Why investing in Food, Health and Education in Africa matters

Relevance of strategic allocation to Africa, and defensive sector allocation in Food, Health and Education

Some regions in Africa represent some of the world’s fastest growing economies where population growth, rising incomes and urban demographic shifts are driving sustained consumer-driven economic expansion. This accompanied with significant increases in literacy, access to electricity and high penetration and uptake of digital technology is expected to drive productivity growth across a number of different sectors, particularly Food, Climate, Health and Education. With relatively diversified economies and an existing competitive foundation to build more sophisticated industries and value-chains, some countries like Zambia, Rwanda, Kenya, Uganda and Tanzania are projected to outpace the growth of their more commodity-dependent neighbours and compatriots across the rest of the continent.

Some regions in Africa represent some of the world’s fastest growing economies where population growth, rising incomes and urban demographic shifts are driving sustained consumer-driven economic expansion. This accompanied with significant increases in literacy, access to electricity and high penetration and uptake of digital technology is expected to drive productivity growth across a number of different sectors, particularly Food, Climate, Health and Education. With relatively diversified economies and an existing competitive foundation to build more sophisticated industries and value-chains, some countries like Zambia, Rwanda, Kenya, Uganda and Tanzania are projected to outpace the growth of their more commodity-dependent neighbours and compatriots across the rest of the continent.

We believe that investors either playing defence and/or looking for a much higher rate of return will undoubtedly need to be more discerning about their asset class, regional, and sectoral allocations — i.e. inside and, particularly ever more so outside of their home markets. As our economies in Europe and the US are well-into the ‘No Growth’ zone, those investors who are discerning enough to overcome the “home bias”, will generate superior alpha by allocating not only investment capital, but also nurturing innovation, human capability, and increasing trade flows into emerging and frontiers markets in a way that ‘lifts-up’ economies, empowers and equitably builds local resilience of our communities both at home, and abroad.

Resilience to long-tail shocks, and defensive sector allocation

The World is seemingly entering a phase of transition and ultimately human progress, whilst also experiencing long-tail shocks much more frequently, and at higher scale than ever seen before (e.g. pandemic, war in Europe, climate-related shocks such as flooding in Pakistan).

Still, how will Africa resolve the tensions between a growing youth population, demand for food security and economic development in the face of growing climate adaptation challenges? Coincidentally, based on the findings of Project Drawdown , counter-cyclical and defensive sectors such as Food, Health and Education also play in the Top 10 solutions to reduce emissions and accelerate climate adaptation. Surely, there is much to be excited about the role of technology in Food, Health and Education in order to make businesses grow faster, and achieve Net Zero Emissions.

Rewards of gender balance

An IFC study from 2019 reveals that companies that maintain a team of between 30% and 70% women enjoy higher returns, with 20% higher net IRR on average.

Gender balanced teams also see better increases in their valuation, growing on average 9% faster than male-dominated companies. Despite these clear advantages, 70% of all investment teams are all-male, highlighting the fact that antiquated practices can hold strong even when they are directly harming a company’s bottom line.

The same study also shows a very encouraging trend among women investors, who are twice as likely to invest in female entrepreneurs than their male counterparts. This means that any efforts to increase the number of women investors is likely to maintain momentum and continue producing positive effects for women in the future.

There is also ample evidence that investments in women are associated with important ripple effects as women in developing countries reinvest up to 90% of their income into their families and communities.

A world with more female fund managers would be a world with a more equitable distribution of resources, where the gender of an entrepreneur will not dictate how easy it will be to access funding. For Africa to succeed, we need to feminise investment funds.