The ABG project supported high-potential SMEs in Ethiopia to attract and use finance to scale up and play a strong role in the economy, while creating 2,632 jobs (70% for women).

<h1 style="text-align:center;">An Update on the ABG Project</h1>RENEW recently hit the four-year mark of the five-year Accelerating Business Growth Project (ABG) in Ethiopia, a collaboration agreement with <a href="https://www.international.gc.ca/gac-amc/index.aspx?lang=eng">Global Affairs Canada</a>. The ABG project aims to support high potential, responsible small and medium enterprises (SMEs) in Ethiopia so they can attract and efficiently use finance to scale up, enabling them to play a stronger role in the Ethiopian economy. The project addresses the gap found in the capital markets in Ethiopia and in many other countries in Africa, called the “missing middle”. Learn more about the project <a href="https://www.international.gc.ca/world-monde/stories-histoires/2021/business-growth-ethiopia-ethiopie-croissance-entreprises.aspx?lang=eng.html">here</a>.With four years completed and the May 2021 finish line quickly approaching, we thought it was a good time to look back and celebrate some of the project outcomes achieved to date (these results are also represented in a visual format below):<ul><li>We are supporting 5,806 jobs across the SMEs in our program of which 3,613 or 62% are held by women. The project target of 5,000 jobs was recently exceeded.</li><li>We have helped SMEs attract $56M CAD in financing for their businesses through 85 investments, to help them scale, create jobs, and contribute to Ethiopia's private sector. 29 of these investments have gone to women-owned businesses, with an average investment size of $493K CAD.</li><li>We have trained and graduated 84 finance professionals (of which 25 are women) and 61 executives (of which 26 are women) from our rigorous CFO100 and Exec's Program training and have equipped them to be strong and ethical managers of Ethiopian SMEs.</li><li>We have trained over 700 SMEs and resource providers on private equity through our PE500 incubator program, equipping them to access or help others access growth capital.</li></ul>As we reflect on this progress and these stories of impact in our <a href="https://www.renewcapital.com/resources/blogs/Celebrating%20our%20Impact">2019-2020 Impact Report</a>, we do so in a subdued manner recognizing the reversal of outcomes that are expected in light of the COVID-19 pandemic's severe impact on East Africa's already fragile private sector. According to ANDE<a href="#section1">[1]</a>, a funding gap of $930 billion already existed for SMEs in emerging markets prior to the pandemic, and this only stands to widen. The RENEW team has been working hard to develop and deliver virtual programs directly helping SMEs respond to the challenges of the current climate under COVID-19 and providing resources and dedicated coaching to help them access much-needed funding during this time.The economy of Ethiopia has increasingly strengthened during the last two decades as industrialization has expanded. Between 1999 and 2015, the poverty rate decreased by 7.6%<a href="#section2">[2]</a>, lifting roughly 8.3M Ethiopians out of poverty. COVID-19 is putting these developmental outcomes at risk by constraining business growth and capital attraction for SMEs which will be most impacted and will require timely support in order to survive. In fact, it is estimated that 42% of all SMEs in Africa are in danger of failing within the next six months<a href="#section3">[3]</a>. For this reason, we believe that programs like ABG, working to leverage capital into SMEs and training local managers to increase their capacity for scaling companies, have the greatest impact on development outcomes.Cover Photo by Ian Christmann: <a href="www.ianchristmann.com">www.ianchristmann.com</a><a href="https://www.macrotrends.net/countries/ETH/ethiopia/poverty-rate">https://www.macrotrends.net/countries/ETH/ethiopia/poverty-rate</a>

4 years into our 5 year project with Global Affairs Canada

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An Update on the ABG Project

