<h1 style="text-align:center;">Rethinking Risk and Return</h1>The New York Times reported Friday in an article entitled, <a href="http://www.nytimes.com/2008/12/13/business/yourmoney/13wealth.html">It’s the New Economic Reality. Work With It.</a>, on the lessons that wealth managers are learning from their failed risk assessments and troubled portfolios:Very few believed a financial disaster like the one we are living through could actually happen, according to a forthcoming paper by Robert Seaberg, head of the wealth planning group at Citi Global Wealth Management. Or put another way, the risk models that high net worth and ultra-high net worth investors trusted to insure their portfolios failed.Seaberg discusses four overall lessons that high net worth individuals and their wealth managers should be taking away from their recent losses. Among them, he urges HNIs to “redefine a safe investment” and “diversify more broadly.” Specifically, “Mr. Seaberg said investors now need to look outside the United States and Europe to emerging and frontier markets in all aspects of their portfolios to create the greatest diversification.”In other words, while investors are doubling down on Treasuries as a safe place to wait out the storm in the short term, the smart money will not stay there, particularly as the yield for Treasuries dwindles to almost zero. Rather, HNIs and funds should seek out new and growing markets, like Africa. While these markets carry risks of their own, they are subject to a different set of risks, some of which can be offset by careful due diligence and local representation.At RENEW, we aim to provide HNWIs and funds with the option to diversify their portfolios, thoughtfully and strategically, beyond U.S. and European markets, while at that same time offering the prospect of demonstrable positive impact on the local economy and community as a result.

Very few believed a financial disaster like the one we are living through could actually happen...

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Rethinking Risk and Return

<h1 style="text-align:center;">Financial Services Over the Longhaul: Lessons from Recessions</h1>There’s no question that portfolios managed by financial services and wealth management firms have taken a nearly unrelenting beating in the past six months. That bodes ill for everyone, from retirees to entrepreneurs just starting out. In some ways, all the red ink can make impact investing seem like an indulgence–an idea only fit for flush times. But as Kevin Jones at <a href="http://www.goodcap.net/">Good Capital</a> writes, “When the existing system is at risk, people are willing to ask a new set of questions and take a look at new ways of doing things. For the people who believe you never could divorce economic from social value, the new reality creates a window of opportunity.”As social value becomes more “real” to investors, RENEW sees a window of opportunity opening for wealth managers, who can now offer to capture and present social returns as part the portfolios they build for clients. The prospect of capturing social value in client portfolios provides a distinct competitive edge at a time when wealth managers are reeling from losses and defending their value to clients. Social value, approached with the same thoughtful, measured method that financial firms are now re-emphasizing in their portfolios, amounts to a new service offering that can help investors capture and enjoy all the value their investments are creating.Not only is the economic crisis forcing investors to consider the social impact–positive and negative–of finance; we’re also learning that a range of investments, particularly those outside of sectors and regions traditionally regarded as “safe,” can actually insulate investors against downturns. This was one of three findings in a study published in the December 2008 Harvard Business Review, titled “Lessons from the Past for Financial Services.”Authors Matthew Sebag-Montefiore and Nuno Monteiro analyzed seven downturns affecting 600 North American and Western European companies in banking, asset management, consumer finance, insurance, investment, and specialty finance over the past 28 years. Among the recommendations that emerge from this research: “Banks that were high performers in the early phases of the current downturn drew, on average, nearly 10% of their revenues from outside North America and Western Europe prior to the softening. That’s compared with 4% for low performers.”Investments in small and medium-sized businesses in emerging economies certainly come with their own set of risks. But if the recent financial collapse is teaching us anything, it’s clear that creatively diversified portfolios are more valuable than ever.

There’s no question that portfolios have taken beating in the past six months.

