<h1 style="text-align:center;">Back to the Source: Coffee</h1>&nbsp;AN INTRODUCTION TO KAFFAKaffa, Ethiopia, from which the term “coffee” is derived, is the birthplace of coffee, according to many experts including <a href="http://www.ncausa.org/About-Coffee/History-of-Coffee">The National Coffee Association</a>. To this day, the Kaffa region in the southwestern part of Ethiopia remains one of the strongest coffee-producing regions in the country.The legend goes that Kaldi, an Ethiopian goat herder, first discovered coffee after he noticed his goats became energetic upon eating cherries from a certain tree. Kaldi shared this knowledge with the monks of a local monastery, who made a drink with the berries and enjoyed its invigorating properties. Soon, the findings of coffee spread from Ethiopia to the Arabian Peninsula and then on to Europe. The earliest credible evidence of either coffee drinking or knowledge of the coffee tree appears in the middle of the 15th century, in the Sufi monasteries of Yemen.(1) By the 16th century, coffee had reached the rest of the Middle East, Persia, Turkey and Northern Africa before spreading to Europe, Indonesia, and finally to the Americas.<figure class="image"><img src="/uploads/dsc_0854_4341a7fdef.jpg"></figure>As it has been since the 16th century, Ethiopia remains one of the largest producers of Arabica coffee beans in the world. RENEW and the Impact Angel Network (IAN) are proud to be a part of this important tradition through our investment in METAD Agricultural Development PLC (METAD), an Ethiopian specialty coffee company founded in 2012 by Aman Adinew. With a vision for crop-to-cup coffee, METAD aims to not only strengthen Ethiopia’s coffee reputation amongst sophisticated consumers in the international market, but also help local farmers improve the quality and value of their harvested crop. In pursuit of this vision, METAD seeks to become the leading specialty coffee brand by offering global and domestic consumers with the highest quality, 100% Ethiopian Arabica coffee.METAD’s coffee cultivation, harvesting and primary processing occurs at farm sites 75 kilometers beyond Yirgacheffe, deep in the heart of some of Ethiopia’s best coffee country. METAD’s 200-hectare Hambela and Gedeb farm and processing sites include washing stations, a dry mill, a huller, beds for sun drying, and warehouses for storage to handle all of the pre- and post-harvesting coffee activities.<figure class="image"><img src="/uploads/view_of_hambela_processing_site_0_5b205d80d6.jpg"></figure>COFFEE CULTIVATIONAs a whole, coffee's production process and value chain are very complex, much like viticulture. The two main species of coffee grown for coffee production today are Arabica and Robusta, with Arabica coffee being indigenous to the mountains of the southwestern highlands of Ethiopia.The Ethiopian coffee value chain starts with farms, like METAD, that grow and harvest red cherries - the coffee fruit and seed (see photo below). Farms either sell the harvested cherries to independent processors or process the crop themselves. A processor has two options: 1) select the highest quality red cherries and dry them on raised drying beds (what is called sun-dried, unwashed or natural coffee) and hull them on location, or 2) remove the pulp from the coffee cherries by using a wet mill and dry the coffee seeds, covered in their parchment. These two types of processing techniques, also known as primary processing, are crucial to the ultimate quality and character of the coffee.In Ethiopia, the processor then sells the dried coffee seeds (or beans) to exporters on the Ethiopia Commodity Exchange (ECX) platform. The exporter cleans, polishes, and bags the coffee beans for export shipping. Finally, an importer, broker or roaster imports the coffee beans into the consuming country, after which they will be roasted and be made ready for consumption.<figure class="image"><img src="/uploads/bts_metad_56d665a740.jpg"></figure>WHAT MAKES SPECIALTY COFFEE "SPECIAL"?Coffee can be broadly defined as specialty or commercial grade. Specialty coffee, a term first coined back in 1978 by Erna Knutsen of Knutsen Coffee Ltd., in the simplest definition refers to special geographic microclimates that produce beans with unique flavor profiles.(2) There is a fundamental understanding that specialty coffee beans will always be well prepared, freshly roasted, and properly brewed; one that the Specialty Coffee Association of American (SCAA) has standardized and enforced. The SCAA is considered to be the world’s coffee authority and the largest coffee trade association, with nearly 5,000 members located in more than 40 countries who represent every segment of the specialty coffee industry.The SCAA defines specialty coffee in its green stage as “coffee that is free of primary defects, has no “quakers” (under-ripe or under-developed attributes), is properly sized and dried, presents in the cup free of faults and taints and has distinctive attributes.”(3) In general terms, “specialty coffee is coffee from a known geographic origin that commands a premium price above commercial grade coffee due to its high quality and particular attributes that it possesses.”(4) In the case of METAD, the company produces Yirgacheffe specialty coffee, the quality of which METAD continually ensures at its coffee lab, the first and only private, state-of-the-art coffee quality control facility on the African continent that is <a href="http://www.prnewswire.com/news-releases/metadkabu-coffee-quality-laboratory-becomes-africas-first-private-specialty-coffee-association-of-america-certified-lab-208654311.html">certified by the SCAA</a>. Specialty coffee from this region is considered to be, by some, the highest quality in the world - an opinion that has been gaining popularity over the past several years.