<h1 style="text-align:center;">RENEW Welcomes Paul Reynolds to Leadership Team and Kirsten Newman as General Counsel</h1>&nbsp;Download the Full Press Release<hr>RENEW Welcomes Paul Reynolds to Leadership Team and Kirsten Newman as General Counsel&nbsp;Denver, CO and Addis Ababa, Ethiopia, October 13, 2020 -- RENEW is pleased to announce the following position changes at RENEW:<ul><li><a href="https://www.linkedin.com/in/paulreynolds5/">Paul Reynolds</a> joins RENEW’s executive team as a managing partner in Addis Ababa, Ethiopia.</li><li><a href="https://www.linkedin.com/in/kirsten-newman-10301aa7/">Kirsten Newman</a> has been promoted to the general counsel position.</li><li><a href="https://www.linkedin.com/in/tomscrivencfa/">Tom Scriven</a>, RENEW’s partner and previous general counsel, will be returning to private practice in Colorado and will remain a partner and on RENEW’s Investment Committee.</li></ul>RENEW, an impact investment and management consulting firm based in East Africa since 2012, announces further expansion with a new executive team member and an internal promotion. This includes RENEW’s new managing partner, Paul Reynolds, from Inchcape, and Kirsten Newman’s promotion to general counsel. RENEW also announces that Tom Scriven, RENEW’s partner and previous general counsel, will be returning to private practice and will remain a partner and on RENEW’s Investment Committee.Paul Reynolds joins RENEW’s leadership team bringing three decades of global investment banking and investment experience. Having been lead adviser on 175 announced transactions worth over €250 billion, Paul has extensive government and board level experience in EMEA and India. Paul built sustainable businesses for Cazenove in the UK (2001-2005), and for Rothschild in the UK (2005-2008), the Middle East and India (2008-2012) and Benelux and Nordic regions (2012-2016), as well as a number of not-for-profit enterprises. In 2017, Paul joined Inchcape (INCH.L) to drive its business development across Africa and investments in Ethiopia. Paul is a trustee of Rainbows4Children (Ethiopia), non-executive director of the Investor Relations Society of South Africa and Kilya Capital in Kenya, Chairman Emeritus of the Middle East Investor Relations Association, Supervisory Board member of Capital Tool Company, and remains a Rothschild Senior Adviser. Paul will be helping to lead RENEW’s investment advisory practice and support the firm’s regional expansion.<figure class="image"><img src="/uploads/pr_kirsten_paul_3_3eabd4f81b.png"></figure> Kirsten Newman, who has been with RENEW since September 2018 as associate general counsel, has been promoted to RENEW’s general counsel. Kirsten is responsible for the legal tasks related to the investment activities of RENEW and for serving the legal and compliance needs of RENEW LLC. Prior to joining RENEW, Kirsten worked as a senior associate in the energy and infrastructure project finance group at Skadden, Arps, Slate, Meagher &amp; Flom. In this capacity, she advised commercial and investment banks, private equity firms, developers, borrowers and issuers in various types of finance transactions, with an emphasis on project finance. Kirsten has extensive cross-border experience, advising on transactions in more than a dozen countries. Kirsten previously studied and worked in London, beginning her legal career in Skadden's London office, advising on international M&amp;A and capital markets deals. Kirsten received her J.D. from the University of Minnesota Law School, magna cum laude and Order of the Coif. She holds a B.A. in psychology, summa cum laude, from the University of Minnesota.Kirsten will be taking over as general counsel from Tom Scriven, who will be returning to private practice in Colorado and will remain a partner and on RENEW’s Investment Committee. Tom has been a partner with RENEW since 2012 and helped build the firm's investment practice and development consulting business with RENEW's founders, Matt and Laura Davis. He has led numerous transactions in East Africa and served as board chair for several portfolio companies.“RENEW has aggressive plans to scale into East Africa, and we look forward to fresh perspectives and insights from the new members of our leadership team,” noted RENEW’s CEO, <a href="https://www.linkedin.com/in/matthew-davis-a948772/">Matthew Davis</a>. “SME investing in East Africa is challenging, but a potentially rewarding and high-impact investment strategy. I am very excited to have Kirsten and Paul helping guide RENEW to our next stage of growth. We’re also grateful for the immense contributions Tom has made to RENEW as general counsel, and we will continue to benefit from his wisdom on our Investment Committee.”About the Impact Angel Network and RENEWRENEW’s<a href="https://www.renewcapital.com/investing" target="_blank" rel="noopener noreferrer"> Impact Angel Network</a> is one of the most active private equity investors in Ethiopia. Its members seek to achieve both significant positive social impact and financial returns through investments in small and medium enterprises (SMEs) in Africa, a proven engine of economic growth and job creation which often lack capital and management capacity due to their size. RENEW and IAN members believe that targeting employment through SMEs is, dollar-for-dollar, the most effective and sustainable way to reduce poverty.RENEW, with its largest office in Addis Ababa, Ethiopia, manages the IAN’s investment operations and provides investment advisory and consulting services in support of its investments. RENEW’s work in Ethiopia was piloted with USAID and is currently undertaken with financial support from the Government of Canada provided through Global Affairs Canada. The project, Accelerating Business Growth, aims to promote sustainable job creation for low-skilled workers, including women and young adults, through a dynamic and growing small and medium business sector in Ethiopia.&nbsp;

Announcing the following position changes

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RENEW Welcomes Paul Reynolds to Leadership Team and Kirsten Newman as General Counsel