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Financial Services Over the Longhaul: Lessons from Recessions

<h1 style="text-align:center;">A Few of My Favorite Things: Some Facts About Africa</h1> As 2011 draws to a close for RENEW and the rest of the world, I wanted to take a few moments to remember some of my favorite things…about Africa:<ul><li>Thirty-six out of 46 African governments made things easier for business in in 2011.</li><li>The International Monetary Fund expects Africa to grow by 6% this year and nearly 6% in 2012, about the same as Asia.</li><li>Africa's combined consumer spending in 2008 was $860 billion, and it is expected to grow to $1.4 trillion by 2020.</li><li>According to Standard Bank, around 60 million Africans have an income of $3,000 a year, and 100 million will in 2015.</li><li>Africa’s enthusiasm for technology is boosting growth. It has more than 600 million mobile phone users—more than America or Europe.</li><li>Ethiopia has grown by about 7.5% this year, without a drop of oil to export.</li><li>Trade between Africa and the rest of the world has increased by 200% since 2000.</li><li>Inflation dropped from 22% in the 1990s to 8% in the past decade.</li><li>In 2010, private-equity firms raised $1.5 billion for projects in Africa.</li><li>In 2010, total foreign direct investment was more than $55 billion—five times what it was a decade earlier, and much more than Africa receives in aid.</li><li>Foreign investors are no longer just interested in oil wells and mines. They are moving on to medium-sized investments.</li></ul><figure class="image"><img src="/uploads/recycledafricamap_0_1c5d67af95.jpg"></figure>﻿In the midst of all these great signs of growth in Africa, RENEW is also growing. Highlights from 2011 include:<ul><li>Implementing a project in Afghanistan, including an investor conference in Washington, D.C. and an investor trip to Afghanistan.</li><li>Conducting surveys on the investment climate in nine countries in Africa.</li><li>Running due diligence on opportunities in East Africa</li></ul>Wonder what the future holds for the RENEW team? Stay tuned for more information about what’s ahead in 2012… &nbsp;

As 2011 draws to a close for RENEW and the rest of the world...

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A Few of My Favorite Things: Some Facts About Africa

<h1 style="text-align:center;">How Does Africa Look Now?</h1>When we first launched this blog about 9 months ago, the first piece we put together - while the global economic situation was still fairly optimistic, mind you - made the case for “Investing in unfamiliar territory” by listing <a href="../../renew/blog/2008/investing-unfamiliar-territory.html">10 compelling reasons</a> that investors should consider Africa much more seriously. Then in September, I blogged about an IMF report that compared the economic prospects of a group of Sub-Saharan African (SSA) countries (largely the same group in which RENEW currently does business) to the position of East Asian economies in the 1980’s, just before their growth took off. The comparison was striking - but does it still hold? The financial sector has undergone major shocks since last summer. What are we to make of Africa as a destination for investment dollars, these days?Well, this is not a light and heady time for African economies - or businesses - to be sure. Almost a decade of consistently strong GDP growth in SSA has been snatched away by the global downturn; credit is tight and leaders in all sectors feel the pressure.But financial crises have a funny way of upsetting conventional wisdom in ways that periods of growth and prosperity cannot. Many SSA countries may have been posting impressive year-on-year growth, but that didn’t seem to be enough to catch Western investors’ attention while other options closer to home beckoned - with ultimately illusory returns. Now that Western markets are in upheaval, business analysts are taking a more serious look at Africa.On the heels of fresh, powerful critiques that question the long-term value of foreign aid to Africa and champion a business approach (see former Goldman Sachs economist Dambisa Moyo’s compelling new book, “Dead Aid,” and her Wall Street Journal summary article, the Harvard Business Review included a piece titled Now’s the Time to Invest in Africa in its Breakthrough Ideas for 2009. Just this week, Time ran its “What’s Next 2009″ feature; sure enough, it includes a strong case for investment growth in Africa titled Africa, Business Destination.The conclusion these articles draw is not that while Western markets languish in uncertainty, Africa has become the new safe-haven. The continent still struggles in many areas. But global economic crisis has cast in stark relief just how much African economies will grow during the next decade, even in the face of worldwide recession. That doesn’t fit with typical Western expectations of Africa. Time quotes IMF senior advisor David Nellor:“The private sector is the key driver,” wrote Nellor, “and financial markets are opening up.” War is down. Democracy is up. Inflation and interest rates are in single digits. Terms of trade have improved. "Crucially,"* said Nellor, “growth is taking off.” The IMF puts Africa’s average annual growth for 2004 to ‘08 at more than 6% — better than any developed economy — and predicts the continent will buck the global recessionary trend to grow nearly 3.3% this year.The Time article, as well as Dambisa Moyo’s article in the WSJ, outline a host of other reasons to take a truly business-led approach to Africa, not least because of the social and civic dividends in accountability, dignity and long-term sustainability that business-led grow will yield. But for our purposes, let’s take a step back and be clear: Africa’s economies, driven by the growth of private businesses, are still growing at a time when Western economies are shrinking. Imagine what these businesses are capable of achieving once capital markets and consumers around the world come out from hiding.

