Bright Future Fund (WABFF).
The mainstream media tend to paint a clouded picture of Africa, concentrating on negative information rather than having a balanced view and digging into Africa's investment potential and positive market trends we are seeing. Africa is on track for growth or development, and it does attract a lot of international investments. Besides, making generalizations about Africa is a bias in itself.
Africa is extremely diverse, and so investment opportunities vary from country to country. Different socio-economic and cultural paradigms also have to be considered. Unless they are familiar with the local context, investors bundle these assumptions and end up with a commonplace: "Investing in Africa is too risky."
Take, for example, the media talk around Nigeria, always mentioning corruption and high risk. What you will hear less in the news is that Nigeria is Africa's biggest economy or that the Netherlands is its 3rd largest trading partner. Or that many Western multinational companies have regional headquarters in Nigeria. To have a proper investment strategy in West Africa, a deeper understanding of the market, including cultural dimensions, is essential.
When it comes to investments in Sierra Leone specifically, investors' thought revolves around risk, which makes them overlook enormous opportunities. In the meantime, we have started seeing foreign investments in Sierra Leone's agribusinesses (honey, palm oil, cocoa, and rice), tourism and other processing businesses.
The country's investment climate is improving; it is peaceful and politically stable. Some articles still refer to Sierra Leone as "recovering from the civil war", but the war ended over 20 years ago. When it comes to investment and economic development, it should not be a factor that scares international investors away.
Yes, investing in fragile economies is risky, but having a local team, partners, sector focus, and niche expertise are reliable risk mitigation tools.
Our investment strategy is unique in several aspects. Sector focus is one: we target not only agriculture (which other investors are interested in) but also emerging sectors like clean energy and waste management that are typically underserved because they are yet to show a good track record.
More importantly, we are investing in SMEs that even most impact investors wouldn't take on due to perceptions of high risks. Indeed, it is risky if you can't adapt your loan to the investees' needs - that's why we apply a much more practical and long-term approach to our partnerships.
For example, WABFF has a medium tenor for three to five years. Even if a local bank gave a loan to the SME (which rarely happens, as they are looking for a higher capitalization), their facility would have a much shorter term - which will only suit some enterprises. Besides, we deploy funds in local currency - here are some of the unique features of the fund.
A clear perspective on the impact. How many jobs will they create? Not just jobs, decent jobs. Will the company employ women or youth? We also look at sustainability, which hinges on the viability of the business, a long-term sustainable approach in which our investees will thrive. And in fact, we are looking at the additionality and how our funding will project this business to help catapult to another level. Our sector approach helps us find projects delivering a broader impact that aligns with our theory of change and its targets, like improved quality of life, especially for women and youth, or climate change mitigation.
We have quite a few inspiring examples. Take one of our investees, Mobile Power, who rents solar-powered batteries for remote off-grid communities. Mobile Power is a major youth employer, including several women who became the company's agents. Many were school dropouts who, because of the job, were able to save money and advance their education. But the impact goes beyond that: our loan enabled rural communities to access renewable energy meaning their children have more time to study, and women felt safer and could spend less time on household tasks.
Another example is the processing enterprise Capitol Foods, which has created many jobs directly and indirectly. Capitol Foods produces natural fruit beverages and cacao powder, sourcing the inputs locally from 6000 farmers. Besides that, there are new company employees, agents who work with farmers, and even drivers transporting those fruits.
Capitol Foods gives farmers much more than income - it gives them knowledge. Many farmers are trained in better agronomic practices to increase productivity and product quality. They help cacao farmers get certified to sell their products at a premium.