<figure class="image"><img src="/uploads/dsc_0739_1_998d048eb3.jpg"></figure>Demand for coffee is poised to hit a record in 2017, as people around the world and in developed markets are increasing their java consumption. Global coffee consumption is expected to grow by 1.2% over the upcoming year, leading to higher prices for coffee beans. “The price for Arabica coffee futures was up 20% in June 2016, marking the biggest monthly gain since February 2014.”(5) Citigroup even estimates that Arabica coffee prices could reach $1.50 per pound by the second half of 2017. To meet this increasing demand for high-quality coffee, international roasters are seeking out traceable and single-source producers in smaller sub-regions of the world. Similar to wine, consumers are willing to buy coffee at a premium if it’s from specific regions, is certified fair trade or organic, is naturally sun-dried, etc. According to a survey conducted by the National Coffee Association, the retail value of the U.S. coffee market alone is estimated to be $48 billion dollars with specialty comprising approximately 55% value share.(6) It is these overall trends that suggest sustained momentum for specialty coffee growth.BRINGING IT BACK TO THE SOURCEIt’s no wonder that with Ethiopia being the epicenter of Arabica coffee, and it ranking among some of the fastest-growing economies in the world, the country is quickly becoming a target for foreign investors seeking attractive returns in the coffee value-chain, as well as domestic and export market opportunities. In fact, coffee is one of Ethiopia’s largest export commodities, with over 55% of the coffee produced in the country sent outside its borders.(7)According to a <a href="https://d3n8a8pro7vhmx.cloudfront.net/eatradehub/pages/860/attachments/original/1433149069/Ethiopian_Coffee_Industry_Value_Chain_Analysis_2010.pdf?1433149069">USAID analysis</a> of the Ethiopian coffee value-chain, coffee generates “70 percent of Ethiopia‘s foreign exchange earnings and provides livelihoods for 15 million Ethiopian smallholder farmers.” The industry employs several hundred thousand workers in processing coffee cherries across hundreds of washing stations and hulling mills around the country.In Ethiopia, government institutions are responsible for the state coffee plantations with approximately 8,000 permanent employees and an estimated 50,000 seasonal jobs.(8) Coffee generates a considerable number of employment opportunities on farms, in the processing plants and in the transport sector. In Ethiopia, coffee constitutes a very important source of seasonal employment for many poor people and most agro-processing employees are women. Altogether, METAD employs 38 permanent staff and several-hundred seasonal staff, 70% or more of which are women. Additionally, they have purchased from, partnered with and/or supported more than 3,500 out growers to provide best practices on growing, harvesting and selling coffee. METAD also creates further social impact in the community surrounding the farm sites by sponsoring a school with over 600 children, constructing new community facilities (such as a school and community center) and working with development partners to build and install new wells.<figure class="image"><img src="/uploads/used_b2a1709f7c.jpg"></figure>Smallholder farmers, those whose plots are less than five hectares (ha), account for 95% of the country’s coffee output.(9) In fact, “average plot sizes do not exceed two ha,” wherein coffee yields remain stubbornly low compared to that of Colombia (1/3 their yield) and that of Costa Rica (1/4 their yield).(10) The country’s remaining 5% of output is produced by plantations, which average more than 50 ha in planted area, and which have been privatized by the government in recent years.”(11) However, because of the predominance of smallholders, the average yield per hectare for all cultivated land is no more than 700 to 800 kg.(12)According to the USDA Foreign Agricultural Service’s <a href="http://gain.fas.usda.gov/Recent GAIN Publications/Coffee Annual_Addis Ababa_Ethiopia_5-12-2014.pdf">2014 Ethiopia Coffee Annual Report</a>, the major reasons for the low coffee production are:<ol><li>Ethiopian coffee farm management system and agronomic practices are traditional and fail to inject new technologies into the country’s coffee production system. In addition, extension services provided to smallholder farmers are inadequate.</li><li>Inadequate use of improved seeds as the supply is limited to areas located near coffee research centers and universities in the country.”</li><li>Historically, there has been a lack of a designated government institution to provide technical support for coffee production. At one time, there was a specialized government agency supporting the production and marketing of coffee. However, it was “dissolved many years ago, leaving the sector with little institutional and technical support from the government.</li></ol>The Government of Ethiopia, though, has recently noted this problem and plans to restructure the coffee development sector by making it a priority value-chain under its Growth &amp; Transformation Plan II - increasing yields from 700 kg/ha to more than 1,100 kg/ha.(12)Ethiopia truly has the potential to increase coffee production and productivity as it has all the necessary “ingredients” including suitable elevation, temperature, soil fertility and sufficient rainfall in coffee growing regions of the country. With the right financial support and guidance, the country could become the number one coffee producer in the world. And METAD, with its clear vision and passionate entrepreneur, is uniquely positioned to become a market leader in Ethiopia’s specialty coffee industry.&nbsp;

