Channelling capital for impactful entrepreneurship in Africa

In the African economic landscape of 2023-24, the channeling of capital for impactful entrepreneurship has emerged as a key driver for fostering innovation and sustainable development. CNBC Africa recently interviewed Karnika Yadav, Director of Africa at Intellecap Advisory Services, to gain insights into the trends and opportunities in impact investing on the continent. Yadav highlighted the significant growth of impact investing globally, with over 1.2 to 1.3 trillion dollars of impact capital deployed worldwide. However, Africa only attracts about 2-3% of this global capital. Despite this small share, there has been a noticeable increase in venture capital and impact capital flowing into the continent in the last decade. In 2022, Africa received 4.1 billion dollars in venture capital and impact capital, showcasing a positive trend in capital inflows. The concentration of impact capital in Africa is largely seen in four countries: Kenya, Nigeria, South Africa, and Egypt. These countries have historically attracted 70 to 80 percent of the capital entering the continent. Kenya, in particular, stood out in the past year, receiving over 800 million dollars. However, Yadav cautioned against excessive excitement over these numbers, as a significant portion of the capital often ends up in a few large companies. She stressed the need to diversify investment beyond the primary destinations to tap into emerging opportunities in other African countries. Sector-wise, fintech, renewable energy, and healthcare emerged as the key areas attracting capital in Africa. These sectors hold promise for driving innovation and addressing critical challenges across the continent. Despite the growing interest in impact investing, there was a 20-25 percent decline in venture capital inflows in Africa in 2023. This dip was attributed to a readjustment following the surge in capital post-COVID, as well as global macroeconomic factors that diverted funding to other regions. Looking ahead, Yadav expressed optimism for an uptick in venture capital investments in Africa, building on the correction observed in the previous year. She emphasized the importance of aligning due diligence measures and supporting first-time fund managers in accessing capital for impactful projects on the continent. In an effort to further facilitate the flow of capital into Africa, the upcoming Sankalp Africa Summit aims to address key issues around unlocking more venture capital for sustainable development. The summit will focus on tailoring investment strategies to suit the African context, supporting local fund managers, and exploring opportunities for inclusive growth and achieving the Sustainable Development Goals across the continent. With concerted efforts from both the public and private sectors, Africa's entrepreneurial ecosystem is poised to attract more capital and drive positive change through impactful entrepreneurship. As the continent navigates the evolving economic landscape, strategic investments in key sectors hold the key to unlocking Africa's full potential for sustainable development and inclusive growth.