<h1 style="text-align:center;">The Ins and Outs of Investing Through an IRA</h1>Did you know accredited, entrepreneurial-minded investors from the United States can invest in companies with RENEW from an Individual Retirement Account (IRA)? An IRA is a tax-advantaged investing tool that sets aside funds for retirement savings. A special type of IRA, known as a self-directed IRA, allows you to invest in different asset classes, beyond the typical investments that IRAs can usually hold. Self-directed investments can include alternative asset classes, such as investments with RENEW and the Impact Angel Network (IAN). In order to invest with RENEW through your IRA, you’ll need to work with a custodian that can accommodate self-directed investments into alternative asset classes.For members of the IAN who wish to invest in companies through their IRA, RENEW can work with any custodian that is set up to facilitate self-directed investments into alternative asset classes. If you already have a custodian who allows this, we can work with them.Want to learn more? Here are some more resources:<ul><li><a href="https://www.investopedia.com/terms/i/ira.asp">A Guide to Impact Investing using an Individual Retirement Account (IRA)</a></li><li><a href="https://www.investopedia.com/ask/answers/102714/what-are-differences-between-selfdirected-ira-and-traditional-ira.asp">Self-Directed IRA vs. Traditional IRA: What Are the Differences?</a> (Investopedia)</li></ul>Contact us at <a href="mailto:renew@renewcapital.com">renew@renewcapital.com</a> if you have questions. And if you aren’t already a member, we invite you to apply to join the <a href="https://renewstrategies.formstack.com/forms/renew_investor_accreditation_form">Impact Angel Network</a>.<figure class="image"><img src="/uploads/sdg_b1dd846a75_d2d6e641da.png"></figure>

How Investments Work with an Individual Retirement Account

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The Ins and Outs of Investing Through an IRA

<h1 style="text-align:center;">Standing Ground with Effoi Pizza</h1>Look for RENEW’s latest Impact Report next week! This year, we’ll explore what it was like for our investors, entrepreneurs and our team to stand our ground during the pandemic in East Africa. The report will feature key statistics and amazing photos and stories from our work in East Africa.In anticipation of the Impact Report, we wanted to share the story of one entrepreneur who more than stood his ground in 2020. Meet Tsega Wubishet (aka Gigi) of Effoi Pizza. Effoi Pizza, a bustling pizza operation in Addis Ababa, now includes 6 branches and more than 190 employees. Gigi previously participated in RENEW’s Exec’s Program, which is how we came to know and love him. So sit back, relax and enjoy how Gigi describes in his own words what it was like to stand his ground and grow his company in 2020.<figure class="image image-style-align-center"><img src="/uploads/gigi_0_954008b5a7_026315a9c4.jpg"></figure>How did you and your company experience the pandemic?By March 2020, Ethiopia recorded it’s first COVID-19 patient and everyone was washing [their] hands, and all the necessary actions were being taken.At Effoi, we initially decided to close in-restaurant dining. By observing the precautions, we continued with takeaway and pizza delivery. The government passed laws requiring clubs and bars to close, but restaurants could stay open at half capacity, with 3 people at a table. We followed instructions and business was back. With the rules, we still managed to pull through that period, mostly with delivery.As an entrepreneur, the one thing I learned is that nothing is certain. We can have 1 year, 5 year strategy, but that is something we keep in our heads and if that doesn’t work, you have to adapt. As long as you have a growth mindset in your head, you come up with new ways to get things done. It was actually good for my business. It [the pandemic] helped me think a lot.Are you familiar with the phrase “Standing Ground”? What does it mean to you as an entrepreneur?Standing ground was actually something I was contemplating in 2020 as I was working on our Entoto project because I was working among trees. It’s a matter of having deep roots in the community. Also as you grow, you have to fortify your system, thicken your trunk, then you can weather the storm. You always sway. That’s why a tree doesn’t break. When you do that, you can consider yourself standing ground. But a tree cannot be healthy by itself, you need to support the entire ecosystem. You cannot stand on your own. You have to support others around you. That tree provides service to the community.Note: Entoto Mountain overlooks Addis and has recently been remade into a beautiful, tree filled recreational area where visitors can take a long hike on a paved bike path and enjoy some of Ethiopia’s best brands, including Effoi Pizza.What is the current state of your business?Business is higher by 50% [compared to] pre-pandemic. We are used to seeing improvements on a weekly and daily basis. We are always breaking records, which means we are always improving. Pandemic slowed down our improvements, but now we are back, and we are breaking records.As you look forward, further into 2021, and beyond the COVID-19 pandemic, what dreams and visions do you now have for your business growth?In the coming 5 years, life will continue. The vaccine will help with that. For Ethiopia, once the vulnerable portion of the society is vaccinated, the cases will go down. This will continue and we will go back to normal. And the young people will always want to go out and dine and enjoy.What did you take away from RENEW’s Exec’s Program?I am grateful to have attended [The Exec’s Program]. I now know how Effoi can and should grow. I may not have had the time to sit and implement everything we were taught, but I now know what is needed.Make sure to check out our Impact Report which will feature more stories of resilience in East Africa.