Developing Ethiopia’s specialty
coffee sector.

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An analysis and overview of one of Ethiopia’s oldest and most lucrative value chains.

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 Back to the Source: Coffee

<h1 style="text-align:center;">Mama Fresh Injera Attends and Speaks at an ACDI/VOCA Workshop</h1><figure class="image image-style-align-left image_resized" style="width:23.27%;"><img src="/uploads/mftc_logo_tm_1_40e48cdd78.png"></figure>Last week, one of RENEW’s portfolio companies, Mama Fresh Injera PLC, had the honor of attending and speaking at a workshop hosted by ACDI/VOCA’s Agricultural Growth Program-Agribusiness and Market Development (<a href="http://acdivoca.org/our-programs/project-profiles/ethiopia-agricultural-growth-program-agribusiness-and-market">AGP-AMDe</a>). According to ACDI/VOCA’s website, the AGP-AMDe program in Ethiopia “uses a value chain approach to strengthen the agriculture sector, enhance access to finance, and stimulate innovation and private sector investment.”The coffee, chickpea, honey, wheat, maize and sesame value chains are all considered to be of the utmost importance to the U.S. and Ethiopian governments, and consequently to the AGP-AMDe program as well. In fact, this program is part of USAID’s Feed the Future initiative, which focuses on reducing global poverty and hunger by accelerating agricultural growth in 19 developing countries.Over the course of the workshop, AGP-AMDe reviewed the progress of their projects in Ethiopia that spanned across the six value chains (coffee, chickpea, honey, wheat, maize and sesame), and showed a new video that outlined the status of the projects in the Amhara region. AGP-AMDe gave certificates of appreciation to partners of ACDI/VOCA, and highlighted the progress of the companies they provided grants to in the various value chains. This includes the sesame unions and associations for honey, pulses and coffee, the Ethiopian Commodities Exchange, and other government and non-government institutions. AGP-AMDe also mentioned RENEW and how private equity investment is helping local business to grow and create a more robust agriculture sector.<figure class="image image-style-align-right image_resized" style="width:40.2%;"><img src="/uploads/img_6262_63e434109c.jpg"></figure>Hailu Tessema of Mama Fresh served as a panelist on Business Enabling Environment: Access to Finance and Investment discussion, along with other companies and cooperative union leaders. Over the course of the panel, Hailu thanked USAID for helping RENEW and the Impact Angel Network (IAN) partner with Mama Fresh, and discussed how RENEW and the IAN have done much more than simply provide access to finance - they have strengthened Mama Fresh as a company. Hailu outlined the changes that have been implemented since the IAN's investment in Mama Fresh, and encouraged the development community to continue to assist local companies partner with investors like RENEW and the IAN. Hailu concluded that while giving grants to local companies is important, private investment (while harder to obtain) makes Ethiopian companies stronger, because it forces companies to adopt new behaviors and disciplines.The work that RENEW and the IAN are doing in Ethiopia with local entrepreneurs would not be possible without the assistance of USAID and our development partners, like ACDI/VOCA.

