This story was told by Sitawa Wafula, a young woman who won the youth philanthropy award last week at the East African Association of Grantmakers (EAAG) annual conference in Mombasa. Sitawa, alongside other philanthropists from the region, social entrepreneurs and hard-to-categorize individuals like myself, were brought together to think about how we can actually be coffee beans and have impact in areas such as the future of social impact investment in East Africa. The different perspectives of participants, ranging from the US and East African CEOs of the Aga Khan Foundation to successful Kenyan social entrepreneurs such as Nat Robinson from Juhudi Kilimo helped us to avoid the abstract global talks we often have in such settings and not to focus much on the inevitable ‘post 2015’ and whether we should reinvent the whole development paradigm.
I had been invited by EAAG to speak about ‘the future of social impact investment in East Africa’.
The OECD Global Network of Foundations Working for Development (netFWD) is focusing on venture philanthropy and exploring how it may differ from more traditional models, as well as whether the approaches such as impact investing actually do deliver more impact.
Allow me to borrow Mfonobong Nsehe’s (contributor to Forbes’ blog) definition: ‘Impact investing, a relatively new concept in African investment circles, typically refers to investments that aim to solve pertinent social and economic challenges while generating a financial return. The impact investing industry channels capital to market-based solutions in areas such as affordable housing, clean technology, financial services for the poor, sustainable agriculture and other related sectors while targeting returns ranging from below market to market rate.’
First of all, I highlighted that social impact investment in East Africa is still in its infancy. Yet, there are some encouraging examples on the continent: the Rockefeller Foundation and the Tony Elumelu Foundation have set up an impact investment [grant] fund for Africa while the Rockefeller foundation has also just launched its ‘Digital Jobs Africa’ initiative, which looks into the challenge of youth unemployment in Africa from a catalytic philanthropy perceptive. So, no need to be bleak about the future of innovative approaches on the continent: there is both potential and opportunities.
Then why isn’t it more widespread? In fairness, only a handful of local foundations in East Africa are using impact investing or even ‘enterprise philanthropy’ approaches to support their partners. The reason for this is mainly that the culture of philanthropy/social entrepreneurship/venture philanthropy is still underdeveloped.
But it’s not just that East Africa is lagging behind: venture philanthropy for development as a whole is still too young to assess as the ‘ultimate new model’. There is little evidence (which is why the OECD netFWD has undertaken a study to look more in depth into venture philanthropy) and we need more data and case studies in order to draw lessons that we can discuss at the regional level.
That being said, if we look at emerging lessons from the rest of Africa and in other developing countries, the future of social impact investment in East Africa will depend on our collective ability to look into the five following dimensions:
- A changing culture of giving and more synergies between traditional philanthropy, aid and governments
- Partnerships to optimize efforts and ensure sustainability
- Identifying and leveraging the opportunities to support social entrepreneurship
- Empowering local actors
- Squaring the circle: connecting the regional experiences to the global dialogue on ‘post 2015’
First of all, the culture of giving needs to evolve: philanthropists and traditional donors need to get past the old ‘charity model’idea that profit is a dirty word and accept that philanthropy is no long about writing cheques and hoping for the best. Philanthropists also need to focus on enhancing their own transparency and accountability. Whether they like it or not, they are part of the political economy and, consequently, are accountable to the governments and taxpayers of the countries they operate in. In reverse, the philanthropic sector has a role to play with governments in discussing how to create a condusive enabling environment for social impact investment
Second, the philanthropic sector has to admit it just cannot do it alone. Partnerships are pivotal to optimize philanthropic efforts and ensure sustainability. This involves (at the risk of sounding like a broken record) joining hands with governments and working with other foundations, traditional donors and NGOs. A recent example of how innovative partnerships could be piloted is Development Impact Bonds.
Third, impact investors need to identify and seek to leverage the opportunities to support social entrepreneurship. If the regulatory environment and the broader enabling environment are not conducive to doing business, innovative individuals will not be able to set up promising social enterprises, which can in turn be supported by venture philanthropist and impact investing funds.
Fourth, impact investors need to empower local actors. If the social and developmental efforts we engage in are to be sustainable, local actors must take over as they reach scale. This requires giving them the means to operate differently.
Finally, we need to ‘square the circle’ by connecting these promising regional experiences to the global dialogue on ‘post 2015’. We cannot continue to operate in siloes. Regional dialogues hardly translate into high level discussions such as the ongoing ones on the post-MDGs framework and the role of philanthropy in that new setting. Networks like OECD netFWD have a responsibility to connect local dialogues with global ones.
In other words, impact investing isn’t the one and only way to ‘change the colour of the water’ and end poverty in Africa but it could help foster new ways of doing business. More importantly, it can help fight the perception that philanthropy is a ‘zero sum game’; it is a positive sum game, as demonstrated by the promising experiences featured at the EAAG conference of social enterprises supported by impact investors which help them reach scale and be sustainable, generating profit and local employment.
Bathylle Missika is head of netFWD, OECD Development Centre
For more information
For more about netFWD, see http://www.oecd.org/site/netfwd
1 See ‘’Rockefeller And Tony Elumelu Foundation Launch African Impact Fund’’, Forbes’ blogpost, May 2013, http://www.forbes.com/sites/mfonobongnsehe/2013/04/05/rockefeller-and-tony-elumelu-foundation-launch-african-impact-fund
2 See Development Impact Bond Working Group Summary Document: Consultation Draft (Center for Global Development and Social Finance): ‘Under a DIB, all interested parties agree a desired social outcome and a metric for measuring success. Private investors bank-roll a programme to achieve the outcomes. The programme itself is carried out by specialised service providers, and investors are paid back by an outcome funder (usually a donor agency) if – and only if – independently verified evidence shows that the programme has been successful.’ http://www.cgdev.org/sites/default/files/DIB_Summary_Recommendations.pdf