What are we to make of Africa as a destination for investment dollars, these days?

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How Does Africa Look Now?

<h1 style="text-align:center;">Uncertainty in Africa</h1>To those wondering what will become of nascent capital markets in emerging and frontier economies in the wake of last year’s financial upheaval, I recommend a fascinating <a href="http://www.nytimes.com/2009/05/17/magazine/17wwln-lede-t.html?_r=2&amp;ref=magazine">piece by Niall Ferguson</a> in this Sunday’s New York Times Magazine; read it not for a prediction of what will happen but rather as a warning against overreaction. In it, Ferguson examines the human reflexes that drive reactions to financial crisis:"For reasons to do with human psychology and the failure of most educational institutions to teach financial history, we are always more amazed when such things happen than we should be. As a result, 9 times out of 10 we overreact. The usual response is to introduce a raft of new laws and regulations designed to prevent the crisis from repeating itself. In the months ahead, the world will reverberate to the sound of stable doors being shut long after the horses have bolted, and history suggests that many of the new measures will do more harm than good."Ferguson elaborates on the positive impact of financial innovation in the U.S. and abroad, dangers notwithstanding. For instance, the securitization of credit lowered costs for consumers in the U.S., while the globalization of finance drove huge growth improvements in emerging economies, particularly Asia. Now investors are pulling back and regulators are swooping in - both healthy reactions so long as they aren’t overdone.Yet it’s difficult to know where the crisis and the reactions that follow will leave Africa’s markets. A recent paper, titled <a href="http://www.cgdev.org/content/publications/detail/1422072">How the Economic Crisis Is Hurting Africa–And What to Do About It</a> by Todd Moss of the Center for Global Development, examines the effect of recent economic turmoil on capital flows to Africa as the continent struggles to steady itself amidst second and third-order financial sector aftershocks. For instance:"One unfortunate outcome of the crisis may be the strangling of the nascent and potentially very sizeable private equity sector. The Emerging Markets Private Equity Association reports that the number of its member funds targeting Africa rose from 16 to 21 in 2008 and new funds jumped by 37 percent to $3.2 billion. But it also expects a very difficult fundraising environment in 2009–10. Most of the private equity raised in recent years to invest in Africa (much of it with some official component, such as the multiple funds started by the Overseas Private Investment Corporation or the African Development Bank) should be locked up for the long term and is unlikely (or unable) to exit quickly. However, this asset class was just beginning to establish itself and the many funds that had not yet completed fundraising or were still being formed may find their plans delayed until the global situation stabilizes and appetite for frontier emerging markets returns."The effects on Africa’s private equity market are still uncertain. Much depends on whether investors see more risk in Africa these days than they did before financial crisis hit developed markets, says Moss:"The other unknown is how investors will interpret risk in Africa over the medium term. Many of the large institutional investors had begun to look seriously at frontier emerging markets such as Africa. Whether they will now recoil because of the perceived risk or view Africa as a potential diversification play in a turbulent world is still far from clear."The risks to business in Africa are real, but by no means should they prohibit investors from expanding their portfolios into one of the few regions of the world that is maintaining growth despite the present economic climate. There is also the fact that growth in Africa is driven by the formalization of a huge amount of economic activity that has until recently remained too disorganized to tap. It turns out we’ve all got some learning to do, and the lessons the developed world is re-learning about solid business practices are the same ones African businesses are starting to absorb. The recent economic experience should draw investors and stable businesses together, wherever in the world they are.