An Interview with Tsega Wubishet in the Entoto Forest

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Standing Ground with Effoi Pizza

<a href="https://latest-api.renewcapital.com/uploads/Press_Release_Rwanda_Final_e91a7d55e4.pdf">Download the Full Press Release</a>&nbsp;<hr><h1 style="text-align:center;">RENEW Enters Rwanda Market</h1>Denver, CO and Kigali, Rwanda, April 29, 2021 -- RENEW, an impact investment firm, announces its expansion into its third African country, Rwanda. RENEW Investment Advisors Ltd. was officially registered with the Rwanda Development Board on April 19, 2021. RENEW also welcomes Lincoln Ford Linguyeneza to the team, as the firm’s Rwandan Legal Counsel.<figure class="image"><img src="/uploads/kigali_fotor_e488f89abb_9736ceced7.jpg"></figure>RENEW’s partners first traveled to Rwanda in 2006 and have been closely watching the county’s growth and improving investment and business climate, while building up the firm’s investment practice in Ethiopia and Uganda.“Now is a good time to establish a presence in Rwanda,” says Matthew Davis, CEO and partner at RENEW. “Investors are moving out of saturated markets in the region to find better valuation in secondary markets. We believe RENEW and our investors can find and build up strong companies led by passionate and visionary Rwandans that can attract larger investments. While Rwanda is small, other countries around the world have proven that when capital is respected and cared for, size doesn’t matter. Rwanda has consistently made it easier for investors to do business and that is something very attractive to RENEW and our investors.”Rwanda has experienced strong growth with a GDP of $10.53 billion and a GDP growth of 9.45% (2019 est.). Several factors make it an attractive destination for RENEW and the Impact Angel Network (IAN), including a growing population (currently estimated at 12.3 million), a rising middle class with a per capita GNI of $2,250 and little to no restrictions on foreign investors. Rwanda is also ranked by the World Bank as the second best country in Africa to do business in and 38th in the world.&nbsp;RENEW first entered East Africa in 2012, when it opened an office in Ethiopia, becoming the second private equity firm in the country. Since then, with the IAN, RENEW has become one of the most active SME investors in East Africa. RENEW and the IAN work in partnership with the development community and impact investors to build vibrant investment and entrepreneurial ecosystems in the countries where RENEW operates. RENEW focuses on SMEs, which globally are the main providers of jobs, but in Africa are trapped in the “missing middle” - an area in the capital market between microenterprises and larger, bankable deals where little capital exists. RENEW is focused on job creation and women’s economic empowerment by building gender-smart management teams in the SMEs it backs.“We believe SMEs can be the engines of job creation and women’s empowerment, and deliver strong returns for investors,” says Laura Davis, RENEW partner and co-founder of the IAN. “We see a lot of opportunity and plenty of deal flow in Rwanda.”###About the Impact Angel Network and RENEWRENEW’s Impact Angel Network (IAN) is one of the most active private equity investors in Ethiopia. Its members seek to achieve both significant positive social impact and financial returns through investments in small and medium enterprises (SMEs) in Africa, a proven engine of economic growth and job creation which often lack capital and management capacity due to their size. RENEW and IAN members believe that targeting employment through SMEs is, dollar-for-dollar, the most effective and sustainable way to reduce poverty. RENEW, with its largest office in Addis Ababa, Ethiopia, manages the IAN’s investment operations and provides investment advisory and consulting services in support of its investments. RENEW’s work in Ethiopia was piloted with USAID and is currently undertaken with financial support from the Government of Canada provided through Global Affairs Canada. The project, Accelerating Business Growth, aims to promote sustainable job creation for low-skilled workers, including women and young adults, through a dynamic and growing small and medium business sector in Ethiopia.###To find out more, please visit <a href="https://renewcapital.com/">www.renewcapital.com</a>.

