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14 August, 2018

The state of African philanthropy & what it means for blended finance

The state of African philanthropy & what it means for blended finance

The recent African Philanthropy Forum (APF) Conference in Johannesburg is an annual event that brings together hundreds of African philanthropists and philanthropies, who through their strategic investments, partnerships, and influence, foster inclusive and sustainable development on the African continent. This year’s theme was, “Potential and Reality: Bridging the Gap”, which focused on the types of partnerships and collaborations led by the homegrown philanthropic community that could support the region in achieving its socio-economic potential.

Convergence was there to lead discussions on the role blended finance can and must play in driving this agenda on the continent. It was the first time we attended this unique and important forum and I left it with many reflections and takeaways, including what issues preoccupy those who have come into wealth on the continent, how they perceive their role, and where blended finance fits into everything.

Africa’s youth bulge and education crisis

The theme of education came to the fore rapidly and there it stayed. It’s not surprising that education is a major issue for the world’s youngest continent that is also on the cusp of a further population explosion. According to UNICEF, as of 2017, close to 50% of Africa’s population is under 18. At the same time, there is a shortage of teachers and schools. The continent will need 5.8 million new teachers by 2030 to meet minimum international education standards.

In my view, what did not surface readily was what comes after education. According to data from the African Development Bank, “while 10 to 12 million youth enter the workforce each year, only 3.1 million jobs are created, leaving vast numbers of youth unemployed.” Once this large, and hopefully educated, young population begins looking for employment, there must be adequate opportunities to meet them. A large young population with job prospects and opportunities for entrepreneurship will be a huge boon for the continent. Conversely, a large population of unemployed young people represents a significant obstacle to sustainable development.

To get jobs, strengthen the private sector

Creating employment opportunities for Africa’s youth will require strengthening the private sector. Throughout history the private sector has created sustainable jobs and entrepreneurial opportunities. In the next decade it will be critical for African small- and medium-sized enterprises (SMEs) as well as the agricultural sector to have access to finance. Only then can they become robust engines of growth that have the capacity to employ significant numbers of people.

How to access this finance? As it stands, the risk perception of foreign investors and local financial institutions means that money will not come soon from these quarters without catalytic capital to accompany it. More local philanthropic capital has to find its way into blended finance structures that fund SMEs and agribusiness in order to create opportunities for Africa’s youth.

Turning to the government instead of business

At APF the topic of collaboration and partnership came up frequently. However, attendees seemed to place themselves adjacent to government more readily than to business. When the subject of leadership arose, the focus was on the lack of a broad and unifying vision for how to develop the nations of Africa, rather than on how to ignite the engine of the economy.

As the CEO of an institution whose mandate is, in part, to build partnerships between donors and the private sector, this troubled me. There is no time to wait for strong leadership to emerge from government or other actors to tackle our common development challenges: with philanthropic institutions and the domestic private sector, there are already at least two constituencies present and ready to engage, and they need to move fast.

A different perspective on philanthropy

In the era of mega-philanthropists like Bill and Melinda Gates and Warren Buffett, it was illuminating to find that many of those present at this forum did not identify as philanthropists. Instead, they saw giving back to their continent, country, and community as a natural response to the wealth they’ve accumulated.

I found myself wondering what this meant for deploying wealth effectively, strategically, and at scale to address the Global Goals. I didn’t expect any discussion of blended finance, but even impact investing was notably absent from the conversation. There was no discussion of investing or leveraging other money, at least not in the formal agenda. However, what I observed everywhere was that there is a powerful drive to give.

It will be interesting to see how the philanthropic community in this part of the world will develop as more Africans attain wealth. It may well take a different path from its peers in other places. I just hope that it sets audacious goals for its capital, goals that include magnifying its impact many times over by engaging with commercial actors. I believe that will be the catalyst necessary to create more economic opportunities for Africa’s youth and a more prosperous and resilient path forward for the African continent.

About the Author
Joan M. Larrea

Joan M. Larrea brings to Convergence 20 years of experience in emerging markets investing. Prior to joining Convergence, she led the U.S. Overseas Private Investment Corporation's (OPIC) efforts to partner with philanthropic and private investors to increase capital flows to OPIC's target markets. While at OPIC, she also directed a pilot program to finance smaller, high impact, and innovative funds, many of which drew on blended finance structures. Before OPIC, Joan served as a managing director on the emerging markets team at Global Environment Fund, an asset manager dedicated to the energy, environmental, and natural resource sectors. She began her career as an investment officer at International Finance Corporation, where she concluded pioneering transactions in a variety of infrastructure and manufacturing sectors across Asia.

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