Vital Capital Managing Partner, Nimrod Gerber, has been appointed to the Africa Council of EMPEA, the global industry association for private capital in emerging markets. Independent and not-for-profit, EMPEA brings together 300+ institutional investors, fund managers and industry advisors, that collectively manage more than USD 5 trillion assets across 130 countries. Its mission is to foster a vibrant and informed industry to realize sustainable growth in emerging markets through authoritative research and intelligence, investor meetings, education, and advocacy.
“The role EMPEA has to play in Africa has never been more important as the continent contends with economic fallout resulting from the global pandemic,” said Mr. Gerber.
“EMPEA is incredibly active in the promotion of private capital and creating new funding opportunities for businesses across the emerging markets. I am excited to contribute to these efforts and further its cause.”
Vital Capital is proud to be featured in the @ImpactAssets 2020 Impact Report as an IA 50 2020 Fund Manager. The IA 50 is a publicly available, online database, featuring a diversified listing of private capital fund managers that deliver social and environmental impact as well as financial returns. You can find us on page 11-12:
Vital Capital has expanded its governance team, with three independent members, and unveiled a new decision-making structure that further strengthens impact analysis in Vital’s investment process while enhancing independence, transparency and governance.
Impact and ESG have always been critical to every investment decision that Vital makes. In the past, impact, ESG and financial considerations for each potential investment would be evaluated by a single Investment Committee. As part of Vital’s new approach, all investments are now subject to rigorous final assessment by the Investment Committee and a separate Impact Committee, which function independently of one another. Each committee has the power to veto any proposed investment. With this new approach, Vital ensures complete independence of decision-making between the two groups, while impact, ESG and financial factors are treated equally and evaluated jointly by Vital’s investment team as part of the due diligence process.
To support this new structure and to further strengthen Vital’s efforts, three new senior independent team members have been appointed to the Impact and Investment Committees. Ms. Kanini Mutooni joins as an independent Impact Committee member while Mr. Jacob Kholi joins the Investment Committee and Mr. Suleiman (Sula) Kiggundu joins the Investment Committee for the Vital Impact Relief Facility, Vital’s innovative debt vehicle focussed on helping businesses weather the economic consequences of the COVID-19 pandemic.
Please see below for brief introductions to Kanini, Jacob and Sula and please join us in welcoming them to the Vital team. We’re very excited to have them on-board!
Kanini Mutooni is Managing Director at Draper Richards Kaplan, a Venture Philanthropy institution focused on investing in global early stage entrepreneurs creating impact. She is also a Senior Adviser for Toniic, the global action network for impact investors with over 300 asset owners representing over $16 billion in investible wealth. Prior to this appointment, Kanini was the Director for Investment at the USAID-funded East Africa Trade and Investment Hub, a $65 million, 8-country initiative to attract investment and increase trade in the East Africa region. Kanini is based in London, UK.
Jacob Kholi brings over 25 years of venture capital and private equity experience having worked for CDC, Aureos Capital and The Abraaj Group since 1995, based in London and in Accra. Throughout his career he was involved in several landmark private equity deals in West Africa, such as Ghana Home Loans (Pioneer property mortgage provider, later acquired by First National Bank of S.A.) and Fan Milk (leading frozen dairy and juices manufacturer, later acquired by Danone) where he served as board member.
Jacob is based in Accra, Ghana.
Suleiman Kiggundu has served in senior leadership roles at various leading institutions, including Equator Bank, HSBC Bank plc and as the Regional Director for Africa at CDC Group plc. He is currently the Chief Investment Officer at Equator Capital Partners, a private equity firm focused on microfinance, SMEs and fintech and he also chairs the CFS Group, a pan-African financial services group. In addition, he serves as a non-executive director of various companies, including I&M Bank (listed on the Nairobi Securities Exchange), GA Insurance Uganda and Red Sea Energy.
Sula splits most of his time between Kenya and Uganda.
Vital Capital has launched a new collaboration with USAID’s Kenya Investment Mechanism(KIM) to support agribusinesses in Kenya affected by the COVID-19 pandemic.