RENEW Announces its Expansion into Third African Country, Rwanda

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RENEW Enters Rwanda Market

<h1 style="text-align:center;">RENEW Attends GenderSmart Investing Summit</h1>From February 1 to 11, RENEW is grateful to attend the virtual <a href="https://www.gendersmartinvesting.com/">GenderSmart Investing Summit</a>. The GenderSmart summit is an invitation-only forum bringing together more than 600 people interested in unlocking gender-smart capital at scale and connecting leaders and experts in gender finance. The theme this year is “crisis as catalyst” and the team is expertly connecting individuals and organizations and working to marshal efforts in support of gender finance around the world.Given RENEW’s mission to turn SMEs into gender-smart companies with gender-balanced management teams, this conference provides deep resources to learn and contribute. This year, the summit focuses include: From Niche to Normal (which includes discussions on how gender lens investing is becoming "just smart investing"); Building a Better Toolkit; Systems and Levers; Investing for Recovery and Resiliency; and Climate &amp; Gender.If you’re interested in learning more about the GenderSmart Investing Summit, we encourage you to check out their <a href="https://www.gendersmartinvesting.com/">website</a>, their educational resources on their <a href="https://www.gendersmartinvesting.com/blog">blog</a>, and their <a href="https://www.gendersmartinvesting.com/2020-partners-and-supporters">partners and supporters</a>.&nbsp;<figure class="image"><img src="/uploads/gendersmart_0_448b60299d.jpg"></figure>&nbsp;&nbsp;

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RENEW Attends GenderSmart Investing Summit

<h1 style="text-align:center;">It’s That Time of Year... For Financial Optimization</h1>During the last quarter of each year, many around the world spend time preparing for the Christmas holiday and tax season! If you are in the United States, there’s an option to optimize your impact investing with a vehicle called a donor-advised fund (DAF).According to a recent article in Axios (<a href="https://www.axios.com/covid-19-spurs-generosity-among-holders-of-donor-advised-funds-7894b4f9-04c5-4b00-87f1-2b52df090e0a.html?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsletter_axiosdeepdives&amp;stream=top">COVID-19 spurs generosity among holders of donor-advised funds</a>) more than $120B sits in DAFs and in 2020 at Vanguard Charitable, donors made $1.3B in grants, which was about 25% higher than 2019.Accredited, entrepreneurial-minded givers from the United States can invest in companies in East Africa with RENEW from a DAF which would have the potential of earning a return on their charitable capital. It may be helpful to think of a DAF as a philanthropic checkbook. A donor transfers assets (e.g., cash, securities, other rights or assets) into a DAF account with a non-profit organization (like divisions of <a href="https://www.schwab.com/donor-advised-fund">Charles Schwab</a> and <a href="https://www.fidelitycharitable.org/open-account.html">Fidelity</a>, <a href="https://www.impactassets.org/our_products/donor-advised-fund">ImpactAssets</a>, the <a href="https://www.ncfgiving.com/open/">National Christian Foundation</a> and <a href="https://impactfoundation.org/open-an-account">ImpactFoundation</a>) that is set up to manage DAFs and facilitate transfers into and out of DAFs in line with IRS rules. Donors then receive a charitable deduction in the amount of the value of the assets transferred to the DAF in the year in which they make the deposit. The funds sit in the account until the donor is ready to make grants to charitable entities or to make impact investments. Any returns earned on the investments are returned to the DAF and can be reinvested or donated.&nbsp;<figure class="image image_resized" style="width:97.28%;"><img src="/uploads/sunset_ethiopia_0_1eef1006e0.jpg"></figure>To make impact investments using a DAF, you’ll need to work with an intermediary like ImpactAssets or Impact Foundation, organizations that specialize in the work necessary to diligence and make an investment using a DAF. This is possible, even if your DAF is held at Schwab or another institution.ImpactAssets is an independent public charity first launched in 2001 by Calvert Foundation. The primary tool of ImpactAssets is known as the Giving Fund, an enhanced DAF that facilitates investments of $25,000 or more and provides socially responsible and impact investment options – enabling philanthropists to both “give and invest for the greater good.”Impact Foundation is an intermediary that can facilitate charitable investments of $100,000 or more. Impact Foundation was founded to provide a streamlined way to fund transformational businesses, make loans to charity, and grow the amount you have to give away. Impact Foundation has a working partnership with the National Christian Foundation to assist NCF donors in making private equity and venture capital investments.Want to learn more? Here are some more resources:<ul><li><a href="https://renewstrategies.formstack.com/forms/daf_for_impact_investing">Download an Interview with Sally Boulter of ImpactAssets</a></li><li><a href="https://drive.google.com/file/d/1JF7QJfASnwqf31gWmkWX8wQfWhgvCFPx/view">Download RENEW’s DAF Q&amp;A</a></li></ul>Contact us at <a href="mailto:renew@renewcapital.com">renew@renewcapital.com</a> if you have questions. And if you aren’t already a member, we invite you to <a href="https://renewstrategies.formstack.com/forms/renew_investor_accreditation_form">apply to join the Impact Angel Network</a>.*The information contained in this blog and the resources linked above is for informational purposes only and no representation is made that the information is accurate or complete, nor should it be relied upon as such. In addition, this information is not intended as legal or tax advice. For such advice, please consult your attorney or tax advisor.

