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USAID and Partners: Accelerating African Entrepreneurship Through Local Impact Investing

Hugues Vincent-Genod | November 16, 2016

 

In the next 15 years, Africa’s demographic growth is expected to push 110 million new entrants into the job market while creating only 45 million jobs. Whether or not the private sector can close this job gap will have a huge impact, not only on the economic well-being of millions of young Africans, but also on the political stability of the continent.

One of the key issues then is: how can investors and donors support the fastest job creators? Early research and benchmarks suggest that Small and Medium Enterprises (SMEs) have a key part to play.

One example is Laiterie du Berger, a dairy company created by Bagoré Bathily in Sénégal in 2005. Investisseurs & Partenaires (I&P), a Paris-based impact investing firm, invested in Laiterie du Berger at the start-up stage. Today, Laiterie du Berger employs 200 formal staff and provides income for 800 shepherd families in the North of Senegal. Its sales of dairy products have reached $5 million and it is the leading dairy with a local fresh milk value chain. The founder Bagoré Bathily now plays an active role in inspiring and supporting young entrepreneurs to follow his path.

Investisseurs & Partenaires (I&P) has so far invested in 61 SMEs in 15 countries, many of which follow a similar growth trajectory as Laiterie du Berger. Together these SMEs have created and formalized more than 4,000 jobs and impacted tens of thousands of households.

Yet, this is only a drop in the ocean. In order to create much-needed jobs in the upcoming decades, the growing numbers of African entrepreneurs need patient and risk-prone capital as well as management support and technical assistance. For the vast majority, the SMEs they run are still small and early-stage, and face high barriers in accessing capital.

Many more investors and fund managers are required in order to address their needs and fill the gaps left by the current financing ecosystem, which is often poorly equipped to support small and early-stage SMEs.

Since 2014, I&P has sponsored and launched 10 new investment teams dedicated to small and early-stage SMEs in 10 African countries, through its IPDEV2 initiative. Three impact funds are already operational in Niger, Burkina Faso and Sénégal, and have invested in 10 start-ups and SMEs so far.

Each fund is managed by a first-time investment team supported by I&P. They raise patient capital from local entrepreneurs, commercial banks, corporates and insurance companies, which all have a long-term interest in supporting SMEs in their country. They also attract local talent by gathering a network of experienced CEOs who coach their investees and provide their expertise to the fund manager.

For example, Dakar-based Teranga Capital has raised a $5.5 million evergreen fund from local corporates and financial institutions, through which it plans to invest $13 million into 50 SMEs in Senegal over the next 10 years. Founded by Olivier Furdelle, Omar Cissé and I&P, Teranga Capital is the first Senegalese investment fund focused on early-stage SMEs with investment needs between $50,000 and $400,000.

With support from USAID’s Partnering to Accelerate Entrepreneurship (PACE) Initiative these three impact funds can now go a step further and provide seed funding and investment-readiness services to 50 start-ups, with the objective of helping them access the capital and technical assistance they need.

I&P plans to sponsor three additional impact funds in Côte d’Ivoire, Madagascar and Ghana by the end of 2017, before expanding the network into new countries. Find out more at www.ietp.com

This blog post is part of USAID’s Global Entrepreneurship Week Blog Series, which focuses on the importance of entrepreneurs for development, the challenges they face, and innovative models being developed to address them.

Hugues Vincent-Genod
Hugues Vincent-Genod is an Investment Officer at Investisseurs & Partenaires (I&P), where he worked on the West African portfolio in Accra,... About the Author