By Moyo Babalola, Doubra Eghage, Oti Ilentamen, Yewande Adewusi

Portfolio selection approaches differ depending on economic profile, geography, and capital market advancement. The focus of this article is selecting private capital opportunities within developing markets.

As private capital investors within the African continent, the team at Alitheia Capital utilizes several approaches to identify attractive industries to invest in. The common objective of these approaches is to identify the sectors that bridge the output gap of the target countries. The underlying premise is that bridging the output gap would align with government plans and provide the best positioning to achieve optimal growth that outpaces the effects of a volatile macroeconomic environment.

Assets within developing markets present a different risk profile compared to those in developed markets primarily due to macro-level patterns such as foreign exchange volatility, inflation rate, and interest rate. Macro-level patterns are systematic i.e. not specific to any industry or company, and beyond the control of private capital investors. Therefore, it is pertinent that private capital investors utilize a portfolio selection strategy that provides a degree of macro-level mitigation even when patterns are difficult to predict.

This article is part of Alitheia’s ongoing insight series that will showcase our learnings and ideas from nearly two decades of investing across African markets.

Complete Farmer, an end-to-end digital, agricultural marketplace that connects African farmers and global industries to competitive markets, resources, data, and each other on a single platform, raises $10.4 million in a Pre-Series A funding round of equity and debt. The equity portion of the round was co-led by the Acumen Resilient Agriculture Fund (ARAF) and Alitheia Capital via its uMunthu II Fund in partnership with Goodwell Investments, who were joined by Proparco, Newton Partners and VestedWorld Rising Star Fund. Debt financing was provided by Sahel Capital’s SEFAA (Social Enterprise Fund for Agriculture in Africa) Fund, Alpha Mundi Group through its Alpha Jiri Investment Fund and Global Social Impact Investments, to fund both CAPEX and working capital investments in support of short and long-term growth.

Complete Farmer currently offers two main solutions tailored to farmers and agricultural commodity buyers. On the one hand, its farmer-focused product, CF Grower helps African farmers optimize their productivity, access global markets, and improve their livelihoods through precision farming tools and data-driven cultivation protocols. CF Buyer, on the other hand, serves buyers across the world by providing them with reliable and easy access to commodities grown to meet their specifications. On the platform, buyers can access a large network of qualified growers, get quality certified crops through a seamless digitized process, and transparently monitor the progress of their orders from order to fulfilment, giving them full control of their procurement process.

A McKinsey report highlights the economic significance of agriculture in sub-Saharan Africa, given that the sector contributes around 23% to the region’s GDP, and the social significance, given that agricultural productivity is predominantly driven by smallholder farmers, who constitute 60% of the population. Despite the glaring opportunity this presents for Africa’s agricultural industry, the sector is rife with supply chain and infrastructure bottlenecks that make it difficult to effectively participate in global supply chains. Given the prevalence of small and medium-sized farms, boosting productivity holds the key to enhancing economic conditions in African nations. Complete Farmer is looking to transform the approach to farming by building technological and physical infrastructure to increase the efficiency and competitiveness of the agricultural industry in Africa. Desmond Koney, the CEO of Complete Farmer, is building a comprehensive one-stop resource for African agriculture leveraging proprietary cultivation protocols for crop production that make it possible for smallholder and commercial farmers to grow crops that meet global market specifications, thereby guaranteeing post-harvest offtake.

The $10.4 million raised will be instrumental in amplifying Complete Farmer’s impact and reach. Since its inception in 2017 and launch on TechCrunch’s Battlefield Africa stage in 2018, the platform has successfully brought together over 12,000 farmers across 5 key regions in Ghana and overseen the cultivation of over 30,000 acres of land, delivering commodities to Asia, Europe, and the rest of the world, as well as reducing post-harvest losses. These compelling milestones reflect Complete Farmer’s substantial progress and its contributions to the industry.

“At Complete Farmer, we are on a mission to revolutionize Africa’s agriculture value chain, to ensure competitiveness for all stakeholders involved ” said Desmond Koney, CEO of Complete Farmer. “We are thrilled to welcome our new partner investors, who are seasoned experts in the industry and have a profound understanding of our mission which enables them make valuable contributions along our entire supply chain. It is a pleasure to have partners who share our belief in Complete Farmer’s potential impact on sustainable food production and food security in Africa and the rest of the world.”