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Uncertainty in Africa

<h1 style="text-align:center;">What Have We Been Up To?</h1>RENEW will soon be rolling out beta versions of web 2.0 tools for both investors and businesses.Soon investors will be able to:<ul><li>Search or browse through profiles of Kenyan, Ugandan, Rwandan and other East African businesses in a new online marketplace.</li><li>Map your geographic and sector-focused investment strategy to specific SMEs, connecting you or your organization directly to owners and staff.</li><li>Contact RENEW directly with request for information and help making investment decision.</li></ul>Entrepreneurs in emerging economies will be able to:<ul><li>Apply for placement on RENEW’s virtual Marketplace.</li><li>Upload their business plan, financial statement, investment proposal, and management team CVs via a secure application for consideration.</li><li>If selected, have a investment profile done on their business completed by RENEW’s team of professional consultants.</li><li>Visit our website and gain access to tools created specifically to address your needs and make your business more attractive to U.S.-based investors and business partners.</li></ul>But I’m getting ahead of myself. Why these tools, and why now?Many of you - friends and colleagues hard at work figuring out how to deploy capital to greater effect in Africa and other frontier economies - have been following us for the past year or so on this site. We’ve sat down with some of you in coffee shops and conference rooms from Nairobi, Kigali and Kampala to D.C., Austin, New York and Denver, and many spots in between. Over the course of these travels (not to mention a financial crisis that shook developed and emerging economies alike and prompted much reflection on the uses of capital) our team has learned some key things about what the SME investments need to become a viable asset class.Over the past several months, our team has been refining that learning by creating practical tools that we think are necessary to move SME investment forward. RENEW started out with a very simple idea: for businesses anywhere, connectivity = growth. Isolation = stagnation. Nowhere is this more true than Africa, where small and medium-sized businesses lack connections to investors, suppliers and customers - and lack the systems and data to build such connections. When RENEW launched its sourcing, due diligence and management consulting services last year, we did so to address the obstacles U.S.-based investors and businesses face finding, connecting to and managing their relationships with African businesses.Our strategy has not changed. Connectivity still equals growth, and RENEW will continue to build and provide on-the-ground expertise and personal relationships essential to doing business. But the landscape is changing - the possibilities for different kinds of connections are proliferating and evolving rapidly. This summer, high-speed Internet cables landed across Africa. Taken together with the remarkable growth in hosted (online) data services, RENEW sees a tremendous opportunity to facilitate a great many more connections between U.S. investors and businesses and African SMEs - and improve the quality of the information exchanged.So the RENEW team spent the last couple of months developing tools that we think can help address the bottlenecks faced by financial institutions (African and U.S.-based), business owners, and development organizations. We would welcome feedback from you, too. Once the new site is up, please let us know what you think at <a href="mailto:renew@renewcapital.com">renew@renewcapital.com</a>. Enjoy!

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What Have We Been Up To?