Managed by international impact advisory and management firm, Palladium, KIM aims to unlock $400 million in investments for key sectors of Kenya’s economy, with the aim to pull small and medium-sized enterprises (SMEs) into competitive and growth-oriented value chains to foster broad-based, sustained, and inclusive economic growth in Kenya. COVID-19 is a particular threat to the livelihoods and food security in a nation that is already grappling with the worst locust infestation in 70 years and trying to recover from extensive flooding. Around 27% of households are suffering from food shortages, according to a recent survey by the World Bank, while in May, the Central Bank of Kenya warned that some 75% of the country’s SMEs face collapse without funding from banks or equity partners.
Under the agreement, Vital’s Impact Relief Facility and KIM will collaborate to identify potential opportunities in KIM’s pipeline that corresponds to Vital Capital’s investment mandate and to leverage KIM’s network of transaction advisors to more efficiently bring transactions to close under Vital Capital’s investment committee. Vital Capital and KIM are seeking to identify and execute at least five completed transactions, providing at least $5 million in financing, to alleviate the strain of COVID-19 on impactful Kenyan businesses, sustaining 500 jobs.
For the official announcement please follow this LINK.
The most disruptive pandemic in more than a century is entering a new phase, with economies in the West slowly re-opening while COVID-19’s epicenter is shifting to South America and cases are spreading in Africa.
But while governments in the developed world are proposing trillions of dollars in additional stimulus to prop up businesses and households whose livelihoods have been threatened, the situation is much different in the developing world—requiring private investors to step up.
Decisive actions by many governments in Africa proved to be an effective first step and demonstrated a well-managed effort in preparedness to the virus’ spread. However, these efforts consumed major parts of available budgets and resources. And mobility restrictions imposed to slow the spread of the pandemic have only added to the economic headwinds—including the global slowdown, supply chain disruptions, and the sharp decline in commodity prices—acting against the African economy, where 80% of trade is to international markets.
Here, the immediate threat—beyond the healthcare crisis—is finding a way to help essential service providers get through the pandemic so they can continue to do their good work. Here, COVID-19 is challenging the private sector to do its part.
In the first real global crisis in the era of impact investing, it would be a mistake for private investors to remain on the sidelines and let governments and multilateral institutions around the world carry the burden all alone. Indeed, the question impact investors will ask one another in the years to come is: “What did you do when COVID-19 pandemic erupted?”
For years, impact investors have been vocal and persistent advocates of the power of private capital to bring about positive social, economic, and environmental change. In the developing world, impact investing is often about something much more elemental: helping deliver critical services such as clean water, food, affordable housing, and healthcare to communities that local governments simply cannot or do not serve.
In the developed world, the big economic worry right now is helping businesses and consumers get back on their feet as stay-at-home orders are lifted. In Africa and the developing world, the more pressing concern is whether companies that serve as safety nets for low- and middle-income households in need can continue to provide critical services during—and after—the coronavirus pandemic. With predictions of 20 million people potentially losing their jobs and as much as a third of the workforce being affected in Africa, there is a real concern that tens of millions of people will be pushed into poverty, wiping out the progress made in the last 30 years toward the U.N.’s first Sustainable Development Goal of “No Poverty.”
That’s why in April, Vital Capital launched a new debt facility, starting with an initial $10 million in capital, to offer loans for essential businesses to get through this wave of coronavirus. We know that without such assistance, many well-run companies making a positive impact—and that under normal circumstances would be financially sound—may be forced to stop operating in this period of social distancing. We need to buy them time by providing the necessary financing and management tools to get past this unprecedented crisis successfully.
For nearly a decade, Vital Capital has worked these types of purpose-driven initiatives throughout sub-Saharan Africa. Attracting capital in this part of the world has always been a challenge, and that was before the new obstacles created by the spread of COVID-19.
Impact investors who care about earning market rates on their purpose-driven investments should consider the effective return on this type of investment. Building a healthcare facility from scratch might require $20 million in capital. To prevent an existing one from closing its doors might only require a loan of $1 million. There’s also the additional value of forging new relationships and building trust with businesses that, once past this crisis, will be critical players in their regions.