The funds will be strategically allocated towards driving Complete Farmer’s expansion plans, facilitating the scaling of its operations, and further enhancing its technology infrastructure. Complete Farmer will invest in the continuous development and enhancement of its digital platform, ensuring a seamless and user-friendly experience for farmers, buyers, and all users of the platform. The funds will also be channelled towards driving further research into the company’s proprietary data-driven farming protocols and other innovations to improve its efficiency and maximize its effectiveness in helping farmers optimize farming practices and increase yields.

“Having been with Complete Farmer from the start as investors, we have had the privilege of witnessing Complete Farmer’s incredible journey unfold over the past six years.” adds Ashwin Ravichandran, Portfolio Advisor at Meltwater Entrepreneurial School of Technology (MEST) Africa. “The progress achieved by Desmond and the team are truly commendable. The addition of new investors further fuels our anticipation for the business’s extended impact. With fresh perspectives and resources, Complete Farmer is poised for remarkable expansion, and we are excited about the journey ahead”

Complete Farmer aims to expand its domestic operations and break into new African countries. This will enable the company to reach more farmers providing them with access to quality inputs, technical expertise, and market opportunities. The funding will also allow Complete Farmer to forge strategic partnerships with key stakeholders in the agriculture and technology sectors and build a formidable team for the next phase of growth the company foresees.

Tamer El-Raghy, Managing Director of ARAF, says: “We are pleased to co-Lead this investment round, having been impressed with the progress that Complete Farmer has made in facilitating access to global trade for Ghanaian farmers, as well as introducing them to new crops and sustainable farming practices. Our goal at ARAF is to invest and grow local enterprises that support smallholder farmers in building resilience to climate change. Complete Farmer’s technology platform and farming protocols enable farmers’ access quality inputs, agronomical support, and premium markets, resulting in improved yields and income as reported by the farmers themselves. We are therefore excited to partner with Complete Farmer over the next phase of its growth through expanding in Ghana and to other parts of the region.”

Tokunboh Ishmael, Managing Partner at Alitheia Capital, adds “We are proud of Complete Farmer’s work and the opportunity to amplify our desired outcomes of fortifying the African agricultural value chain and bolstering export prospects through this investment in Complete Farmer. Employing home-grown technology developed in Africa, Complete Farmer serves as a vital bridge that connects local farmers and their products with global markets and financial resources. This connectivity results in increased incomes for farmers, elevated product quality, broader access for buyers, and an overall enhancement of global trade dynamics”

Proparco, a subsidiary of Agence Frainçaise de Développement (AFD) focused on private sector development, sees significant value in Complete Farmer’s innovative approach. “We are proud to partner with such pioneering Ghanaian entrepreneurs. Complete Farmer is a unique digital platform that helps African farmers optimize their productivity and improve their access to offtake,” stated Sadio Dicko, Proparco’s Deputy Regional Director for West Africa. “This investment, alongside other Proparco’s partners, will provide Complete Farmer with additional resources to both improve its digital infrastructure and tap into new markets for the benefit of the African agriculture sector”

LAGOS, NIGERIA – Haul247, an end-to-end logistics tech platform connecting businesses to haulage and warehousing assets, has raised $3 million in a seed funding round. Haul247 will use the investment to increase its market share in Nigeria, expand to other African markets, recruit talent, and develop its technology.

Alitheia Capital led the $3 million seed funding round via its uMunthu Fund, while Investment One participated. This follows a pre-seed funding round in 2021 by Khafid Gbadamosi and Horsham Gates. More recently, the company was selected as one of the recipients of the 2022 Google for Startups Black Founders Fund.

With over a thousand trucks on its roster and about 151,000 sqm of warehouse space available across various locations, Haul247 provides a unique platform for businesses to seamlessly book trucks and warehouses across multiple geo-locations in Africa using real-time technology.

Africa’s logistics industry remains fragmented, with over 80% of the market being operated by informal carriers that own one to three vehicles.

“Africa’s logistics sector continues to be hampered by a lack of supporting infrastructure, bottlenecks in service delivery, and a widespread informal approach to logistics business,” says  Sehinde Afolayan, CEO of Haul247. “Haul247 was founded to address the supply-demand mismatch in the ecosystem and optimize logistics service delivery in key African markets.”

Afolayan, who has over a decade’s experience in the African supply chain business, believes that solutions to logistics in Africa that do not solve warehousing challenges will be more costly, inefficient, and risky.

“Our platform connects businesses with reliable and efficient haulage and warehousing assets, making the movement of goods across the continent easier and faster. With the support of our investors, we will expand to new markets, recruit more talent and develop our technology to make logistics even more accessible and efficient for businesses in Africa”, he says. Afolayan believes this funding round will help Haul247 cement its position as Africa’s Airbnb for trucks and warehouses.

