Frank Aswani: Strengthening Africa’s Social Investment Ecosystem to Help Tackle COVID-19

COVID-19 Africa Watch talks to Dr. Frank Aswani about ways to bolster Africa’s social investment ecosystem to help the continent’s economic recovery from the pandemic.

Interview

Key Takeaways

Below are some of the main takeaways from COVID-19 Africa Watch’s conversation with Dr. Frank Aswani, CEO of the African Venture Philanthropy Alliance: AVPA, a pan-African network for social investors collaborating to increase the flow of capital into social investments across Africa, and working to ensure that capital is deployed as effectively and innovatively as possible for maximum social impact.

  • Foreign aid and government spending will not suffice to fill Africa’s SDG financing gaps, particularly as aid to Africa has been declining and public finances across the continent have been severely impacted by the pandemic. The private sector, which is the other potential source of capital, have not traditionally funded social investment. AVPA is trying to tap into that sector by bringing together different types of investors and enabling the de-risking of social investments and the crowding-in of private sector capital. AVPA’s vision is that in the next 2-5 years, its network will have significantly contributed to closing the African SDG financing gap by becoming the most comprehensive network of social investors active in Africa.
  • AVPA has faced three major challenges in its efforts to increase capital flow into social investments during the pandemic. First was the unavailability of information on the African social investment space, which they sought to remedy through a landscape mapping study spanning 18 countries. Second was the fact that collaboration platforms for different types of social investors operated in silos. AVPA moved to solve this by bringing together debt, equity and grant funding onto a deal-share platform that can support interaction across various forms capital and investors. The third challenge was a lack of investor education on innovative finance, for which AVPA is developing an investor education program.
  • Looking ahead, from an economic perspective, AVPA recommends that African governments consider investing in creating and supporting an ecosystem that is conducive to growth of Small and Medium Enterprises, and especially of women-led businesses. Successful laws and policies in some jurisdictions could also be replicated across multiple African countries, to stimulate the social economic sector and to mobilize more capital for an inclusive post-COVID recovery.

The interview was conducted by Anthony Murimi, an IFC-Milken Institute Capital Market Program Scholar from the Central Bank of Kenya. A transcript is available below.

Transcript

Interviewer

Hello. My name is Anthony Murimi, an investment analyst with the Central Bank of Kenya, and an alumnus of the IFC-Milken Institute Capital Markets Program. Today, I am delighted to welcome Dr. Frank Aswani, who will be sharing with us his views on social capital investment in Africa and how this capital is effectively and innovatively deployed for maximum social impact. Dr. Aswani is the CEO of the Africa Venture Philanthropy Alliance, AVPA, and former Vice-President and Director of Strategic Relations with the African Leadership Academy. Thank you, Dr. Aswani, for being with us today.

Dr. Frank Aswani

Thank you very much. Thank you for having me.

Interviewer

Welcome. To start off the interview,  can you please briefly tell us about AVPA, its objectives, and the potential it is trying to tap into in terms of social investment in Africa?

Dr. Frank Aswani

Thank you. Before I tell you about AVPA, let me tell you about the problem we are trying to solve. I always say that if you’ve got an hour to solve a problem, spend 55 minutes unpacking and understanding the problem. So, Africa is at crossroads. We need between half a billion to $1.2 trillion annually to meet 2030 SDG financing gaps. Traditionally, this has been funded generally by aid and government funding, but what we’re seeing is that aid to Africa is reducing. And we know that across the continent, our governments are broke.

To that end, we need to be thinking about other sources of capital. And one of the most obvious is the private sector, who traditionally have not funded social investments. But there is almost $250 trillion in the capital markets and a lot more in the financial markets that we can tap into. So, what AVPA is trying to do is to bring together these different types of investors to support collaboration and enable the de-risking of social investments and the crowding-in of private sector capital as well as increasing the amount of grant capital available on the continent.  We do this by bringing together players who are deploying grants, debt, and equity on our deal platform for greater collaboration and increasing investments in African social opportunities.

Interviewer

Onto my second question, what are the major challenges that AVPA has faced in its efforts to increase the flow of capital into social investments during the period of COVID 19 pandemic and what strategies have you put in place to respond, notably in terms of innovative financing?