Renew Capital Angels invested in Mama Fresh Injera, a commercial manufacturer and exporter of fresh-baked injera and spices. Injera is a staple bread of Ethiopian cuisine and is made from teff, a gluten-free grain.

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Mama Fresh's Hailu Tessema participated as a panelist at last week's AGP-AMDe event.

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Mama Fresh Injera Attends and Speaks at an ACDI/VOCA Workshop

<h1 style="text-align:center;">Our Portfolio: 7 Companies, 1,161 Jobs</h1>One of RENEW's core beliefs is that a thriving private sector made up of robust small- to medium- sized enterprises (SMEs) is the engine of a thriving economy. Since 2013, when RENEW 's Impact Angel Network (IAN) first invested in an Ethiopian SME, the network’s portfolio has grown by six incredible companies across seven additional investments. We believe that investing in these high-growth and high potential companies, and others like them, will create the stepping-stones that lift emerging economies out of poverty.<figure class="media"><oembed url="https://youtu.be/FhLyVJwqS9c"></oembed></figure>To celebrate these successes, we've created a short video that tells part of the story of each company in the IAN’s portfolio. Celebrate with RENEW, the IAN and the entrepreneurs behind these growing companies by watching their stories unfold. And be sure to stay tuned until the end - we have some great tidbits you will not want to miss!

Taking a closer look at the seven companies and entrepreneurs that make up the Impact Angel Network’s portfolio.

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Our Portfolio: 7 Companies, 1,161 Jobs

<h1 style="text-align:center;">The Best of 2016</h1>The RENEW team wishes you all a happy New Year! As 2017 is newly minted and we look to the future, the RENEW team would like to take a moment and reflect on some of our favorite (and most popular) thought-content pieces of 2016:The Rise of Private Equity in East Africa: This is an analysis of the current state and future state of private equity in the East Africa region, as well as the country of Ethiopia. This content piece examines the regional trends from the previous seven years, looks at the prospects of growth in private equity investment in Ethiopia, and explains how the rise of the global impact investor plays an integral role in this investment.Never Forget Africa: RENEW experienced some exciting growth this year by expanding our team, including Justin Reesor, our Operations Manager. In his introductory blog, Justin tells the story of his journey to RENEW, which started as a promise he made to himself during a college cross-cultural trip to South Africa to ‘Never Forget Africa’. Read Justin’s inspiring blog, and don't forget to check out <a href="../2016/going-against-grain.html">Tristan Pelham-Webb</a> or <a href="../2016/africa-final-frontier.html">Prasoon Raghuwanshi’s</a> equally compelling personal stories as well.10 Things You Should Know About Ethiopia's Business Environment: The World Bank published its 2015 Enterprise Survey on Ethiopia, which outlines some very interesting information about the biggest obstacles private sector companies face in Ethiopia. The RENEW team compiled 10 key takeaways, focusing our analysis on the outliers – indicators that differed significantly in Ethiopia compared to the general region of sub-Saharan Africa (SSA). Some of the findings may come as a surprise so be sure to <a href="/newsroom/10-things-you-should-know-about-ethiopias-business-environment">read more</a>.Member of the IAN Visit Ethiopia: 2016 kicked off with an exciting start! In mid-February, RENEW hosted an Econ-Tourism Trip for members of the Impact Angel Network from San Francisco, Los Angeles and Minneapolis. The group met with many Ethiopian entrepreneurs, from both RENEW’s portfolio and investment pipeline, and visited a number of businesses in and around Addis Ababa. Read more about their experience and consider joining us this upcoming February 2017 for our annual Econ-Tourism trip!UHNW Millennials and Impact Investing: Impact investing is gaining popularity across all generations, and none more so than with millennials, who are expected to inherit some $59 trillion in the coming decades. In this content piece, the RENEW team takes a closer look at what UHNW millennials value most, as well as the interactions between millennials, their parents and their advisors.Read more or tune into RENEW's Investing On The Frontier podcast on millennials.<figure class="image image-style-align-right"><img src="/uploads/2016_feb_econ_tourism_bd05a0e087.jpg"></figure>

The RENEW team reflects on our favorite and most popular content pieces from 2016.

