Monday 20th January's UK-Africa Investment Summit represents a landmark opportunity to consolidate the mutually beneficial trading links that exist between the UK and the countries of the African continent. But its importance is even greater than that.
The world has ten years to achieve the United Nation’s Sustainable Development Goals (SDGs) – the blueprint to achieve a better and more sustainable future for us all. The financing gap to achieve these goals – which include eradicating poverty and fighting the causes of climate change – is estimated at about $3 trillion a year. The financing required for implementing the Goals for Africa is estimated at between $500 billion and $1.2 trillion a year.
The huge sums involved means that the bulk of that money will have to be mobilised from the private sector. There is simply no other solution imaginable.
Unfortunately, outside of governments and philanthropists, it is opportunity that moves money not need. Sometimes that is a tough message to hear, especially for impact investors – those that invest to bring about positive environmental and social change as well as to make a financial return.
Thankfully, we are now at a point where need and opportunity are starting to converge. Let’s take electricity generation as an example. Over 600 million people in Africa still do not have access to reliable and affordable sources of electricity. Without electricity, it is almost impossible to get an education or access to decent healthcare or even run a business. There are now great opportunities for UK investors to support the rollout of African renewable power projects – particularly solar and geothermal – while making a commercial return.
Or let’s look at digital infrastructure. CDC last year invested $180m in a company called Liquid Telecom, to enable it to accelerate the completion of a pan-African network consisting of 70,000km of fibre optic cable that covers some of the most poverty-stricken countries on the continent.
The cost of accessing the internet and making mobile calls in places like the Democratic Republic of the Congo will plummet as a result. We estimate that over the next five years the network will add over $250m to the DRC economy. And this is in a country where the average daily income is just $1 per day. In real terms, that will transform the prospects of countless people in the country.
Africa is one continent but 54 different countries. It has been ignored as an investment destination by almost all mainstream capital for decades, particularly outside of the natural resource and mining industries. Today however there is a new reason to get excited about Africa and that is growth. Today the continent is home to eight of the 15 fastest growing economies in the world. By 2050 a quarter of the world’s consumers will be African.
While many countries on the continent, for reasons of conflict or poor governance remain difficult places for investment, there are an increasing number of countries such as Egypt, Ethiopia, Rwanda, Ghana and Côte d’Ivoire that are changing - improving governance, focusing on enabling the private sector and improving the ease of doing business.
They are providing role models for other countries in how to attract private capital and generate the economic growth to drive the returns necessary to attract significantly larger flows of capital.
Africa needs investment to drive growth, create jobs and improve lives. At CDC we have been making impact investments for 70 years to help countries build better economic and social infrastructure, stronger and better capitalised financial systems and more productive agricultural and manufacturing sectors. We have earned a consistently positive return by doing that.
Today our investee companies collectively employ about 370,000 people and contribute hundreds of millions of dollars in tax revenue to their local governments.
We have a decade to achieve the SDGs. The UK-Africa Investment Summit offers an opportunity for more UK funds to become impact investors by participating in the continent’s growth, make attractive returns and a meaningful difference to people’s lives.
Nick O’Donohoe is the Chief Executive of CDC Group, the UK’s publicly owned development finance institution and impact investor
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