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).

* according to the United Nations

We’re excited to announce that Vital Capital been selected to the ImpactAssets 50 2020!

The IA50 ia a publicly available, online database for impact investors, family offices, financial advisors and institutional investors that features a diversified listing of private capital fund managers that deliver social and environmental impact as well as financial returns.

“With record applicants and assets under management, the IA 50 continues to reflect the rapid growth and interest in impact investing,” said Jed Emerson, ImpactAssets Senior Fellow, and IA 50 Review Committee Chair. “This year’s showcase includes eleven impact funds with more than $1 billion in assets under management. And to ensure we’re capturing the best future ideas, we’ve added emerging impact managers, who have the hunger, creativity and a willingness to explore alternatives that more seasoned fund managers may not.”

The IA 50 2020 saw a record number of private debt and equity fund manager applications. Managers who met the IA 50’s in-depth review criteria manage an estimated $39.8 billion in assets devoted to creating measurable, positive impact, up from $26.9 billion in 2019. Emerging impact managers direct nearly $400 million into cutting-edge strategies and high impact investments.

Eytan Stibbe, founding partner at Vital Capital, writes about how business leaders should be a force for positive change.

See the article published on CTECH here.

A new report “Impact Due Diligence: Emerging Best Practices” was recently released by Pacific Community Ventures together with support by the IMP and GIIN. The report examines trends and offers insights in an important, yet underdeveloped, area of investment practice. After analyzing impact investors due diligence approaches PCV present seven areas of best practice.

See in the report a brief case study on Vital and our Impact Diamond (page 42).

Click here for the report.

Vital’s Head of ESG, Ms. Tamar Pashtan, spoke at the Milken Institute’s 22^nd Annual Global Conference on Meeting SDGs through Disruptive Technologies. The panel hosted an important discussion on how project finance structures can overcome gaps and critical development needs in water, food, energy, and health technologies for adoption and diffusion in new growth economies.

We’re pleased to announce that we’ve been selected as one of 50 impact investment fund managers recognized in the Impact Assets 50 database in 2019. The IA50 recognizes outstanding impact investment funds with a demonstrated positive social, environmental and financial impact.

As the most veteran impact investor at the World Economic Forum, Eytan Stibbe, Founding Partner of Vital Capital, was invited to moderate the Multilateral Meeting on Impact Investing & speak at the session Scaling Up Solutions for Supply Chain Traceability. The Multilateral Meeting brought together key members who champion impact investing to jointly design the Forum’s impact agenda into 2020.

The London Stock Exchange Group launched their second edition of the Companies to Inspire Africa Report.

In their second report LSEG included 360 companies from 32 countries who they see as high-growth firms that are crucial to the future of the African economy, capable of driving transformative economic growth in their home countries, Africa and beyond. Congratulations to Vital portfolio companies featured.

For the full report: https://www.lseg.com/resources/companies-inspire-africa/companies-inspire-africa-2019