For U.S. Investors: Should a DAF be part of your impact investing planning?

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It’s That Time of Year... For Financial Optimization

<h1 style="text-align:center;">It Just Got A Lot Better for Investors in Ethiopia…If You Export</h1>In an effort to incentivize exports from Ethiopia and replenish the desperately low hard currency reserves that have held back the country’s growth for years, the National Bank of Ethiopia (NBE) has issued a directive allowing exporters and recipients of inward remittance to open a foreign exchange retention account at the bank of their preference. But not every foreign exchange remittance entitles a company or individual to open a remittance account. The directive is focused on: resident companies, institutions, individuals and government organizations, other than a diplomatic mission, who receive foreign exchange regularly from abroad. This is good news for a lot of exporters. Here’s how it works:There are two types of foreign exchange retention accounts, i.e. “Foreign Exchange Retention Account A” and “Foreign Exchange Retention Account B”. These accounts will be credited from the export of goods and services and incoming transfer made for inward remittance. Of the total foreign exchange earnings, 30% of the account balance will be deposited in Retention Account A for an indefinite period of time and 70% of the account balance will be credited to Retention Account B for up to 28 days. At the end of the 28 days, the balance will automatically be converted into the local currency, Ethiopian Birr (ETB). The funds in Account A and B can only be used to finance direct business-related and current payments, the details of which are listed in the directive.&nbsp;<figure class="image image_resized" style="width:72.66%;"><img src="/uploads/addis_city_fotor_d30a657494.jpg"></figure>&nbsp;Before this directive, this was not the case. Most exporters used their influence at banks to finance their other import businesses. This, through time, distorted the export sector and created something called commodity dumping. Here, exporters buy up anything they can export (sesame, mung beans, coffee) and sell it on the international market for below-average prices and quality, simply to get access to their forex. Next, they use their influence at the banks to open up letters of credit to purchase items like flat-screen TVs, mobile phones, computers, etc., which is where they generate their real profits. The imports handsomely compensate for any losses they realized on their exports. This ultimately came to the detriment of the country’s reputation in the international markets. Because exporters only cared about the forex they generated, their quality and reputation for the products they sold were second to closing the deal. The millions of farmers that were at the start of that value chain also suffered, as they did not always get the best prices and also had the long-term impact of bad branding which hurt their future development and growth. Also, the forex generated wasn’t regularly used for tractors and machines, new seeds and fertilizer that could improve the commodities which these exporters sold. Rather, it was used to import luxury goods that most Ethiopians never get to buy.[<a href="https://www.renewcapital.com/blog/2020/it-just-got-lot-better-investors-ethiopia-if-you-export#item1">1</a>}The new NBE Directive No. FXD/66/2020, which repealed Directive No. FXD/48/2017, seems to balance the strict regulations of the past with practical current realities and falls somewhere in between. According to the new directive, exporters who have a balance in Retention Account A, in addition to financing their export business, can also use their foreign exchange to import pharmaceuticals and pharmaceutical products, agricultural inputs and pieces of machinery amongst other items. The details surrounding these imports are exhaustively listed in the new directive. These items are given priority in the allocation of foreign exchange by the government. Hence, if properly implemented, the government will be able to incentivize proper exporters, while simultaneously managing the foreign exchange needs of those sectors, which are not being directly financed by export retained earnings but are actually necessities.The manner of utilizing the foreign exchange in Retention Account B remains unchanged. This account can only be used to finance direct business-related and current payments like the import of goods and related services. In addition, it can be used to settle external loans and supplier’s credit, and to settle service payments.Another unchanged item from the previous directive is that companies with retained earnings can freely negotiate with their banks and sell their foreign exchange at a price that is not exceeding the selling exchange rate prevalent on the date. Currently, as a rule, the NBE sets the daily buying rate of foreign exchange for banks (i.e., the price at which banks are allowed to buy foreign exchange). However, banks do have the liberty to decide the selling exchange rate but cannot exceed a 2% margin from the buying rate set by the NBE. The retention directive puts an exception to this rule and allows banks to freely negotiate with exporters who have foreign exchange in their retention account. It allows banks to buy the exporters’ foreign exchange at a favorable price rather than using the daily buying rate set by the NBE. They will still need to remain within the 2% margin since that is the selling rate cap. This incentivizes exporters who have more than enough foreign exchange in their accounts to meet their import needs.The new directive seems to have two overarching purposes. The first one, as discussed above, is to incentivize exporters by allowing for favorable use to meet their import needs and to also get higher exchange rates if they decide to convert their foreign exchange to Birr. Secondly, this helps in channeling the foreign exchange earned from exports to priority areas. Even though the repealed directive had a similar arrangement with even stricter regulations, it was not effective when it came to enforcement. The new directive, if supported with proper enforcement mechanisms, will provide a certain degree of flexibility and channeling of foreign exchange into key import areas such as materials required for export packing and labeling; service payments; settlement of external loans; import of agricultural inputs and pieces of machinery; manufacturing inputs; and machinery and equipment.Overall, this is a good step in the right direction for Ethiopia and for those looking to invest here. Any efforts to increase the country’s foreign currency reserves are welcomed advances. We hope, and may see, further reforms on the horizon.For more information on RENEW or to speak with one of our investment analysts, please visit <a href="https://renewcapital.com/">www.renewcapital.com</a> or email us at <a href="mailto:info@renewcapital.com">info@renewcapital.com</a>. RENEW also holds monthly calls for members of the Impact Angel Network (IAN), which is an educational network for investors seeking to make financial returns and a positive social impact by investing in SMEs in Africa. If you’re interested in applying to the network, you can fill out the IAN application form <a href="https://renewstrategies.formstack.com/forms/renew_investor_accreditation_form">here</a>.&nbsp;1. According to the Minister of the Ministry of Trade and Industry in an interview with Ezega available at: <a href="https://www.ezega.com/News/NewsDetails/7345/Ethiopia-Introduces-New-Directive-to-Halt-Fraud-in-Export-Business">https://www.ezega.com/News/NewsDetails/7345/Ethiopia-Introduces-New-Directive-to-Halt-Fraud-in-Export-Business</a>

