Rock
stars, charities, governments, NGOs – everyone has had
a go at answering the big question: what can we do about Africa?
Pop concerts, appeals and international agreements certainly
help to focus the public’s attention on the huge problems
that Africa’s people endure, but nothing seems as yet
to have succeeded in tackling the poverty, disease and suffering
in a meaningful way.
However, according to David Flint of the City of London, from
a business point of view Africa is currently looking like
a good place to invest. “Now is a time of real opportunity
in Africa,” he says. While it is clear that the continent
needs the support of the wealthy west, the answer does not
only lie in valuable handouts; it can also be found in investment.
And, says Flint, at a time when “returns in most of
the developed world are poor”, returns on investments
in Africa are distinctly more appealing.
“Everyone can think of African countries that may be
going the wrong way, but a number are moving in the right
direction,” says Flint. For charitable organisations
looking to invest their funds in line with their own ethos
and missions, certain schemes buying into this African opportunity
could provide very interesting options.
That said, mainstream collective investments concentrating
on Africa are few and far between. African holdings make up
just a few per cent of most emerging markets funds, although
funds such as Fidelity’s Emerging Europe, Middle East
and Africa fund are a little more exposed to the region. Investec
does manage some pan-African funds, and New Star recently
launched the Heart of Africa fund, investing in sub-Saharan
countries excluding South Africa.
For a charity looking for returns while also investing in
areas close to its heart, these funds clearly allow the investor
to direct their money towards the region. It may be that the
money goes to financial services, for example, but the hope
is this will feed into other areas and help with more generalised
development.
But if a charity wants to invest in a way that lets them clearly
see the impact their investment has on communities on the
ground, while still enjoying returns, there are other alternatives.
Africa Invest
One such alternative is Africa Invest. Launched by Cru Investment
Management, this initiative currently invests in Malawi.
Its main purpose is to set up farms in the country, giving
rural communities the ways and means to build up real livelihoods
for local people through investment.
“It is essentially private equity investment into
commercial farming,” explains founder Jon Maguire,
chief executive at Cru IM. The crops, primarily paprika
and Bird’s Eye Chillies, are grown for export, and,
says Maguire, they are planning to move into food processing
too. "Paprika is worth so much more when it has been
processed,” he explains.
The scheme forecasts returns next year of £820,000
from an investment of £2.5m. In February, it opens
up to accept investment from institutions and individuals.
The initiative plans to raise £30 million, and hopes
that each £1,000 will financially engage 40 Malawians.
Capital is protected, and 70 per cent of the investment
stays in a UK account while the remaining 30 per cent is
sent directly to Africa. However, while private investors
can put in a minimum £4,000, the minimum investment
for institutions is 50,000 euros, or around £30,000,
placing this scheme out of reach for the majority of smaller
charities.
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Microfinance
For organisations that want to invest more directly into
schemes helping communities, but with smaller sums to invest,
an organisation called Oikocredit may provide an alternative
solution. This cooperative offers microfinance in Africa
and most other parts of the developing world.
A child of the 1960s, the organisation was set up in response
to questioning of the church’s investment policies.
The General Assembly of the World Council of Churches met
in Sweden in 1968, and much emphasis was put on the dichotomy
between the church’s preaching of peace and love and
its investment in morally questionable areas which supported
the Vietnam War and Apartheid, for example.
Oikocredit, at its origins, aimed to “encourage social
justice by giving credit to productive enterprises run by
disadvantaged people”. It still carries on in this
vein today, offering what we now know as microfinance to
poor entrepreneurs and cooperatives in developing countries.
It lends small, sometimes relatively tiny, amounts of money
to people who want to set up businesses or start projects,
as well as lending larger sums to other groups who in turn
lend the money on to those who need it. It offers not just
microcredit but also microinsurance, which can provide vital
cover for a person’s only source of income.
Oikocredit is a Dutch regulated cooperative and the FSA
has given permission to market in the UK. Charities, and
indeed individuals, can invest in Oikocredit from as little
as £150 through shared capital. Dividends are not
huge – investors usually receive a maximum two per
cent on their investment, which is not guaranteed.
However, funds are fairly easy to access and can be withdrawn
at any time, subject to a period of notice. In theory, as
this is shared capital, the shareholders could vote against
the withdrawal of a sum of money, but this has never happened,
and, says Patrick Hynes, Oikocredit UK representative, it
is unlikely to. “The capital is not protected, but
in 30 years no one has lost any money,” adds Hynes.
Dr Phyllis SantaMaria, a consultant to Oikocredit and national
coordinator for 2005’s Year of Microcredit, explains:
“Rather than a charity raising money somewhere else
and then investing it on the stock market, for example,
before using it for the cause, Oikocredit allows them to
invest directly in something that is doing good.”
The organisation can also offer help and technical support
to charities looking at setting up their own microfinance
projects.
However, unless you are an exceptionally large investor,
you cannot choose where in the world your funds end up,
so it would not be possible to specify that you want your
cash targeting Africa, for example.
Oikocredit has also issued bonds to raise funds which are
in turn used to finance microcredit. The organisation is
considering issuing further bonds in the future.
Another alternative is Shared Interest, an industrial and
provident society which lends money to people and fair trade
enterprises in Africa, as well as Latin America and India.
Again, it works on the principle of shared capital, paying
dividends of 1.75 per cent at the moment.
Clearly, there are higher returns to be found elsewhere,
but that is not the point, says a spokesman for the organisation.
“It’s not meant for someone looking for returns.
This is a social investment; it suits people who are happy
to park their money but want it to be put to good use.”
Investors can invest and withdraw at any time, as it is
not a fixed-term investment, although there is a six month
notice period on withdrawals. There is currently a maximum
investment of £20,000, which could act as a disincentive
to the very largest charities, although the limit may be
increasing under upcoming government regulations.
For charities looking to invest in line with their missions,
it is certainly possible to use the funds and invest in
a way that will further those missions. Stepping away from
the FTSE4Good trackers and other, more traditional, socially
responsible investments towards these more specialised investments
may in some cases offer more than respectable returns. And
where dividends are not so great, the fact that the funds
are helping to get closer to a charity’s goals could
make placing money with the likes of Oikocredit a judicious
choice.
Directing investments solely at Africa remains easier for
those charities with large sums to invest, but for whatever
size of the organisation, there is a suitable option to
put funds to good use, in Africa and in other areas in the
developing world, while they are waiting to be spent elsewhere.
Further information
Africa Invest
Find out more about the Africa Invest initiative at cruim.com
Email info@cruim.com
Oikocredit UK
Visit the website at www.oikocredit.org
Shared Interest
Find out how Shared Interest functions and how you can get
involved at
www.shared-interest.com
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