<h1 style="text-align:center;">In Africa, Do What Works</h1>What a refreshing piece from the New York Times columnist (and longtime development aid advocate) Nicholas Kristof in last Sunday's Times. His insightful take on the much-debated value of development aid titled simply <a href="http://www.nytimes.com/2009/11/22/books/review/Kristof-t.html?_r=2&amp;ref=review">How Can We Help the World's Poor</a>, was right on the money. Kristof advises that we take note of but look past the headline-grabbing debates between the various camps promoting or excoriating aid as a giant waste of time.Look, says Kristof, to the projects that are being rigorously evaluated, some of which actually produce measurable results for the poor. And guess what? Many of these turn out to be businesses:<blockquote>I was recently in Liberia, a fragile African democracy struggling to rebuild. It is chock-full of aid groups rushing around in white S.U.V.’s doing wonderful work. But it also needs factories to employ people, build skills and pay salaries and taxes."</blockquote>Through our online Marketplace, RENEW is working to provide a forum for these entrepreneurs to tell the story of the impact they have had and the impact they hope to achieve.<a href="https://renewcapital.com/marketplace">Take a look</a> and tell us what you think.

What a refreshing piece from the New York Times...

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In Africa, Do What Works

<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;">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;">Recent U.S./Uganda Investment Forum in Chicago</h1>There is an ever-increasing voice within the African Diasporas to find common strategies to financially engage their home countries. The Ugandan Consulate in Chicago, Ugandan Embassy in D.C. and the Ugandan Investment Authority recently responded by hosting the first annual U.S./Uganda Trade and Investment Forum this September.For a first-time effort, the response was powerful. The Office of the Mayor of Chicago, the Ambassador of Uganda, the Governor of Illinois and State Department representatives were among the voices supporting a pro-active investment strategy. Additionally, six members of Parliament flew in for the event and shared their support from all reaches of Uganda. The room was committed to creating an enabling environment for trade and investment opportunities between businesses and government agencies located in the United States and their counterparts based in Uganda.There was also a significant private sector presence as the Bank of Uganda director, Ugandan investment bankers and fund managers mingled with dozens of small- and medium-sized entrepreneurs from both the U.S. and Uganda. Some were just getting the lay of the land while others were agreeing on specific action items between the parties.I was surprised by the frank, yet polished discussion and clear desire by the participants to stop simply talking about the potential and start doing something. The group heard from a variety of entrepreneurs who provide services or products and need linkages to build their business to the next level. Both the private sector and public officials were able to provide real value-add feedback to these business owners in terms of relationships, tax ideas, AGOA strategies, and further marketing. The government speakers outlined public benefits and programs that would enable investment or jump start current businesses.Although I didn’t see any contract signed in the room, it was clear that a wave of energy had inspired the parties. As I said goodbye and collected contact information I couldn’t help but note a real sense of excitement and hope for the path forward. The presence and meaningful participation from high level decision makers from both the public and private sector gave confidence to the men and woman from both the U.S. and Uganda who will be putting their money on the line to open the door for a vibrant trade relationship between the two countries.

There is an ever-increasing voice within the African Diasporas...

Uganda

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Recent U.S./Uganda Investment Forum in Chicago

<h1 style="text-align:center;">Application for Online Marketplace</h1>By completing RENEW’s application, business owners and managers can activate eligibility to be represented in RENEW’s virtual marketplace. The application should only take a few minutes to complete, and will provide potential investors with relevant information on your company.UPDATE (December 2011): This application is no longer available. To be considered for RENEW's portfolio, please <a href="https://www.renewcapital.com/contact">contact us.</a>

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Application for Online Marketplace

<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;">When People are in Need, Charity is Tempting</h1>Charity is tempting, but ultimately unproductive. Today’s Washington Post has a story titled, “World Bank Cuts Growth Forecast for Developing Nations” (some regions, like Sub-Saharan Africa, are still growing though, unlike the West). A headline like this sends people immediately into a scramble for foreign aid and charitable giving to offset the pain these countries are feeling. Not so fast, writes the Post:“The assumption is that just mechanically pouring money and credits into poor countries makes them have higher growth,” [William Easterly] said. “We have 60 years of evidence against this proposition — lots of money pouring in without discernible growth effects.”"Perhaps the best way for wealthy countries to help the rest of the world is to get their own economies back in gear," said Harry Broadman, a former World Bank official and now managing director of the Albright Group.“First and foremost, the engine of growth is not going to be aid,” he said. “It’s going to be the boost in external demand from growth occurring in the industrialized countries.”All the better if that growth in rich countries is directly fueled by the success of businesses in developing countries. Concerned individuals in the US and other Western countries need to approach the need in developing countries as a business problem, not a charity problem.