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The Best of 2016

<h1 style="text-align:center;">Members of RENEW’s Impact Angel Network Visit Ethiopia</h1>2016 is off to an exciting start! Last week, RENEW hosted an Econ-Tourism Trip for members of the Impact Angel Network from San Francisco, Los Angeles and Minneapolis. The group met with many Ethiopian entrepreneurs, from both RENEW’s portfolio and investment pipeline, and visited a number of businesses in and around Addis Ababa.<figure class="image image_resized" style="width:99.68%;"><img src="/uploads/site_visits_6a1789ef5f.jpg"></figure>The investors were introduced to a total of twelve companies, spanning across multiple sectors – from chemical and food manufacturing to coffee and pulses - eight of which are being considered for upcoming investments. The remaining four companies are current <a href="../../marketplace/portfolio.html">portfolio investments</a> of the IAN, including Desta PLC, METAD Agricultural Development PLC, Mama Fresh Injera PLC, and a food and beverage company. One of the many highlights of the visits was the soft launch of Mama Fresh’s visitors center, where members of the IAN were able to experience the entire production line of injera (from grain to flour to dough to baking), and sample some of Mama’s home-made Ethiopian dishes.<figure class="image image_resized" style="width:98.76%;"><img src="/uploads/cultural_31ce456388.jpg"></figure>Throughout the trip, the group experienced Ethiopia’s historic culture and delicious cuisine. During the first day, several members of the group explored the famous Piazza district of Addis Ababa, visiting places such as <a href="http://www.tomocacoffee.com/">Tomaco Coffee</a> and the <a href="http://taituhotel.com/">Itegue Taitu Hotel</a> (the oldest hotel in the city). The following day, the entire group went on a sightseeing tour of Addis Ababa, took a look back in history with a stop at the National Museum of Ethiopia, home of the infamous <a href="https://en.wikipedia.org/wiki/Lucy_(Australopithecus)">Lucy</a> skeleton, and went on a food tour with local foodies Xavier Curtis and Eliza Richman of <a href="http://www.addiseats.com/">Addis Eats</a>. The group also visited Mercato, the largest open-air market in Africa, enjoyed a happy hour at the RENEW office with development partners and members of the business community, and spent a day exploring <a href="http://whc.unesco.org/en/list/18">Lalibela’s</a> famous 11 monolithic rock-hewn churches.RENEW is in the midst of planning the next Econ-Tourism Trip, which is slated to take place this summer with a focus on a multi-generational experience. Contact us to learn more about scheduling your own Econ-Tourism Trip!

IAN members visited several Ethiopian entrepreneurs and businesses around Addis Ababa.

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Members of RENEW’s Impact Angel Network Visit Ethiopia

