Tracking social investment financing trends in Africa

The landscape of social investment in Africa is rapidly evolving, with a shift towards more regionally-based social investors as highlighted by the Africa Venture Philanthropy Alliance (AVPA). In a recent study conducted across nine countries in Africa, AVPA shed light on the challenges and gaps in social investment financing on the continent. According to Frank Aswani, CEO of AVPA, the gap in social investment financing in Africa amounts to a staggering $500 billion to $1.2 trillion annually until 2030. Traditionally, social investment in Africa has relied heavily on aid and government funding, but with aid dwindling and government tax revenues not meeting optimal levels, new approaches are needed. The COVID-19 crisis has further exacerbated the situation, leading to a reduction in foreign direct investment (FDI). As a result, African countries are compelled to explore alternative sources of funding, with a growing emphasis on the role of the private sector. The need for greater collaboration between private sector players and traditional grant makers, along with policy changes to incentivize capital flow, has become imperative. One key aspect highlighted by Aswani is the importance of leveraging grant capital to de-risk social investments, thereby attracting more local private sector participation. With a strategic blend of grant capital and innovative financial tools like impact investing and blended finance, the objective is to create a more sustainable and impactful social investment ecosystem in Africa.