We implore impact investors in other parts of the world to extend similar lifelines to vital, impact-oriented businesses. In Africa, we know that governments and development banks will step in to save large, strategic assets as well as infrastructure projects nearing completion. We also know that many local commercial banks will likely prioritize their existing clients and outstanding loans. And we know where that leaves many micro, small- and medium-sized enteprises, which account for more than 70% of employment in Africa and 40% of the GDP. That’s according to McKinsey & Company, which calculated that $50 Billion are required in the next 3 months to save these 90 million (MSMEs)
Meanwhile, the developing world can’t count on the same level of foreign investments as they’ve enjoyed in the recent past. In Africa, foreign direct investment is already projected to fall 30% to 40% due to the coronavirus economic shocks, according to the United Nations, as money that would have been directed to the region is likely to stay in the U.S. and Europe to shore up domestic economies.
In this odd period of hyper-isolation, investors in the West may wonder why they should care about saving small businesses in Africa when there are plenty of companies and communities in need closer to home. But if this pandemic demonstrates anything, it’s how interconnected we all are, and that economic black swans, which affect our own well-being, cross oceans quickly.
The question that impact investors must ask ourselves is: Will we be true to ourselves and our values at this consequential moment in history, when the communities we serve need us now more than ever? Or will we effectively isolate ourselves from this crisis, and let the positive impact we’ve made in recent years fade away?
We are thrilled that Vital Capital was highlighted in the Global Impact Investment Network’s flagship report, the “2020 Annual Impact Investor Survey.” The report incorporates data from more respondents than ever before – almost 300 impact investors – focusing on their investment activity, capital allocations, performance, and impact measurement and management.
To mark the 10th edition of the study, this year’s report looks back on the impact investing industry’s significant advancement over the past decade – and it starts with Vital Capital’s 2011 fund launch. The timeline “Notable Commitments Over the Past Decade” on page 20 of the report begins with our successful $350 million investment fundraise. We are proud that our smart, targeted investments have delivered essential development impact to millions of individuals in low and middle-income communities and helped kick-off a decade that has seen so many important developments in impact investing.
The report also features Vital’s insights on how the impact of the COVID-19 pandemic reinforces the need for investments along SDG themes. Though each firm’s contributions are unattributed, you can find our quotes on page 65. In addition, Vital’s data contributed to the survey’s research.
Some key findings from the report:
Most respondents (57%) indicated that they are ‘unlikely’ to change the volume of capital they plan to commit to impact investments in 2020: This uninspired response from the industry underscores the need for additional funds similar to the Vital Impact Relief Fund.
Strong performance is motivating investment activity: One critical driver of market growth is the industry’s performance – in both impact and financial terms – over time. 88% of respondents report meeting or exceeding their financial expectations. In terms of impact performance, 99% of respondents noted that they have met or exceeded their expectations since inception.
“Sophistication of impact measurement and management practice” is cited as one of the greatest areas of progress over the past decade: Impact measurement and management (IMM) practices enable impact investors to demonstrate real results and ensures accountability. IMM practices now reflect greater sophistication and strategic use of tools. As the market matures, much opportunity still exists for greater depth and refinement.
Interest in key sectors and geographies (excluding outliers): Top sectors to which respondents allocated capital were energy (16%), followed by financial services (excluding microfinance), with 12% of sample AUM. The majority of capital is allocated to developed markets (55%), with the top region of investment being US & Canada (30%). Top asset classes are private debt, comprising 21% of the sample AUM, while public equity accounts for 19%.
Growth marked by 17% compound annual growth rate (CAGR) among repeat respondents: Among repeat respondents to the GIIN’s 2016 Annual Impact Investor Survey (2015 year-end data) and this year’s survey, aggregate AUM grew from USD $52 billion to $98 billion.
The current market sizing was calculated to be USD $715 billion based upon assets of the 294 respondent investors from the 2020 Annual Impact Investor Survey.
In a recent interview with Michael Holder for Environmental Finance, Vital Capital Managing Partner, Mr. Nimrod Gerber discussed the economic crisis facing Africa as a result of the coronavirus pandemic and how small- and medium-sized businesses stand to be most affected. Mr. Gerber described how Vital Capital has adapted its core strategy to extend support to these companies with the launch of the Vital Impact Relief Facility, explaining that: “This is what impact investment is all about: we see the need from being on the ground, not from our theoretical model. The need right now is to preserve impact and to save existing value – not necessarily to build new impact, as with our greenfield projects.”
He also issued a rallying call for investors to preserve impact and value by backing these otherwise viable companies that have recently joined the “missing middle” of financially underserved businesses: “Fantastic companies, which are creating an important impact for their communities and have good financial performance, are now fighting for survival. And unless someone acts fast there’s going to be a massive destruction of value.”