<h1 style="text-align:center;">Back to the Source: Energy</h1>In July 2013, members from the Impact Angel Network closed an investment in <a href="http://www.dventus.com/">dVentus Technologies PLC</a>, an ISO 9001: 2008 certified high technology company of U.S. origin incorporated in Addis Ababa, Ethiopia in 2010. The investment helped dVentus to design, develop and manufacture smart grid solutions, energy efficient power generation and distribution solutions. dVentus is strategically situated to respond to the needs of the domestic and international markets with solutions specifically targeted for the clean energy, energy efficiency and smart grid technology sectors.Anticipated social impact from this investment includes millions of Ethiopians with access to more reliable, efficient electricity and the increased employment of professional and highly skilled engineering jobs. In fact, the company currently employs more than 85 hardworking, intelligent and extremely talented men and women to work on product concept design, R&amp;D, development and manufacturing in its state-of-the-art facility.&nbsp;The fostering of these bright minds and innovative companies is critical if Ethiopia hopes to achieve its goal to become a middle-income country by 2025 through increased agriculture and industry. A reliable power grid providing adequate sources of electricity to its residents and industries is a reality that Ethiopia needs to quickly put in place.While Ethiopia is equipped with access to vast renewable energy resources and has the potential to generate more than 60,000 megawatts (MW) of electric power from hydroelectric (86%), wind and solar (8%), as well as geothermal sources (6%), the country only has approximately 2,300 MW of installed generation capacity.(1) With a population of over 95 million people and projections suggesting that the total demand for power will grow by 30% per year, the country is facing an electricity deficit.(2) And of Ethiopia's 95 million citizens, about 80% live in rural areas and only 2 million (mainly urban dwellers) have access to electricity distributed by Ethiopian Electric Power’s (EEP) grid.(3) This translates to a meager rate of 23% connectivity for the entire country.(1)<figure class="image"><img src="/uploads/usaid_power_africa_graphic_545f437012.png"></figure>It will come as no surprise then that Ethiopia ranks 159th out of 190 countries in the World Bank’s <a href="http://www.doingbusiness.org/data/exploreeconomies/ethiopia/">Ease of Doing Business 2017 Report</a>, and in their <a href="http://www.enterprisesurveys.org/data/exploreeconomies/2015/Ethiopia">2015 Enterprise Survey</a>, electricity was ranked as the second highest business environment obstacle for firms. The major constraints of the power sector in Ethiopia are inadequacy of supply, poor quality of supply, poor customer service, lack of trained labor and lack of finance.(3) However, there is a clear political will in Ethiopia to ensure the fulfillment of the development goals in the Growth and Transformation Plan (GTP), as the power sector has been identified as a key in achieving these goals.Under the first GTP, the Government of Ethiopia intends to increase generation capacity to 10,000 MW upon the completion of two major hydropower plants set to become operational in 2017 and 2018.(1) The second GTP has a new, equally ambitious target to increase generation capacity to over 17,000 MW by 2020, with an overall potential of 35,000 MW by 2037.(1) This increase in generation capacity would help sustain the economic growth Ethiopia has experienced and enable it to become a regional renewable energy hub in East Africa.Assisting Ethiopia in achieving its goals under GTP is the Power Africa initiative, a multi-partner program launched by President Obama in 2013. Power Africa’s goals are to increase electricity access in sub-Saharan Africa by adding more than 30,000 megawatts of cleaner, more efficient electricity generation capacity and 60 million new home and business connections.(1) Power Africa is supporting Ethiopia’s energy goals through wide-ranging technical assistance in cooperation with the government of Sweden and Norway, the World Bank, the International Finance Corporation, European Commission, the UN, and DFID.(1) However, Ethiopia is not only looking to the public sector for assistance in developing its energy sector, but also to private investors who are seeking attractive financial and social returns, like the Impact Angel Network.<figure class="image"><img src="/uploads/bts_dventus_c693df3693.jpg"></figure>According to EEP, "the opportunities in the power sector represent about $3 to $4 billion per year. Of this, 65% is in generation, with the rest spread across transmission, universal access and engineering services."(3) The long-term goal is to maximize the country’s energy power potential, one that dVentus fully supports through its products and service offerings.dVentus’ portfolio of products includes smart electric meters, smart water meters, system solutions, generators and converters, and their service offerings range from electric power and water analysis to system design and smart grid upgrades, all in the effort to assist Ethiopia and the world beyond in sustainably powering enterprise and economic development.RENEW and the IAN are proud to be a part of dVentus’ story.

An overview and analysis of one of the key ingredients that drive many of dVentus’ product lines.

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Back to the Source: Energy

<h1 style="text-align:center;">On the Ground Perspective</h1>Investing On The Frontier’s hosts, Matt and Laura Davis, bring you the sixth episode in our podcast series from RENEW’s office in Ethiopia.After braving the perilous traffic that is all too prevalent in Addis Ababa, Matt and Laura sit down to provide a quick financial update on the country, and bring you an on the ground perspective on last month’s headlines on recent events in Ethiopia.&nbsp;

Tune in to the sixth episode of RENEW’s podcast series, Investing On The Frontier, for an on the ground perspective from our team in Addis Ababa.

