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Can a little investment in the missing middle have a big impact on the SDGs?

By Laura Davis | Wed Apr 04 2018
As I write this, RENEW is celebrating 6 years of operating and investing in Ethiopia. We and the world have come a long way since we first entered the country in 2012. Personally, I try to live in the camp that believes the world is getting better; however, the media is good at convincing us otherwise.
One milestone that has me cautiously optimistic actually occurred back in 2015, when the United Nations released a sweeping action plan for the world to meet 17 Sustainable Development Goals (SDG) and 169 targets by the year 2030. Daunting, right? In particular, because the SDGs were a follow up to the Millennium Development Goals, which we did not achieve. 2030 is 12 years away and the UN seeks to end poverty in all its forms, achieve gender equality, empower all girls, and accomplish a number of other bold actions. Inspiring! And the UN goes even further by providing frameworks, action plans and a call to governments, organizations and businesses around the world to join in this massive effort. And guess what? A lot of organizations, governments and the private sector have aligned with them. Read this: How 17 Companies are Tackling Sustainable Development Goals (and Your Company Can, Too. Though, I am not naive about the challenge the world is up against, setting audacious goals and rallying people and organizations behind them, is a key step to accomplishing big change.
The gap in financing to achieve the goals is estimated to be at $2.5 Trillion. On September 18, 2017, UN Secretary General António Guterres started a speech with strong words to the private sector saying…
“Either the Sustainable Development Goals are fully assumed with enlightened self-interest by the business community, the private sector, and the financial sector, or the Sustainable Development Goals will be a very nice exercise in diplomatic discussions in New York and maybe in some policies of some governments, but the impact on people, the impact on poverty, the impact on the planet, will be extremely, extremely small.”
Ahh,there it is. Enlightened self-interest; a philosophy in ethics that states that a person (or group) who acts to further the interests of others ultimately serves their own self-interest. Enlightened self-interest is, in my opinion, the only way we’ll be able to reach (or try to make some measurable impact with) the SDGs in the next 12 years. But what is enlightened self-interests and what form do they take for the business community? I think several terms shed additional light on his meaning, including “conscious capitalism,” “blended finance,” “impact investing” and a host of other popular buzzwords that related to investing for both positive financial and social returns.
Most would agree that there are easier places than Africa for RENEW and the Impact Angel Network to invest, so I think I can safely put us in the category of businesses that operate with enlightened self-interest. Our enlightened thought is that almost all of the problems that people are trying to fix on the continent will go away or get significantly better once there is a thriving private sector. To name a specific SDG that aligns with our business model, it would be Goal 8:Decent work and economic growth, which fits squarely in RENEW’s impact investment model.
The beauty of an impact investing firm is not only do we align with Goal 8, but we also get to participate in and measure the sustainability efforts of every one of the companies in which we invest. Their business models are diverse and each one of them is playing a different but important role in meeting the SDG goals.
This is how I believe RENEW and our portfolio companies align with the SDGs and are creating positive social impact in Ethiopia.
    In 2017 alone, RENEW’s portfolio companies directly or indirectly supported 2,280 individuals and 5,700 small-holder farmers in Ethiopia by providing full and part time employment at competitive salaries and wages.
    Mama Fresh is not only a worldwide ambassador of Ethiopian cuisine but the company also provides nutritional lunches to all of its 63 employees, of which 84% are women, many of who have families at home to feed.
    Tebita Ambulance, East Africa Emergency Service’s in-country partner, has transported more than 50,000 patients to local area hospitals and clinics, saving thousands of lives that would have otherwise been lost.
    In addition to exporting some of the highest value speciality coffee from Ethiopia, METAD supports 408 elementary and middle school-aged students near its Hambela farm through a newly built school, uniforms, and covering the teachers’ salaries. Desta PLC, a textile manufacturing company, also encourages and provides in-company trainings for employees who are interested in pursuing a leadership role.
    Konjit, the “Mama” behind Mama Fresh, is one of the co-founders of one of the most well recognized injera brands in the country.
    Ethiopia is a landlocked country, making water a very precious resource. Growing, drying, and preparing coffee cherries for roasting is normally a very water-intensive process that creates quite a bit of water byproducts and waste. METAD, being an environmentally conscious company, uses a coffee cherry cleaner/pulser that reduces water waste by 10% and educates smallholder farmers on irrigation best practices.
    dVentus Technologies, under the direction of a former GE executive, is building smart electric meters, smart water meters, and other efficient energy grid solutions for the East Africa region and the continent.
    In addition to providing 2,280 jobs in 2017, our portfolio companies have grown their collective sales by 19.2% and net profit by 33.7%, directly contributing towards the underlying goal of creating a robust private sector.
    KROTAJ plans to add value to a key Ethiopian commodity and generate foreign currency for the country; Sadura plans to produce a quality food product for local consumption; Mama Fresh takes teff and makes injera for the export and local market. All three companies are growing leaders in their respective fields and are continuing to develop and set industry standards through ISO certification.
    By investing in the private sector, RENEW’s portfolio companies are able to, in turn, create jobs in the local economy, and thereby contribute towards a growing middle class and decrease income and socioeconomic disparities.
    Roadrunner Technologies and partner organization Deliver Addis reduce traffic and increase livability of Addis by delivering food and other items directly to customers.
    Desta PLC, Mama Fresh, Sadura, and KROTAJ all seek to backward integrate into their respective agricultural value chains, thereby creating sustainable supply chains, educated farmers, and informed consumers.
    dVentus Technologies seeks to assist Ethiopia and the world beyond to sustainably power enterprise and economic development, METAD seeks to educate small holder coffee farmers on environmentally friendly farming techniques that conserve water and save trees, and Roadrunner seeks to reduce CO2 emissions by reducing the amount of old and polluting vehicles on the road.
    Just to make sure you are still paying attention, you probably know there’s no ocean access in Ethiopia, so we’ve got nothing here! Stay tuned when we expand to new countries that have coastlines.
    METAD seeks to sustainably manage the forests surrounding and running through its coffee farms by growing coffee varietals that require the shade of trees, and thereby fights against desertification.
    All of RENEW’s portfolio companies work hand in hand with the Ethiopian government to foster peaceful relations and understanding with its citizens and the outside world, be it through international trade, economic policy implementation, or sharing the values and culture that makes Ethiopia unique.
    It’s important to thank our partner Global Affairs Canada, and previously USAID for seeing the potential of a partnership with RENEW and the IAN to help achieve the SDG goals in the countries we operate.
It’s clear that many of SDGs have the continent of Africa specifically in mind, and so grows our conviction that a vibrant private sector is a solution to many of these goals. And, if we believe the idea that countries with vibrant and thriving private sectors are better off than those without, it only makes sense to want to find solutions that stimulate Africa’s private sector as a main theme for the SDGs. Therefore, ethically led, growing small to mid-size companies in Africa (can we say companies acting out of “enlightened self-interest”), are one of the best antidotes for what ails not only the continent, but the world.
At RENEW, we’ve grown a substantial and dedicated network of impact angels who believe in this. It could be said that the Sustainable Development Goals are baked into the very core of RENEW’s business model, and the portfolio companies in which RENEW and the IAN invest. I wholeheartedly believe that if we and many like us continue to fervently pursue enlightened self-interest, the world will continue to get better and better.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.

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