Investors should allocate capital to business in Africa
By Kenny Nwosu
As we aim to build a better Africa, we must appreciate the huge potential the continent offers in terms of our youthful human capital base, high-growth prospects, and impactful investment opportunities. At Norsad Capital, we believe that investors also need to prioritise allocations of capital to Africa, to complement their investments in other regions of the world.
This thinking is driven by our observation that attractive risk-adjusted returns can be earned by long-term investors. This is despite the context that the continent of Africa has been severely constrained from participating as a significant player in the world economy; yet, there is so much that’s positive about the continent as long as one is prepared to take a closer look at the potential on offer.
While financial returns are obviously a crucial part of investing, Norsad also focuses on the societal returns available through impact investing. In more advanced economies of Europe and North America, society has moved beyond many of the issues that are still predominant in Africa, such as the lack of financial inclusion and the opportunity for most people to secure sustainable livelihoods. Being the region of the world with the highest levels of unemployment, according to the International Labour Organisation, it is extremely difficult for most people in Africa to secure good employment opportunities, and this has resulted in the development of a large informal sector, in which people have to accept lowly-paid work that holds little opportunity for career growth.
Fostering and supporting the growth of businesses is crucial for the continent to create meaningful employment opportunities. But, an important issue that holds Africa back in terms of business development is access to finance for businesses. The conventional approach to lending taken by banks – which may be perfectly suited to a wider group in the developed economies of the world – does not address a majority of businesses needs on the continent. As a result, very few businesses qualify for business loans from traditional banking sources as established in other regions of the world.
It is against this background that we developed our products at Norsad Capital – a specialist approach to providing finance to profitable businesses on a growth trajectory. We are not restricted to the same lending criteria as banks, and so we are able to complement bank funding and open up access to finance for growth beyond what can be activated by traditional bank lending.
We provide growth finance to businesses with an aim to create industry champions, and we also select the beneficiaries of our lending on the basis of the social impact these businesses have through the services and employment they provide. The positive impact of this approach can be seen in tangible numbers – over 13 000 direct jobs supported by the businesses we are currently financing, and almost 200,000 indirect jobs impacted through their supply chains and local spending. Many of the jobs also benefit those most marginalised in society, namely women and the youth.
There can be little more satisfying than to be able to respond to a need – and then see the fruits of that response, especially when that involves improving the lives of millions with talent and enthusiasm but who are otherwise held back by issues beyond their control. Let’s endeavour to contribute to building a better Africa!
Nwosu is Norsad Capital Chief Executive Officer.