A look at the new National Bank of Ethiopia export directive

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It Just Got A Lot Better for Investors in Ethiopia…If You Export

<h1>Book Review: Prosperity Paradox</h1>Why do some countries develop in a generation and others languish in poverty and dust for hundreds of years? No book or perspective can ever tell the whole story, but as an investor who has dedicated the last 10 years of my life to building the private sector in East Africa, I found great hope, helpful insights and a practical framework from Clayton Christensen’s book Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. How satisfying that the book, published in 2019 and co-authored by Efosa Ojomo and Karen Dillion, has an ORANGE cover? Orange is my signature color and one of the primary colors of RENEW’s brand, so I was immediately drawn to the book! In this case, you can judge the book by its cover.&nbsp;<figure class="image"><img src="/uploads/ppnew2_84c669a3d4.jpg"></figure>&nbsp;The book details a framework that challenges many preconceived notions of development and could revolutionize the economic situations for millions across the continent of Africa if entrepreneurs, development organizations, philanthropists, government officials and investors were to implement this framework.I would distill the framework down into three key takeaways. This is my personal summary - you might discover more:<ul><li>Use “Disruptive” Innovations - Other innovations that Christensen has defined throughout his career at Harvard like efficiency innovations and sustaining innovations are good, but not great for an economy. Efficiency innovations free up cash flows but rarely create new jobs. This is the nature of resource-related innovations. Sustaining innovations ensure a company continues to maintain its market, often by adding bells and whistles to make sure the product maintains its competitive edge in the light of new market entrants. But disruptive innovations create new markets, making non-consumers into consumers, creating employment and giving cause for forward and backward integration that often positively impacts infrastructure and policy. My take - don’t just copy and paste models that work in the East or West, in Africa. Rather, start by asking what will it take to create a market here?</li><li>Focus on Turning Non-Consumers into Consumers - Speaking of market creations, Christensen spends a fair amount of the book detailing case studies from companies like Singer, Kodak, Bank of Italy, Ford, Sony, Indomie and the like that build companies that produce products and services that don’t try to steal consumers from other companies, but rather bring new consumers into the market because of the value of their creation. The end of the book also includes an encouraging list of companies around the world that are creating markets by building disruptive innovations. My take - instead of looking at business as fighting for a bigger piece of a fixed-sized pie, ask how can we build something that makes the pie even bigger.</li><li>Ask if We are Solving the Jobs to Be Done - Does the product or service solve the problem for which the company was hired to do? It’s not always as clear as an entrepreneur might like to think. The authors provide the example of a newspaper in an airport. Does a passenger buy the newspaper ahead of the flight to find out the latest news or as an insurance policy in case he or she is seated next to a pesky passenger he or she doesn’t want to speak to? My take - many times a successful product or service that works in one market falls on its face in Africa. The job to be done here might be different - a well dug in one location to help prevent women from having to carry heavy jugs multiple kilometers might have eliminated their bonding time with peers, so it never gets used. Ask, what's the job the customer needs to be done here in Africa? Not, here's what we did in other countries, so it should work here.</li></ul>Christensen and his colleagues also provide some specific advice for each stakeholder intermingled throughout the great case studies and stories in the book. Here I try to summarize a few of the things the book highlights for each stakeholder group.For Entrepreneurs<ul><li>Look for opportunities to create new markets. Be sure to focus on creating markets by creating products that address the needs of non-consumers. Identify pockets of non-consumption by looking at skill, time, wealth, access, etc. and know that existing data does not predict non-consumption.</li><li>Don’t fight against bad policies, lack of infrastructure and corruption...use them. From the book and my own experience in Ethiopia, I know that is a losing battle that consumes way too much energy. The book says to focus first on your market-creating (disruptive) innovation, and if you are committed, the other things will likely follow. In some cases, you will end up building the infrastructure, supply chain, etc. yourself.