 

Dr. Frank Aswani

Great question, Anthony. I think we will face three main challenges. One is just a challenge of information available information on the African social investment space. It is not easy to find databases. It is not easy to find content that talks to opportunities and gaps or even success stories. So, we did a landscape mapping study across 18 countries – six in East, six in West, and six in Southern Africa. The study can be found on our website and it brought us some really interesting information that will now enable social investors to smartly deploy the time and resources towards solving very targeted issues and challenges of the continent.

The second issue is just collaboration platforms for the different types of social investors. We are uniquely positioned due to the fact that we are a platform that brings in one place debt, equity and grant funding. And furthermore, we have provided a deal share platform that supports the interaction of these different types of capital and investors into social investments in Africa.

The third challenge that we’ve we found is the lack of investor education on innovative finance in order for us to play in this new space of impact investing, blended finance, looking at tools like social impact bonds,. We are also developing an investor education program to try and see how we can build capacity of the African social investor in innovative financing, so more of them can get to play comfortably in this new financial paradigm.

Interviewer

That is great insight. From what you have mentioned, would you consider putting a private placement on social bonds in Africa?

Dr. Frank Aswani

Yes. I mean we have got to look at a lot of these kinds of innovative tools. There are a couple of bonds, for example, that are available and running in Africa, but not at the scale and speed we would like to see them. And that is just because people don’t know about these tools. We have got to bring them up the competence and consciousness curve so that we can have a lot more of them being active participants in this space. And the other thing that we are deliberate about at AVPA is seeing how we can support the smaller-ticket investors – because the majority of our investors are not deploying $5, $10, $50 million. They are playing under $5 million. So, what does innovative financing mean to that particular segment of players as we accommodate the bigger-ticket-size players at the same time? We are particularly focused on the smaller tickets as investors and keeping them to be more active in this space.

Interviewer

Onto my third question. Last year, you held a very interesting webinar series with program implementers in Africa to hear how they are experiencing and responding to the outbreak and to share solutions that can be implemented quickly and effectively. Could you please tell us more about the key lessons that came of this webinar series?

Dr. Frank Aswani

That was a really great series. We had 10 webinars that we ran from about March to October. As we listened to all the efforts on COVID-19 at the emergency phase, we were not hearing enough about solutions being put out for people to learn from each other, about best practices and especially solutions for the most vulnerable. So, we decided with a partner in telecom to run this series of “crushing the curve”.

The webinars were fascinating and really successful, and there were some huge lessons. The first lesson we learnt is that there are a lot more similarities among the challenges facing the most vulnerable in Africa, than there are differences. The second thing we learned is that movement of information at speed is super important. And anything we can do to support that is hugely beneficial to the broad ecosystem. The third thing we learned was the significance of collaboration. Through this series and other platforms that we set up on the back-end to bring together players in the COVID-19 emergency response space, a lot of people who never have connected and collaborated on initiatives, got together and actually did some work together. And the final thing that we also learned was just how vulnerable women are around the continent. I think the COVID-19 crisis really brought out the gender gaps in the continent. We then decided to set up a gender platform, as part of our first thematic platform, in response to thinking through the recovery of the African economy through a gender lens.

Interviewer

You’ve mentioned something very important that is affecting us, even in Kenya, in regard to the ramifications of the COVID-19 and the economic meltdown. We’ve witnessed a problem in the family unit whereby gender violence has really gone up. And my question to you is, do you think this is happening all across Africa?

 

Dr. Frank Aswani

You know, I think the joys of having our pan-African network is we realize that it was the same right across and maybe a lot more in some countries than others, but by and large was very similar across the continent.

Interviewer

Okay. So, my fourth question. Out of the organizations that you featured in your webinar, could you tell us about one or two that stand out as particularly interesting examples of responding to the crisis?

 

Dr. Frank Aswani

Yes, I think I’d like to talk about two. One is a program called “Safe Hands” in Kenya that was brought together by a lot of private sector companies,  who came together and created an informal organization that leveraged their skills, competence, and resources in response to the COVID-19 crisis. So, you find people who have logistical companies and are rooting into the townships and slums of Nairobi. They could suddenly tell you exactly where to find people, where to find safe places to put hand-washing stations, and all those kinds of things. But also, they contributed financially to the initiative.

