$200 million MasterCard Foundation Africa Growth Fund aims to transform the sub-Saharan business landscape
A $200 million US project funded by MasterCard Foundation will create 15,000 decent jobs in sub-Saharan Africa over the next five years. The MasterCard Foundation Africa Growth Fund is a finance tool to encourage gender-lens investment vehicles in Africa. This will support women and youth-led small and medium-sized businesses. MEDA will lead a consortium of partners that will oversee this first-of-its-kind initiative.
The Fund is founded on the principles of Gender Lens Investing and is the largest project of its kind on the African continent.
Gender lens investing (GLI) assesses companies on how they deal with gender balance. With GLI, investors don’t just look at a company’s financial performance. They evaluate how a company strikes a balance between female and male employees.
“We need to do everything it takes now to build a continent with shared prosperity and sustainable, inclusive growth.”— MEDA president and CEO Dr. Dorothy Nyambi
This groundbreaking initiative is aligned with MasterCard Foundation’s Young Africa Works strategy. That strategy complements MEDA’s core strategic goal of creating decent work for 500,000 people by 2030. “We need to do everything it takes now to build a continent with shared prosperity and sustainable, inclusive growth,” said MEDA President and CEO Dr. Dorothy Nyambi.
The fund of funds will strengthen and empower a new crop of investment vehicles. She said that will drive job creation for women and youth through investments in small and medium-sized businesses. “More than 75 percent of ventures funded will be led by women creating jobs.”
An investment vehicle selected for this project could include a group setting up debt or venture capital structures to invest in agri-businesses. It would not be banks, hedge funds, or traditional investment managers. This initiative is a game-changing venture for the continent, said Huges Vincent-Genod. He is the investment director for Investisseurs & Partenaires (I&P). I&P is an investment group that finances and supports African entrepreneurs. I&P will work with MEDA to identify the investment vehicles that will lend to target businesses.
The fund of funds focuses on the long-term growth of African impact investing. The emergence of African investment teams will power this growth. It will invest $150m in investment vehicles that fund small and medium-sized enterprises in sub-Saharan Africa. Another $50 million will fund critical support services. These include business development training to de-risk portfolio companies, support for gender lens investing, results measurement, and other costs.
Business development services can remove barriers preventing women-led firms from growing and creating jobs. Many small businesses and women-led enterprises struggle to get financing, says MEDA staffer Samuel Akyianu. He heads the MasterCard Foundation Africa Growth Fund project based in Accra, Ghana.
He said that these businesses often lack a clear marketing plan, accounting for revenues, and making a profit. They also may be inefficient or uncompetitive in the goods and services they intend to sell. They frequently are not compliant with legal and other relevant regulatory issues.
Business development services to address these issues can take several forms. They may include one-to-one mentorship. This could focus on operational expertise and governance, including financial management. They might include training on developing business plans or loan applications to increase investment readiness.
The need for this sort of approach is enormous. The World Bank puts the finance gap facing women-led firms in the Global South at $5 trillion. The consortium of partners makes this investment fund unique. The fund will focus its investments on Senegal, Ghana, Nigeria, Ethiopia, Kenya, Uganda, and Rwanda. MEDA has offices and programs in each of these countries. Opportunities in nearby countries or linked to programs in the target nations will also be considered, Akyianu said. “We’ve always known that we will spill out beyond those seven countries.”
The fund has built up a pipeline of 180 diverse investment vehicles. That list was then narrowed to 50 promising firms and a short list of 22. So far, the Fund-of-Funds has recruited two investment vehicles supporting entrepreneurial growth. Akyianu hopes to release details about a second investment vehicle soon.
Over time, funding will flow to about 20 investment vehicles and 200 small and medium-sized businesses, said MEDA International board chair Greg Gaeddert. Investments take a variety of forms. They could be a combination of equity, quasi-equity (a form of debt that includes flexible repayment terms), and debt financing, depending on the situation. This will be patient capital, deployed for between 10 and 15 years in some cases, Akyianu said. Ninety percent of the investment pool will be deployed with youth-led businesses. At least 70 percent of these are to be women-led firms.
The MasterCard Foundation Africa Growth Fund supports eight of the United Nations’ sustainable development goals. These goals flow from the UN’s 2030 Agenda for Sustainable Development. All United Nations Member states adopted the agenda in 2015. It provides a shared blueprint for peace and prosperity for people and the planet, now and into the future.
Susan Phillips sees the fund-of-funds initiative as a positive step in international development. Phillips is a Carleton University professor who studies non-profits. “The trend has been to take systems change much more seriously, which requires patient, long-term capital.” She said achieving those goals requires long-term commitment and taking impact measurement seriously.
New Mauritius Foundation represents evolution, is part of MEDA’s growth
A new corporate structure shows the evolution of MEDA’s mission of creating business solutions to poverty, Bert Friesen says. “It’s an evolution of innovation and keeping the core message,” says Friesen, a former MEDA board chair who now heads its Mauritius Foundation council. “We’re still evolving and growing from the core message. It’s not that we’re changing.”
MEDA set up a subsidiary in Mauritius for several reasons. Mauritius’s legal, banking, and government systems mirror those of the African countries where the MasterCard Africa Growth Fund will invest, he said. Having a Mauritian subsidiary simplifies business interactions and related financial transactions.
Mauritius is an island nation about 500 miles east of Madagascar in the Indian Ocean. The MEDA Mauritius Foundation (see graphic, left) includes four MEDA board members, MEDA CFO/CIO Wendy Clayson, and two Mauritian business experts. One of the Mauritian representatives, Thierry Koenig, heads ENSafrica, the country’s oldest and largest law firm. The other, Caroline Leclézio, is CEO of Asterism Limited (previously ENSafrica Fiduciary).
The Foundation council plays an important role in funding applicants to the MasterCard Foundation Africa Growth Fund. An investment committee receives funding applications and does extensive due diligence. After that research is done, applications are forwarded to the foundation council for final review and sign-off. “This is the funding approval vehicle on behalf of MEDA,” he said. “It very strongly represents MEDA’s review and approval of these program funds.”
Progress to date on the Africa Growth Fund shows that MEDA has been able to attract some of the world’s most qualified people, not only in Mauritius but in sub-Saharan Africa, he said. Capital markets provide core services in the Global North. Countries in the Global South need those core services as well, he said.
Friesen is thrilled that MEDA is playing a part in helping to build those services. “That’s one of the great things about MEDA; they’ve always been able to adapt and grow.