In discussing how Vital Capital is supporting its existing portfolio, Mr. Gerber explained that in addition to putting in place World Health Organisation guidance on workplace practices as part of its standard ESG practices, in many cases the investment team are “rolling up our sleeves,” helping out overloaded CEOs as if they are working for the companies themselves: “they are calling banks, talking to creditors, arranging international alternatives to existing supply chains.” With Vital Capital’s deep and long-established presence in the region, Mr. Gerber also revealed how Vital’s team can bring some “extra perspective” to management teams that may not have encountered too many crises before.
The full article can be found online here (subscription required)
Our team recently participated in webinars hosted by GIIN and Big Path Capital focused on the economic consequences of COVID-19 in Africa and on the role the impact investment must play. These discussions have been illuminating and served to further shape our thinking and approach to supporting impactful businesses providing services to communities throughout our target geographies in sub-Saharan Africa.
We wanted to share some of the key takeaways:
The pandemic is already affecting businesses, demanding urgent, direct action
While the full extent of the public health emergency caused by COVID-19 in Africa has yet to unfold, the economic impact is already undeniable. Supply chains are being disrupted, foreign investment is drying up and governments don’t have the financial clout to offset the effect of the “stay at home” mobility restrictions they’re imposing. This threatens the livelihoods of employees and the communities these businesses serve. As our managing partner, Nimrod Gerber commented during the Big Path Capital panel: “One thing for certain is that the economic crisis is already a reality… it’s already happening. We cannot sit on the fence; impact investors need to step up now to secure businesses delivering essentials for local populations.
The ‘missing middle’ is most at risk
Against this backdrop, it’s the small and medium-sized businesses that are most vulnerable. While the very small ‘mums and pops’ businesses may be able to manage, and large strategically important companies will be at the top of the list to receive what government aid is available, it’s mid-sized companies – the financially underserved missing middle – that are most at risk. The harsh reality is that as financing channels have dried up, many previously viable and successful firms now find themselves in this bracket – and this missing middle has grown dramatically in just a matter of weeks.
Impact investors have a key role to play
It’s these businesses that need to be supported: to survive the crisis; to maintain the positive economic and social impact they have on their communities; and to position them to thrive in the future. The good news for investors is that it presents a significant opportunity to create both impact and financial value – there are plenty of great companies with fantastic profitability that, without the stresses presented by the crisis resulting from the COVID-19 pandemic, wouldn’t be in difficulty.
This is a test for impact investing
There is an opportunity for impact investment to demonstrate it truly works. Investors are in a position to create real impact and to be financially rewarded but it requires a flexible approach and urgent and immediate action.
The risk is that if these companies are left to fail, it would represent a terrible destruction of both value and impact. The damage caused and cost of failing to act would be great – not just for the businesses and communities affected, but also for the credibility of impact investing more broadly.
In an interview with Ian King of Sky News, Vital Capital founder Mr. Eytan Stibbe discussed the impact that the spread of COVID-19 is having on Africa and highlighted the financial needs of SME’s providing essential services in the region. “The first [to be affected] and most vulnerable are the small and medium-sized businesses,” Mr. Stibbe told Sky News. “Their financing channels have dried up and there will be plenty of opportunities to invest.”
With foreign direct investment globally expected to fall by 30%-40% as a result of COVID-19*, the potential economic crisis facing Africa is severe and companies offering essential services in the developing world are among the most vulnerable to the coming financial shocks. It’s a situation that demands urgent and immediate action to save these businesses, which is why we have announced an emergency debt facility to help such companies continue to offer their critical services and get them through the coronavirus pandemic.
The Vital Impact Relief Facility, which starts with an initial $10 million in capital, will primarily target financially sound African businesses involved in agro-industry and processing, healthcare, and sustainable infrastructure and education in Kenya and Uganda. We plan to roll the facility out to our target geographies including Ghana, Democratic Republic of Congo, Côte d’Ivoire, Angola and Senegal, and are calling on other investors to join us and ensure that impactful businesses across the region can survive the crisis, continue to benefit millions of people across the continent and emerge even stronger from this crisis.
For official announcement click on the Vital Impact Relief Facility (link).