<h1 style="text-align:center;">Thoughts from the ANDE Meeting</h1>This past Friday I attended a small portion of the 3 day extravaganza that is the <a href="http://www.aspeninstitute.org/policy-work/aspen-network-development-entrepreneurs/">Aspen Network of Development Entrepreneurs (ANDE)</a> annual meeting in Glen Cove, NY. ANDE is a membership organization that is bringing structure and something like a shared agenda to the new and uncertain field of SME (ANDE calls them “SGBs - small and growing businesses”) investment.This is sorely needed. The ANDE meeting was perhaps the only gathering I’ve attended where I felt that everyone there understood exactly why SMEs/SGBs are important and shared a common goal: help them succeed. The field spends so much time explaining itself that it’s important that organizations that do already “get it” can sit down and talk about where they are stuck, where innovation needs to occur and figure out who might have some good ideas.I also appreciated the fact that ANDE spans a range of nonprofit and for-profit approaches, and the <a href="http://www.aspeninstitute.org/sites/default/files/content/upload/ANDE">stellar roster</a> of participants mostly recognizes that this spectrum is necessary to move the SME field toward self-sufficiency. To me, some of the most exciting stuff to come out of this meeting has to do with how and where, exactly, nonprofit organizations can supply the sort of technical assistance that entrepreneurs need in order to prepare themselves to attract private capital. That is the sort of discussion that makes ANDE’s convening work exciting and of great value to the work that RENEW does.

This past Friday I attended a small portion of the 3 day extravaganza...

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Thoughts from the ANDE Meeting

<h1 style="text-align:center;">Welcome to Our New Website</h1>We are excited to announce the launch of our new website. Assisted by the professionals at <a href="http://developmentseed.org/">Development Seed</a>, the RENEW team has worked hard over the past few months to offer a number of new services and features that we believe will add value to investors, developing world businesses and others in the social investment community. Here is a brief overview of what you will find as you navigate through our new site:<ul><li>For investors: We now offer an easy way to browse investment opportunities in developing countries. Our Marketplace (beta) currently features opportunities in sub-Saharan Africa with more coming soon.</li><li>For businesses in developing countries: In as little as 30 minutes businesses can apply to be featured in our Marketplace (beta). We will also be featuring resources and tools to help businesses grow.</li><li>For the social investment community: As part of our blog, we will be active in scanning the news and providing our thoughts and ideas for building the middle markets in developing countries.</li></ul>Enjoy the site and please send us your thoughts at <a href="mailto:renew@renewcapital.com">renew@renewcapital.com</a>.<figure class="image"><img src="/uploads/RENEW_Home_Page_Screen_Shot_Nov_2009_30de6c4623.png"></figure>

We are excited to announce the launch of our new website.

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Welcome to Our New Website

<h1 style="text-align:center;">Compelling Incentives to Invest - Is a Tipping Point Near?</h1>As Western investors slowly begin seeing potential in Africa, we'll probably begin seeing more articles like <a href="http://www.bloomberg.com/apps/news?pid=20601080&amp;sid=aeuJT_pSE68c">Ethiopian Farms Lure Investor Funds as Workers Live in Poverty</a> coming from main-stream investment publications like Bloomberg. As African leaders shift their focus from aid to investments, they hope that market drivers will help take their economies up the <a href="http://www.doingbusiness.org/EconomyRankings">World Bank rankings</a>, and flood their markets with foreign direct investment. Africa's leaders can now be found as frequently on Wall Street asking for investments, as they can in Washington, D.C. asking for aid. The Fortune article, <a href="http://money.cnn.com/2008/02/13/magazines/fortune/gunther_africa.fortune/index.htm">Investment in Africa Starts to Pay Off</a>, reads, "...virtually every country, their presidents, and even the leaders of the opposition parties, have gotten on the same page regarding the primacy of the private sector, the need to deregulate, and the importance of attracting foreign investment. Centralized planning, state control of assets and socialistic rhetoric, for the most part, are dead. Market forces have won."The U.S. only has a handful of funds actively investing in Africa, while India, China, the Middle East and Europe are moving in to take advantage of the handsome social and financial returns Africa is offering. So, although considerable amounts of perceived and actual risk exist, the questions is out there: is a tipping point near?Let us know your thoughts.

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