The second one came out of a South African network, it was called “Mthunzi Network”. We had a COVID-19 platform in Kenya, Nigeria, and South Africa and Mthunzi Network came about in response to the struggles of getting food to people, especially the most vulnerable because the logistics of moving physical food are quite staggering. You’ve got to check expiry dates, you’ve got to literally move goods, services, and it’s a mission. And Mthunzi Network was formed within three months on the platform that we had created, and it has led to testing and delivering digital food vouchers. And so now people are getting food vouchers over the phones. And it distributes over half a million food vouchers to a lot of people in South Africa and continues to do so. Now it is actually a formal organization with a CEO and a board and is something that was just sparked by bringing people together on a collaboration opportunity that COVID-19 created.

Interviewer

To my fifth question, looking ahead, what do you think should be the priorities for economic recovery? In particular, how does AVPA plan to collaborate with the public sector in formulating and implementing policies that support small business and enhance the growth of social enterprises in Africa?

 

Dr. Frank Aswani

I think looking ahead, priorities should possibly be what COVID-19 has given us – a chance to really press the reset button on a lot of things. I think from an economic perspective, governments should really look at how they can reduce the burden of driving economic growth and support a lot more private sector involvement, especially the in the Small and Medium Enterprise space. I think SMEs in Africa have been totally unsupported and their impact has been under-estimated. And this is the time when we should really invest in creating the ecosystem to make SMEs survive and thrive. Especially also, if we look within that space, look at the women-led businesses and support women entrepreneurs.

The second thing is just to learn from each other. For us, who have got a bird’s eye view of the continent, it was very interesting to look at some of the policy differences amongst many countries. I think some of these laws could be copied and pasted with some tweaks across multiple African countries just to stimulate the social economic sector to mobilize more capital.

I think there’s also a couple of other things that we could do a lot smarter. Look at on SME support, look at the Startup Act, for example. There is a Startup Act doing the rounds on the continent. It’s been implemented in Tunisia, I think Rwanda and Senegal. I think more African countries should adopt the Startup Act to be able to create much better environments for small businesses to get started.

And also, the social sector policies – that is, currently policies that have been set up across Kenya and South Africa, two countries that are looking at putting acts before their parliaments to be adopted to stimulate the social sector. I think we have depended too much on government, and recognizing that aid is also reducing, we’ve got to think differently. We’ve got to think very creatively about how we are going to support economic recovery.

Interviewer

Okay. On to my sixth and final question.  As social investor in Africa, where do you see AVPA in the next five years? And what do you think is needed for AVPA to achieve maximum social impact?

Dr. Frank Aswani

We are a fairly young organization. We are just getting into our third year – and our second year, as you can imagine, was quite challenging because of COVID-19. But this is good. I think we are building a network of people who thrive in problems and challenges. We are problem solvers. And our aspiration is that in the next two to three years, the AVPA network will have significantly contributed to closing the African SDG financing gap by being the most comprehensive network of social investors active in Africa. That’s very much what our vision for the next two to five years will look like and what is needed to achieve maximum social impact.

So we need support. We need donors and funders out there to come and support people like us. Secondly, I think we need a pan-African approach. I think we need Africans to understand that our problems across the continent are a lot more similar than they are different. And what AVPA will then do is leverage our international networks. We have sister networks in India, Asia, and Latin America to also accelerate Africa’s learning by bringing lessons in from those parts of the world and taking lessons from Africa to the other regions globally.

And the third and final thing, is that we want to work with governments on policy change to make this space a lot friendlier to the social investor.

Interviewer

Do you have any other input that you’d like to add before we wrap up?

 

Dr. Frank Aswani

Yes, I have a plea to most of the Africans with resources, whether you’re a corporate or you are a high net worth individual. Most of us have lived the problem and we are in the best place to live the solution. This constraint will be solved by us engaging and supporting African solutions to African problems. That means that some of the more prominent Africans, whether they are corporates or individuals, have to be supportive of coming together to give treasure, time and talent in making the African dream a reality.

Interviewer

We have come to the end of our interview. The Milken Institute and I thank you again for your time. Please keep up the great work. Goodbye and stay safe.

via COVID-19 Africa Watch
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