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On the Ground Perspective

<h1 style="text-align:center;">RENEW Speaks at Posner Center Business Leaders’ Event in Denver</h1><figure class="image image-style-align-left image_resized" style="width:40.07%;"><img src="/uploads/posner_logo_2_fa8185fdf9.png"></figure>Last week, I had the pleasure of speaking at the <a href="http://posnercenter.org/">Posner Center for International Development’s</a> annual Business Leaders’ event in Denver, Colorado. The event highlighted activities of Posner Center tenants and international companies working together to pursue both business goals and development objectives.I was honored to join keynote speaker, Kelly Brough, CEO of the Denver Metro Chamber of Commerce, in commending the Colorado-based businesses and NGOs in attendance to continue their already vibrant collaborations in the international arena to realize business growth and social impact. Developing countries, such as those on the African continent in which RENEW operates, present unique opportunities for such collaboration. These countries possess new markets, new supply chains, and opportunities for technology transfers, strategic acquisitions and equity investments.Ethiopia is an example of one market that is seeing significant growth and attracting the attention of NGOs, businesses and investors alike. Ethiopian companies in RENEW’s portfolio are responding to the growing demands of the country’s more than 95 million people and an ever increasing middle class. These dynamics are contributing to Ethiopia being consistently ranked among the top 10 fastest growing economies in the world.International businesses and investors are looking to Ethiopia for its significant agricultural potential, particularly in areas of coffee, sesame, honey, cut flowers, livestock, and cotton, among others. But, there are clear needs for technology transfers, value chain improvements and outside expertise to unlock this potential. Attractive returns on investments can be realized by responding to these needs. Companies like Samsung, Dow, Heineken, Coca Cola, H&amp;M, WalMart, GE, among many others, as well as RENEW’s Impact Angel Network (IAN), are making or actively considering these opportunities to benefit from and help contribute to Ethiopia’s growth.Collaboration is often key to these investments, as companies seek to navigate an unfamiliar regulatory environment and tailor products and services to local consumer preferences and needs. During my conversation at Posner last week, I highlighted several examples of such collaboration between U.S. businesses and Ethiopian companies, including those in the Impact Angel Network <a href="../../marketplace/portfolio.html">portfolio</a>. These partnerships are providing access to new markets and knowledge transfers, which benefits both companies – the Ethiopian portfolio company and the U.S,-based partner.Frontier markets, like Ethiopia, are still volatile, so it is important to have appropriate hedging strategies in place (talk to your investment adviser, if you are considering investment opportunities in these markets). There are challenges to investing and doing business that warrant patience. In some instances, an effective strategy may be to enter a frontier market with a local partner and, in a more limited way, initially to allow for adaptation to the local context while building a company that operates to international standards. This is one reason why RENEW and the Impact Angel Network focus their investments on small and mid-size companies: invest in smaller companies and provide them the capital, networks and mentoring they need to scale. In this way, a small investment can now provide significant upside potential and exposure to an exciting part of the world economy.RENEW thanks the Posner Center for International Development for inviting us to participate in its annual Business Leaders’ event. The Posner Center is a Denver, Colorado-based shared work space and community of innovators whose mission is to grow lasting solutions to global poverty.<hr>RENEW is an impact investing firm working in Ethiopia through its partnership with USAID activities. It has been facilitating impact investments in East Africa and Asia since 2008. RENEW manages the Impact Angel Network, one of the largest U.S. based angel networks for Africa. &nbsp;

Partner Tom Scriven discusses impact investment and business opportunities in frontier markets.

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RENEW Speaks at Posner Center Business Leaders’ Event in Denver

