Social capital: the silver bullet for Africa?

Emile Schmitz of Africa Interactive visited SOCAP Europe in Amsterdam on May 30, 31 and June 1st 2011. He wrote this article:

For the first time SOCAP took place in Europe to connect leading global innovators – investors, foundations, institutions, startups and experienced social entrepreneurs – and to build a market for impact investing and social capital. To what extent was Africa on the radar?

Socap Amsterdam

SOCAP is a multi-platform organization dedicated to accelerating the flow of capital to good. The first event was held in the United States in 2008 and the organizers felt it was time to bring the concept to Europe, Amsterdam to be precise.

Social Capital

What is social capital or impact investment? In short these are investments that are not only expected to yield a financial return, but moreover an impact in social and environmental terms. An example can be the investment in solar-lighting solutions in Africa, which can be both financially attractive, but also reduce CO2 emissions and health hazards, compared with the current kerosene lights.

Various large investment institutions and banks were present at the conference and a positive, enthusiastic vibe was spreading the ‘social or impact investing’ ideas. So to what extent was Africa on the radar?

The kick-off was promising, both HRH Princess Maxima of the Netherlands as well as the Director of ‘Stichting Doen’ (main sponsor) used African examples of impactful investments in Rwanda and Mali. In the opening panel, Marilou van Golstein Brouwers, Director of Triodos Investment Management, also stressed the importance of transparency in banking. The presentation of around 50 social entrepreneurs who received a scholarship inspired many of the attendees.

Diving deeper into to numerous panels, a variety of investment funds appeared. Some, like ‘Root Capital’, invest in smaller, early-stage entrepreneurs with great impact but lower financial returns. Others, like ‘E+Co’ focus on clean energy projects and promises higher financial returns. Overall, it seems investors and highly affluent individuals and families seem to be highly interested in these new types of investments.

Social entrepreneurs

These social entrepreneurs were also represented. One of the inventive BoP cases presented in the exhibition area is Movirtu. They are enabling people in developing countries to access their mobile identity without owning a phone or SIM card (80% of people living below the poverty line in rural sub-Saharan Africa and South Asia). The UK-based company makes use of software that enables ‘cloud phone services’ aimed at those living in rural areas on less than $2 a day.

Risks and challenges

Great ideas, but some of the participants warned for a overheating of this emerging field. Even though many investment funds talk about similar commercial returns and social or environmental impact, some questioned how realistic this is. Literature on setting up new business and investments in Africa show the explicit need for ‘whitespace’ and early stage financial or grant support to launch new, social enterprises. Requiring a high commercial return (around 20%) from these enterprises will not always be realistic and can even ‘kill’ a project in its early stages.

Investors like ‘InReturn’ and the investment fund of ‘Cordaid’ raised other challenges. They warned for the lack of strong, competent investment fund managers in Africa and the constraining regulatory environments.

All together, the big trend towards impact investing can be promising and will surely lead to even more investment in Africa. However, HRH Princess Maxima stated, and many agreed: Impact Investing is not the ‘silver bullet to solving poverty’. According to HRH Princess Maxima it should be part of a holistic approach.

SOCAP Africa?

During the three days many people from all over the world entered the podium for inspiring talks about their activities. James Kimisoi, from ‘Justice & Peace for the Catholic Diocese of Eldoret’, urged to organize the next SOCAP in his home country Kenya. “To connect you to the entrepreneurs we are talking about today.”

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