The Competition is on Amongst Impact Fund Managers
According to research from KPMG, Africa attracts more impact investing currency than any other area in the world. With the increasing amount of impact capital flowing into Africa, fund managers seem to be fighting over the same, and increasingly scarce ‘safe’ bets; established companies with all the bells and whistles. Fund managers are therefore struggling to allocate their capital and consequently miss their funds goals in achieving positive financial results along with positive impact. In an attempt to overcome this challenge, fund managers seem to be responding in two ways. Some are seeking early-stage ventures while others ease their impact targets and allocate capital in favour of commercial performance.
KPMG draws their conclusions based on a portfolio of companies, that are financed by challenge funds, but are managed by KPMG IDAS Africa. In terms of commercial performance, agro-processing projects are the most profitable sub-sector group in the portfolio, however, renewable energy projects grew turnover 3x faster than agro-processing projects and had larger gross margins. These two sectors also attract most support from investors. In terms of impact, agro-processing projects reach fewer households, compared to financial services and renewable energy projects, but do provide the highest benefit per household – usually through sourcing produce from smallholder farmers.
For further details on their research/evaluation please check out their paper ”Impact Investing In Africa: Performance Insights From The KPMG IDAS Africa Portfolio”.