Tokunboh Ishmael, Managing Partner at Alitheia Capital, adds, “We are excited to be at the forefront of optimising logistics service delivery in key African markets, as trade and commerce is a key lever for driving development. Our investment further enables Haul247 to provide a seamless logistics solution for transporting and storing goods across the continent in a way that unlocks value and amplifies impact for individuals and companies throughout the value chain”.

Haul247’s proprietary software enables individuals, enterprises, manufacturers, and FMCGs to book logistics services in three simple steps quickly. The software takes an order request from a shipper, attaches a quote, and then matches the request with the most suitable truck and warehouse for efficient fulfillment.

Companies looking for warehouse facilities can also use the same process, making it an efficient and versatile platform for all logistics needs. Additionally, the system allows shippers to track the status of their goods until they reach their destination.

The founders of Haul247, Sehinde Afolayan, Tobi Obasa and Akindele Philips, believe the company is well-positioned to unlock Africa’s commercial potential while delivering value to clients and partners.

Experts globally have identified logistics as critical to The African Continental Free Trade Area’s (AFCFTA) success. According to the World Economic Forum, demand for intra-African freight will see a 28% increase by 2030, bringing benefits and transformation to the continent’s broader economy.

 

Gender Lens Investing toolkit

The Alitheia IDF Fund (AIF) Gender Lens Investing toolkit overview is an open resource that gives an
outline of AIF’s approach to gender lens investing. AIF is a $100 million private equity fund that invests
growth capital in SMEs in Western and Southern Africa using a gender lens to identify opportunities that
increase returns to and improve outcomes for women.

The toolkit is summarized for ease of applicability to funds that are interested in mainstreaming gender in
their portfolio, or proactively investing with a gender lens. This toolkit overview is based on AIF’s Gender Lens Investing Toolkit, a proprietary resource that was created thanks to funding from the Dutch Good Growth Fund. It was coordinated by Alitheia IDF Managers, and written with the contribution of Mennonite Economic Development Associates (MEDA) and Dalberg Capital.

Creator: ASHRAF SHAZLY | Credit: AFP/Getty Images


Politics, Philosophy and Economics of ODA in a time of COVID-19


In these unprecedented times, development assistance must shed the skin of its past and be adaptive. Despite a long history of Overseas Development Assistance (ODA) flowing into developing countries, ODA has failed to fulfil its ambition of developing the essential infrastructure needed to tackle the health pandemic and economic fallout from a crisis like COVID-19. With the global pandemic and economic meltdown, there’s a risk that the already meagre. ODA could be reduced, as developed economies look inward to prioritize spending at home to recover the economic and human loss that many have experienced this year. This will create an epic gap in the ability to develop economies to provide an environment that enables the bottom billions to reach their full potential.

ODA’s historic inefficiency has always been evident to astute observers, however, the pandemic spotlights the glaring gap and inadequate investments (or perhaps mismanagement by the ODA receivers) in the healthcare, education, finance, and energy sectors. The lockdown has even further exposed the under-funding, inefficiency and unsustainability of key sectors of developing economies; from the exclusion of children of the digitally excluded with no opportunity for remote learning to businesses which continue to remain heavily reliant on cash transactions. In the face of this crisis, investments to boost and transform these sectors are pertinent now more than ever. As with past crises, this is a defining moment. Stretching the deficiencies of ODA further, the investment gap in critical sectors will impact our collective ability to achieve the Sustainable Development Goals (SDGs). For instance, how can we achieve SDG3 to ensure healthy lives and promote well-being for all with an inadequate and crippling health infrastructure? Or SDG 4 to ensure inclusively and quality education for all when ordinary folk cannot afford to send their children to school, talk less of providing the technological tools that COVID-19 has revealed as sine-qua-non to fully participate in modern-day learning?

COVID-19 will no doubt have long-term negative socioeconomic consequences that will further fuel inequalities and vulnerabilities. The developing world already fraught with weak healthcare systems, and other existential threats (such as disease, food security, climate change, etc.), faces the additional impact of the pandemic and subsequent reversal of limited economic development successes and reduction of ODA.

Aside from the long-term effects of the pandemic, the short-term practices and policies required to ‘flatten the curve’ of the disease are difficult to enforce in developing economies where low-income households/individuals are reliant on daily income generation to meet their basic needs. For this group, their livelihoods are key to their health and lives. The UNDP Administrator, Achim Steiner estimates that developing countries could lose US$220 billion in income, noting that this pandemic could cause “a massive reversal of gains made over the last two decades, and an entire generation lost, if not in lives then in rights, opportunities and dignity.” So, already fragile economies (and households) are set to suffer a triple whammy of poor infrastructure, debilitated income, reduced official development assistance, and comatose SDGs.