</li><li>Know what job your customers are hiring you for. It’s not always as clear cut as you might think. Ask yourself, does the product or service solve a job my customers need to get done? And if you don't know what that is, start to build up a very strong primary research function within your due diligence team. The information you're looking for is likely not available. Long conversations over tea and coffee will be the best way to understand that job before investing millions into an idea that might not be what the customer wants (almost every well drilling NGO should read that again).</li></ul>For Development Professionals and Philanthropists<ul><li>Stop drilling wells - We all know friends and organizations that have been heartbroken by the terrible issues surrounding lack of infrastructures such as access to power and clean water across Africa. But rarely does it work over the long term to address those problems from a philanthropic perspective. We end up keeping people in uninhabitable places and/or wasting resources because infrastructure is not owned and maintained by the community. Thousands of wells dug with well-intentioned grant dollars lie in ruin across Africa. Christensen’s answer: Let the private sector create a market-disrupting innovation that pulls non-consumers into a marketplace and addresses the issues with a private-sector solution. This isn’t an overnight solution, but perhaps it is time to put more resources towards investing with the private sector vs. flushing grant dollars down wells and toilets. As I like to say, every decent job we create through investment in a local company provides more access to clean water and healthcare.</li><li>Support cultural changes rather than institutional changes - This is hard to do. I get it. But start with the end in mind, and support initiatives that you think will get you there. I wish the book spent more time focusing on what this could/should look like.</li></ul>For Policy Makers<ul><li>Let innovations pull the right policies and infrastructure in place - The authors share stories from developing countries across the world we’d like to forget. We’ve all seen those well-intentioned infrastructure projects that go nowhere because they aren’t in line with what the private sector and the community needs or will use. Rather, is there a way to focus on innovations and let necessary infrastructure and policies follow? The book goes into great detail about how the United States and other countries were before market innovations like Henry Ford’s affordable Model T, which helped pull America’s highway system into existence. This story is well known, and the authors go into many other unknown and overlooked examples of market innovations pulling infrastructure and proper policy into existence.</li><li>Remember good laws are not enough - Christensen opines that institutions reflect what people value, and therefore leaders and policymakers should focus on changing culture where necessary in order to impact institutions. He puts it another way “institutions are a reflection of the culture, behavior and norms.” His advice? Whether you are a policymaker, investor, entrepreneur, or development professional, don’t wait to get institutions right; rather focus on innovation. In the end, most successful institutions grow from culture.</li></ul>For InvestorsThe following are from the book, but it’s slightly difficult to know where the book’s perspective ends and my own begins.<ul><li>You must take a long term approach - If you think you are entering a developing country to make a quick buck, maybe look elsewhere. I know firsthand that building markets take determination and grit, and the book supports that.</li><li>It’s not for lack of resources - Resources already exist in Ethiopia and across Africa. They just need to be developed and properly utilized. Money, natural resources, human resources, you name it, they exist but have a plan to develop them.</li><li>Be prepared to build your own supply chain - Have a strategic plan for where you start investing and know that you can’t just build a hospital. You need to build the infrastructure to make the hospital run, a healthcare worker training school, a patient education and outreach team...you get the idea.</li><li>Look for market-creating innovations (disruptive innovations) - Not that other investments shouldn’t be done, but if/when you find market-creating innovations, and you have the stomach to see them through, you’ll likely find the legacy building financial returns and social impact you crave.</li></ul>In summary, disruptive innovations create new markets by making non-consumers into consumers. The book gave me great hope that building 100M USD companies in Africa is well within reach for RENEW and for entrepreneurs across the continent.If you haven’t read the book, you should.

A must-read for policymakers, entrepreneurs, development professionals, philanthropists and investors in emerging markets