Charitable Investment Options for Benevolent Investors

By Renew Capital Marketing and Communications Team | Wed Mar 01 2023

Africa's economy has been expanding rapidly in recent years. The continent’s growth is based on several key industries, from agriculture and mining to tourism and telecommunications. These growing industries are partly being fueled by those investing in Africa.

Recent studies show that investments in Africa's economy will only continue to grow, with the region obtaining nearly $83 billion in investments in 2021. And a significant portion of these investments is expected to come from investors looking to make their dollars stretch further so they can help as many people as possible.

Some investors aren’t just looking to make a return on their investment, though—they want to find investments in Africa that will contribute to the continent's growth. That's where investment options like venture philanthropy, charitable investment options and impact investing strategies come in.

So, how can you get involved? Keep reading to learn more about how your investments can make a difference.

What Is Venture Philanthropy?

Venture philanthropy is a type of investment that’s becoming increasingly popular among those looking to impact the world positively. These investment options support early-stage businesses or charities working to solve social or environmental problems.

The venture philanthropy process starts with finding a business or charity you want to invest in, funding it and offering nonfinancial support, such as consulting. Unlike traditional investing, the primary goal of venture philanthropy is to make a positive impact, not a profit.

There are several benefits to venture philanthropy, including:

The ability to have a direct impact on the business or charity you're investing in.
The opportunity to identify systemic issues and be part of the change.
The ability to magnify the work of a charitable cause.

Although venture philanthropists don’t set out to earn a profit, they should know that there is some level of risk involved, as with any business endeavor.

What Is Charitable Investing?

Charitable investing is one method venture capitalists/philanthropists may use when rebalancing their portfolios. When you invest in a charity, you're providing funding that will be used to support their work. But there is a difference between donating directly to a charity and charitable investment options, like a donor-advised fund (DAF).

Those who plan to give regularly may choose to use a DAF. A DAF is a philanthropic vehicle administered by a public charity. It’s like an investment account dedicated to supporting qualified charities of your choice. Accredited, entrepreneurial-minded givers can contribute to a DAF with the potential of earning a return on their charitable capital. The giver does not keep any returns - ultimately all funds must be donated to a charity, but it can enable the giver’s donation to go further.

There are several benefits to charitable investment options like a DAF, including:

DAFs grow tax-free.
DAFs don’t require any account administration on your part.
DAFs enable you to create a lasting legacy by naming family members as successors.

Speak with a trusted advisor to discuss the best investment options for you and your goals.

Charitable Giving vs. Impact Investing in Africa

So, when searching for African companies to invest in, how do you choose what kind of investment to make?

Charitable giving is one way to support causes, but investing in Africa, for example, is different. Impact investing allows you to invest in Africa in a way that makes a positive social or environmental difference while seeking a financial return on investment (ROI).

Giving in the form of a donation is effective for providing basic or urgent needs, especially in light of a crisis. A charitable donation is a one-time gift, and what you give away does not come back. Additionally, it may not always be clear where those dollars are being spent.

Conversely, impact investments may offer a more sustainable, long-term solution. Impact investing aims to empower recipients, helping companies get on their feet instead of relying on outside funding indefinitely. With impact investing, you can invest in socially responsible funds, private companies or lend to nonprofits whose mission align with your values.

The Benefits of Choosing to Invest in Africa

Africa has a lot of needs but just as much potential. Investing in Africa can help address some of the most pressing issues facing the continent while also supporting its growth.

1. Providing New Skills to Workers

One of the biggest problems facing Africa is a lack of skills and training. That’s because many African countries have a high youth unemployment rate. By investing in African businesses or charities, you can help provide added skills and training to workers. This not only benefits the individual workers but also the businesses and charities they work for.

2. Increasing Access to New Markets

Another significant benefit of investing in Africa is that you can help increase access to new markets. Many African countries are emerging economies, showing much growth potential. By investing in businesses or seeking out charity investment options, you can help them expand into new markets and reach more people, a win-win for everyone involved.

3. Making a Positive Impact on People’s Lives

When you invest in Africa, you can make a positive impact on people’s lives. Your investment can help fund important initiatives like healthcare, education and poverty relief.

How to Impactfully Invest in Africa

For investors who are not located in Africa, joining an established platform can make it easier to invest.

Renew Capital has been working in Africa for ten years, connecting international investors with high-growth businesses across the continent. We have a deep understanding of the challenges and opportunities that exist in Africa, and we can help you navigate them. Our angel investing experience is all about helping you find investment opportunities that are making a difference in the world.

If you're interested in learning more about how to invest in Africa with Renew Capital, we invite you to apply to become an angel investor today. We’re happy to answer your questions and discuss your goals – and how you can make an impact.

This blog is for general information purposes only and should not be viewed as investment, tax or legal advice, or as a solicitation of an offer to buy or sell securities or to adopt any particular investment strategy. Impact investing, and investing in frontier markets specifically, is speculative in nature and involves a high degree of risk. The Renew Capital Angels invest in companies located and doing business in sub-Saharan Africa. Investors should understand and be willing and able to handle the risks of investing in such frontier markets, which are more significant than the risks associated with investing in securities of U.S. companies or in other developed countries. Risks include the risk of total loss of an investor’s entire investment. Investors should fully understand all risks and consult with their independent financial, legal and tax advisors to determine whether any particular investment or investment strategy is appropriate for them. Renew Capital does not make any recommendation regarding the appropriateness of any specific investment opportunity for any specific investor, and nothing in this blog should be considered an individualized recommendation or personalized investment advice.