Charity is tempting, but ultimately unproductive.

When People are in Need, Charity is Tempting

<h1 style="text-align:center;">A Case for Impact Investing, Cont.</h1>What if the solution to global poverty didn’t rest in the hands of a few Harvard economists, or executives from the World Bank, or some leading development experts on retainer in Ghana? Not in a massive government building, nor within the ivy-laden walls of a university, nor at the podium of the United Nations. What if the solution is in the mind of a Ugandan seed producer and a business-savvy American? RENEW believes that a significant piece of the poverty puzzle can be solved when such a tourist meets a passionate, hard-working entrepreneur — particularly when this happens 100,000 times over.In our January 23, 2009 post, we met the Ugandan entrepreneur. Now let’s meet our tourist. Keep in mind, it may be you or someone you know. They’re your neighbor down the road, your friend Tom. The one that just took that safari last summer. If you were traveling with him, this is what you may have seen…After an amazing journey through some of the most rugged and beautiful land on the planet, and seeing a spectacular range of wildlife, Tom was convinced that he and his family had truly experienced Africa. On his way back from the reserve, his kids got thirsty, so Tom stopped by a small store on the roadside to get some drinks. Stepping out of the Land Rover, he was immediately surrounded by a group of children begging for money. Because Tom’s a compassionate person, and because he just spent $5,000 on a safari, guilt causes him to hand over some spare change from his pocket. The four children scuffle to divvy up the loot.As he walked into the store, three vendors immediately surrounded him trying to get Tom to buy from them – “all the stores are the same,” Tom thought. Trying his best to drown out their pleas, he finally found what seemed acceptable and bought four warm Cokes. After he handed off a few bills from his wallet to the lucky vendor, he noticed the other two peacefully turn away and return to their respective perches, waiting for the next tourist to come by. As Tom climbed back into his SUV and headed for the airport, he was noticeably distant, gripped with cognitive dissonance — Africa is beautiful and full of potential, and yet gripped in poverty.You watch Tom contemplate this dilemma in his head, idly staring out the window at the distant city skyline. You notice that Tom seemed troubled during the entire flight home. After what seemed to be hours of squirming in his seat, Tom leaned over to his wife and started with his famous “what if.” You’ve seen this before — Tom starts in: “What if those were our kids on the street?” “What if I was that vendor and that was my business?” “What if I hadn’t been raised on Elm Street, but in a back ally of Nairobi?” “What if I didn’t get an education, or have that amazing teacher?” He asks these, not expecting an answer, but searching for resolution.His thoughts wander back to what it was like growing up in America. He went to high school, fell in love and graduated from college. He worked for a good company, and after a few years of making a name for himself, he and some friends had an idea. They wrote out a business plan, moonlighted for a few months, scrounged up some money from friends and family, and went full-time to work on their dream. They got the business going, and then got a loan from a local bank. Ten years later they sold the company, made a few million and went their separate ways. Tom was now trying to spend some much deserved time with his family. His kids had been talking about Africa ever since they saw some movie in school about the civil war in Sudan, and they pleaded with him to take them on an adventure. Just excited to see his children interested in something other than Xbox or American Idol, Tom jumped at the opportunity; he was ready for an adventure too. So he contacted his travel agent, booked a flight and there they were in Africa…Now we get to ask “what if.” What if Tom had a way to deal with his dilemma? What if he were able to shift his association of Africa with poverty to Africa with opportunity? What if he were able to zoom out, and see the economic development that could occur if provided the right support? What if Tom had not gotten out of his Land Rover, and instead, driven to the industrial park on the outskirts of the city? What if Tom would have met the business owner in need of capital and support (<a href="company-profile-case-impact-investment.html">Read that story</a>)? After all, she had employed the mothers of the children Tom had met that day. What if they had a conversation, and the owner told a story of a vision she had to start a company that employed women and supported a growing industry in her country, one that would provide seeds and jobs to thousands of small farmers?But instead: she sadly explains that she had to let some of her workers go last month. The interest rates on the bank loan she had to take to meet the demand of a contract that didn’t yield the profit she needed to keep the employees on once the contract was over.Here’s the secret that the scholars, economists and experts haven’t grasped: The solution to poverty will become clear when Tom, and the thousands of others who have had similar experiences, meet the business owner and begin a business relationship; one that unlocks the vision and potential within the entrepreneur, and addresses the dilemma within Tom. The interaction, and thousands like it, will shift the way that we in the West see Africa. But first, Tom must encounter the entrepreneur.Stay tuned…

What if the solution is in the mind of a Ugandan seed producer and a business-savvy American?

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A Case for Impact Investing, Cont.

<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?