Global cooperation has played a critical role in development and recovery, especially post an incident of significant proportions as COVID-19. Post-world war II interventions provided a template for ODA enabled countries to contribute and collaborate to lift up the weakest. However, years of low impact and slow progress have revealed the problems of an ODA formula based on the North-South flow of aid through NGOs and humanitarian work as the dominant narrative for poverty alleviation and economic development in the global south. A recent USAID report also points to this, noting the inadequacy of current global health funding. It suggested that new models of financing development are needed to achieve the Sustainable Development Goals (SDGs).

ODA presented as charity often results in short-lived solutions and small-scale impact. However, outcomes can be significantly improved by employing some key principles of impact investing: intentionality, sustainability, and metrics. This may serve to reduce the short-term nature and behaviour of aid money flowing into NGOs, and the seemingly tick-box nature of ODA by Development Assistance Committee (DAC) countries. With this possibility, either redesigning ODA in order to improve accountability, sustainability and scale of impact is imperative or simply doing away with it. I recommend we consider the former and look for ways to meaningfully repurpose and redesign ODA.

AID can be repurposed and redesigned to achieve ‘more bang for every buck’

ODA should be extended, repurposed and redesigned to accelerate the attainment of desired developmental goals. Investing in businesses that simultaneously deliver social and financial returns has given me a front-row seat on investing in scalable and sustainable enterprises that consciously solve developmental problems. These enterprises are founded and led by entrepreneurs and management teams who maniacally attack an intractable problem and desire to build organizations that are leaders in their domain, at scale. They want to be accountable. They are intentional and consciously pursue profit with purpose. This combination of factors achieves significantly more than pure aid.

Data published by the OECD shows that between 2015 and 2017, Nigeria and Ghana received a net aid disbursement of over $40 billion and $7 billion, respectively with little remarkable difference in development. In comparison, during the same period, less than $7bn was allocated to impact investing transactions in the two countries ($4.7 billion in Nigeria and $1.2 billion in Ghana) according to a report published by the Impact Investors Foundation. Yet, this has resulted in accelerated growth in new models of access to financial services, health, and education for over tens of millions of individuals, households, and businesses with targeted financial and social returns exceeding two times the value of each dollar invested.

Investing with a purpose allows for measurable economic, social, and environmental returns providing sustainable and scalable solutions to the intractable problems of developing countries. With impact investing, funders and entrepreneurs collaborate with the intention of addressing market failures with home-grown solutions at scale. They analyze the sustainability of their interventions through a financial lens while simultaneously tracking the impact of the money on their intent to improve and transform lives. Unlike ODA, providing a return on funds that flow from the developed to the developing world. Integrating the latter to the broader global economy in a commercial manner while meeting the latent consumer needs and desires in poorer economies. This is crucial given the complaints around aid from the citizens of donor countries and their increasing retreat to national preoccupations

This is not to completely discount AID but instead to call for greater focus on how the mechanics and dynamics of private equity and impact investing in emerging markets can be employed to solve the social challenges of these economies. Finding a balance between ODA as a charity and investing with impact is the sustainable way to progress. Opening a tap for ODA to be reallocated to an investing approach will increase the odds of the attainment of sustainable development goals.

In the wake of the COVID-19 health crisis, although it will be easier for donor countries to focus funds on the recovery of their economies, deciding not to commit to ODA due to the resulting economic downturn will impact DAC countries whether they like it or not. The world is only as strong as the weakest healthcare system and, dare I say, economy. Thus, this is the time for ODA to double down and hold recipient countries more accountable by switching a greater proportion of funds from pure aid to a combination of charitable and investing strategies. This is not the time to retreat into self.

Through innovative financing ACEF is enabling social impact by helping reduce deaths from respiratory diseases, which currently exceed 1.6mn deaths annually

Impact Investing seeped into the conscience of the investing ecosystem over a decade ago and refers to the varying degrees that investments can deliver positive social, developmental, economic, and financial returns all at once. Impact investing therefore refers to investments that deliver both social and financial ‘returns’. These social returns improve the livelihoods of low-income households by providing access to essential services such as health and wellbeing, education and opportunity, finance, and growth, which would otherwise have eluded them. Despite its growing popularity and necessity, funds allocated to impact investing still represent less than 20% of global mainstream funds under management.

