Most of the continent’s venture capital comes from outside its borders, with investors navigating the complexities of working across vastly different economic regions on the continent and creating dual dividends of financial and social returns with a single investment. These topics, and more, were the focus of the Investor Day hosted by Founders Factory Africa (FFA) in Partnership with the Africa Tech Festival at Innovation City in Cape Town on 13 October 2023.

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The easiest way to reduce risk in the ecosystem is to collaborate

The day was divided into three panels, with Panel 1 addressing venture capital investing across Africa’s different countries and regions. Panel 2 focused on the dual goal of impact investing on the continent, with financial returns and social change firmly in its mind’s eye. The day’s final panel was an Un-panel, featuring attendees who were given the opportunity to drive a discussion that was on their minds, with panellists nominated by other attendees.

Philani Mzila (Investment Manager, FFA) moderated Panel 1, which featured Octavius Phukubuye (Investment Manager, Microtraction), Mathew Saunders (Head of Investments, Future Africa), and Lumi Mustapha (Head of Legal, FFA) as its guests. This is what Mzila had to say about the discussion between himself, Phukubuye, Saunders, and Mustapha.

“We all know Africa isn’t a behemoth; it’s 54 unique countries. As investors, it’s crucial for us to have a deep understanding of the diverse landscapes in which we operate. Investing in start-ups goes beyond merely providing financial support; it involves a comprehensive appreciation of each country’s unique attributes and the specific hurdles that may arise within those contexts,” Mzila says.

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As described by Mzila, there were several key takeaways that Investor Day attendees took away from the panel:

• As investors operating across diverse geographies, you must be well-versed in local intellectual property rights, ensure effective contract enforcement, and adhere to local financial regulations.
• Infrastructure gaps, digital penetration rates, and consumer behaviour are still crucial factors for consideration. However, this should not deter you, as these factors also present opportunities and strategic focus should be intensified in markets exhibiting substantial white space.
• Collaboration is the easiest way to de-risk early-stage investments in unfamiliar markets. Finding strong local partners to invest alongside is critical. The use of venture scouts can also significantly increase local knowledge and context.

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Impact investing through venture capital is targeting critical problems on the continent

After Panel 1 wrapped and a short break, Loraine Achar (Investment Associate, FFA) drove the exchange of opinions on Panel 2. She was joined by Opeyemi Solaru (Impact Associate, FFA), Farah Emara (Co-founder, Fresh Source), and Olwethu Mhlana (Founder, Lulibo Market).

“VC investing in Africa has emerged as a promising approach to drive sustainable development and address pressing social and environmental challenges across the continent,” Achar says. “By directing capital towards businesses and initiatives that generate financial returns and positive social and environmental impact, VC investors play a crucial role in shaping Africa’s more equitable and resilient future.”

For Achar, some key insights that emerged from Panel 2 included:

• Addressing pressing needs — Impact investments target critical areas such as financial inclusion, healthcare, education, agriculture, and renewable energy, addressing the continent’s most pressing needs.
• Economic empowerment — Impact investors foster economic growth and job creation by supporting entrepreneurship, particularly among women and youth, driving economic empowerment and reducing poverty.
• Measurable impact: Investors are committed to measuring and reporting their social and environmental impact, ensuring their investments create positive change and drive accountability.
• Growing ecosystem: The impact investing ecosystem in Africa is expanding rapidly, with an increasing number of investors, fund managers, and impact-focused businesses emerging across the continent.
• The “trade-off” — While not every investment may achieve an optimal balance between financial returns and social impact, enterprise growth in African businesses can contribute to improved livelihoods, job creation, gender inclusion and overall social development. Investors can strategically identify impact priorities to ensure balance across the portfolio.

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Tech, inclusion, and the future possibilities of Africa’s tech ecosystem

The Un-panel ended the day’s activities, with Takondwa Mwendera (Managing Producer, FFA) elected as its moderator. She was joined onstage by Mayumi Wakebe (Investment Director, Shizen Capital), Brenton Naicker (Principal & Head of Growth, CV VC), Gugu Chavarika (Venture and Research Lead, Thought Lab), and Kelly Parkhurst (Executive: Design & New Digital Ventures, ABSA).

“The Un-panel session emerged spontaneously, sparking insightful reflections through an unconventional format. Kicking off with a riddle, the session delved into the interconnectedness of economic prosperity and community well-being, echoing the African philosophy of Ubuntu,” says Mwendera. “This unique forum aimed to highlight the intricacies of fostering a positive ripple effect that extends beyond profit margins, fostering lasting change in communities and individual lives.”

Drawing inspiration from the earlier panel discussions of the day, the conversation commenced with a reflective round on the experiences of Investor Day, with each panellist providing a series of insights, according to Mwendera.

Wakebe, participating in her first panel discussion, expressed a keen interest in learning from the African tech ecosystem. Her goal is to establish a fund on the continent, and she was learning as much as possible as she travelled across the continent and engaged with different stakeholders within the tech ecosystem. Parkhurst emphasised the need to overcome challenges related to digital access and the burgeoning growth of AI tools. This led to an engaging discussion with the audience that debated the ethical use of AI tools, with a specific mention of Chat GPT.

Chavarika advocated for diversity and inclusion in the future of tech in Africa. Her perspective, complemented by Parkhurst’s insights, underscored the importance of a holistic approach to ensure a tech landscape that caters to a wide range of voices and experiences. Naicker contributed to the discussion by emphasising the need to make technology more accessible. His insights shed light on the importance of breaking down barriers to entry, ensuring that opportunities in the tech sector are available to a broader spectrum of individuals.