<h1 style="text-align:center;">The Rise of Private Equity in East Africa</h1>&nbsp;CURRENT STATE OF PE IN EAST AFRICAAccording to the African Private Equity and Venture Capital Association, there were reportedly&nbsp;158 private&nbsp;equity transactions in the East African&nbsp;<figure class="image image-style-align-center image_resized" style="width:29.76%;"><a href="http://www.avca-africa.org/media/1314/avca-spotlight-on-east-africa-private-equity-public-version.pdf"><img src="/uploads/avca_infographic_0_51f293adde.png"></a></figure>region between 2007 and 2014, totaling approximately $1.5B (1). Now, with Ethiopia being the second most populous country on the continent with over 95 million people, one would expect for the majority of the capital to have been deployed to this country. Unfortunately, Ethiopia still has a ways to go. Only 4% of said 158 deals completed in the region took place in Ethiopia, accounting for only 7% of the impact capital distributed (see <a href="http://www.avca-africa.org/media/1314/avca-spotlight-on-east-africa-private-equity-public-version.pdf">figure</a> to the right) (2). Kenya, with less than half Ethiopia’s population, has attracted the majority of private equity transactions and has become known as the private equity hub of the region. In addition, according to the Global Impact Investing Network’s 2015 impact investing report on East Africa, “Ethiopia’s financial services sector - and particularly the financing options available to small and medium enterprises (SMEs) - lags that of other major East African economies” (3).While it seems Ethiopia may have been receiving the short end of the stick in recent years, many in the investing world believe this will soon be changing.FUTURE STATE OF PE IN ETHIOPIA:There are several reasons why Ethiopia is becoming a rising star in the region, one being the country’s double-digit gross domestic product (GDP) growth rate over the past ten years, which is expected to continue over the next five years (4).In line with Ethiopia’s economic growth, the country’s population is expected to continue to increase. If economic output advances faster than population growth, the country will see a broadening of its middle class. As real / disposable incomes rise, demand for higher quality goods and services will rise and the private sector will respond and compete for customers. The good news is that there are plenty of driven and professional Ethiopian entrepreneurs who are more than ready to meet this growing domestic and international demand by providing local value-chain addition across various industries.The Ethiopian government is in favor of this new industry and has thrown its support and weight behind the small to medium sized enterprises that, with the right partners, could become the market leaders of tomorrow. The government’s Growth and Transformation Plan II seeks to make Ethiopia a lower-middle income country by 2025 through rapid (double-digit) economic growth, industrialization and structural transformation (5). The two pillars that will drive this major development will be manufacturing and agriculture.Ethiopia is home to many promising investment opportunities in both of these key sectors, among several others, a fact that is not lost on international private equity investors. The agriculture industry is ripe with investment opportunities in major commodities such as coffee, honey, teff, sesame, flowers and livestock. And the manufacturing industry is just as plush with its ever growing market for fast moving consumer goods, textiles, etc. In fact, in 2014 a major private equity firm - KKR - invested $220M into an Ethiopian rose farm. While large deals by private equity firms and institutional investors are important and vital to the country’s continued growth, they unfortunately do not address the important issue raised before - Ethiopia remains one of the most capital constrained economies in the region for SMEs.&nbsp;CUE THE RISE OF THE GLOBAL IMPACT ANGEL INVESTOR.High net worth individuals (HNIs) across the United States are looking to engage their personal wealth in ways that are different from the typical financial portfolio or fund. High impact (and at times higher risk) investments in frontier economies, such as Ethiopia, are increasingly becoming an important part of said investors’ financial goals. The reason? Investing in SMEs located in developing countries can provide investors with a double or even triple bottom line - financial returns, positive social impact and positive environmental impact. Every dollar invested has the potential to not only provide the company with the ability to scale, but also create jobs in the local community, pay workers a better wage, provide employees with healthcare, pay taxes, and so much more. Impact investing essentially combines the best elements of philanthropy and traditional investing.Operating under the philosophy of “doing well, by doing good”, many governments and NGOs are seeing impact investing as the long-term development solution for emerging economies, as it sustainably contributes towards a country’s economic growth. In lieu of giving a hand out, investors and development organizations can, together, give these countries a hand up - empowering them to take over their own development stories.<figure class="image"><img src="../../sites/default/files/pe_blog.jpg"></figure>Investors should not discount the challenges that these frontier markets possess though - in many instances, it’s still very much the Wild West. RENEW believes that every investor needs to talk with their financial advisors before considering making such investments and should work with a trusted in-country partner. Whether it is large institutional players or boutique investment firms, Western investors can find investment professionals working out of offices in Addis Ababa, Nairobi and Accra. In Ethiopia, where RENEW has an office, we offer our angel investors a full, turnkey, in-country investment service through our Impact Angel Network. And, while Ethiopia trails Kenya’s in private equity, we believe the country will soon be changing that story as well. In fact, we are already seeing progress! In just four years, the Impact Angel Network has closed seven investments and we are gearing up for another strong year in 2016.(1) <a href="http://www.avca-africa.org/media/1314/avca-spotlight-on-east-africa-private-equity-public-version.pdf">African Venture Capital and Private Equity Association: Spotlight on East Africa Private Equity</a> (2) <a href="http://www.avca-africa.org/media/1314/avca-spotlight-on-east-africa-private-equity-public-version.pdf">id.</a> (3) <a href="https://thegiin.org/assets/documents/pub/East Africa Landscape Study/09Ethiopia_GIIN_eastafrica_DIGITAL.pdf">The Global Impact Investing Network: The Landscape for Impact Investing in East Africa</a> (4) <a href="https://thegiin.org/assets/documents/pub/East Africa Landscape Study/09Ethiopia_GIIN_eastafrica_DIGITAL.pdf">id.</a> (5) <a href="https://www.africaintelligence.com/c/dc/LOI/1415/GTP-II.pdf">Africa Intelligence: The Federal Democratic Republic of Ethiopia, Second Growth and Transformation Plan</a>

The RENEW teams take a closer look at the current state and future state of private equity in Ethiopia.