Within the impact investing ecosystem, there are two schools of thought: the purist’s view which assumes that the investor must have a stated intention determined at the onset of an investment in order to track and measure certain outcomes. The stated intention comprising targets such as increasing the number of households with access to clean water, off-grid clean energy, good quality health or education, or other social services. This view is so pervasive that those not explicitly professing the purist mantra are viewed with suspicion. The second school of thought believes that by virtue of financing opportunities in key sectors of an economy and thereby creating jobs, impact implicitly emerges.

As a former Wall Street investment banker turned impact investor, I have had cause to pause and rethink the many ways impact can occur. I have found myself caught in the middle of two seemingly irreconcilable positions. There are those who believe that anyone professing to be an impact investor should constitute itself as a non-profit organization, for whom profit is secondary. They say one should not be making money off enterprises that benefit or serve the poor. Others ask, ignorantly, whether it is even possible to think of the poor as a potential market to be addressed for anything other than aid.

On the other side of the debate, since creating Alitheia thirteen years ago, my experience has been that my former investment banking colleagues are stuck on the thought that I am perhaps running a charity and financial returns are not on my mind. My ‘new’ acquaintances who are on a crusade to rid the world of its social ills cannot believe someone with my hard finance training, skills, and experience is truly aligned with their objectives of improving the lot of the poor and lifting them out of poverty.

The questions that occupy my mind when I think of these two positions are: is it really a crime not to state intention at the onset? Who should have the responsibility to state intention? Shouldn’t good business sense and investing include a broad set of metrics that considers the social good of an enterprise as well as the financial good? Is measuring impact really such an anathema to the spirit of capitalism?

I experienced first-hand the purists’ suspicion when Alitheia set about to finance and develop an enterprise that helps prevent infant mortality caused by the effects of the inhalation of firewood smoke on an infant’s respiratory system. The enterprise provided a low-cost alternative to energy usage by enabling women in low-income households to use cooking gas instead of firewood, switching from a dirty to a cleaner fuel. The enterprise’s stated intention is to have a positive social and environmental effect on the lives of five million households over a five-year period, while also turning a decent profit for investors.

Alitheia worked with a large oil and gas company in Nigeria to make the project a reality and at a meaningful scale. Despite the lauded positive social outcomes, the new enterprise struggled to secure financing from purists. They could not get past the fact that the oil and gas company stood to gain profitably from the cooking gas sales. Never mind the hundreds of thousands of infants that would survive early childhood or the 30,000 community entrepreneurs created in the distribution network. They had not thought about the trees that will be spared or the noxious substance that will be reduced in the environment.

The purists questioned whether the oil and gas company would remain committed to the new enterprise since it had not stated an intention to have positive social outcomes. Furthermore, they argued that the oil and gas company were only interested in providing a clean gas solution because Alitheia had made them aware of the market potential of low-income households.

My view was that intentionality is not the only prerequisite to impact investing. What was important is that, by Alitheia helping the company to make the connection between social conscience and profit, a win-win scenario was created for all parties – the infants, the households, the environment, the oil and gas company, and the investors in the new enterprise.

Working with the oil and gas company, Alitheia designed and financed a product and accompanying distribution system that not only benefited women in low-income households and their families but also opened up a new customer base for the company.

Although the social outcome of the enterprise is significant, foundations and philanthropists, etc equally viewed it with suspicion with comments such as ‘another large corporate turning a profit off the poor.’ While these kinds of thoughts are beginning to shift as success stories are beginning to emerge, investors are nonetheless classed as either ‘impact first’ or ‘finance first.’

The continuum runs from those who are chiefly concerned with having an impact, to those who are driven by profits. Even though it is perfectly possible to balance the objectives of impact and profits, the purists think that anyone to the right of impact first is not really bothered with the poor, and may simply be using the impact tag for some ulterior motive. At the other end the traditional investor, driven by profits, views those to the left of finance first as charitable organizations.

However, if impacting investing is ever going to gather meaningful momentum, purists and hard finance pundits alike will need to shift positions and recognize the necessary role of the other. By recognizing their mutuality and co-conspirator, perhaps one day we can report on impact investing commanding a bigger slice of global financial flows to drive shared prosperity to make a dent in solving global issues that improve the lives of all.

Thirteen years after Alitheia started, it is good to see our philosophy of impact investing becoming more mainstream with the original ‘Finance First’ naysayers joining the movement. Nowhere is this more apparent than with KKR topping the recent Private Equity International ranking of impact investors. Alitheia shows up in this ranking through its partnership with Goodwell, the runner up to KKR. Nonetheless, the presence of traditional investors now highlights the importance of impact investing.

#impactinvesting #SDGs #privateequity #profitwithpurpose