In Conversation With… Jerry Parkes of Injaro
The launch of the Agri-Business Capital (ABC) Fund earlier this year by Injaro Investments and Bamboo Capital Partners, together with a spate of recent roundtables in Oxford, Cambridge and elsewhere, has us thinking about definitions and drivers of impact investment in our countries.
With backing from the European Union, the Africa Caribbean Pacific Group of States (ACP), and the Alliance for a Green Revolution in Africa (AGRA), inter alia, the ABC Fund aims to raise EUR 200 million and support SMEs across the agribusiness value chain, particularly young people within rural settings to scale. In that, the ABC Fund touches on some of the core themes that will shape the region in the coming decades. Namely, the demographic bulge and agricultural sector productivity.
Putting the discussion in context, the Global Impact Investing Network (GIIN) measured USD 6.8 billion and USD 9.3 billion in direct impact investments in West and East Africa respectively, between 2005 and mid-2015. And since then, the strategy does not appear to have lost momentum.
With this in mind, we sat down one sunny Friday morning in Accra with Jerry Parkes, Co-Founder & Managing Principal of Injaro, to learn more about the nuances: among them, the conservatism of the Ghanaian investor, the disconnect between Western and African views of impact at times, women’s empowerment and more. Here’s a snapshot…
Songhai Advisory (S.A): How should investors think about impact? Is there a ‘one size fits all’ approach to impact investing?
Jerry Parkes (J.P): There’s choice that an investor needs to make between returns and impact and each investor has a different level of willingness to sacrifice one in favour of the other. The language is evolving because nowadays you have investors who might describe themselves as “impact first or finance first” while being anything in between. The more there are discussions around this, the better the level of clarity and the higher the probability of alignment between investors on their specific preferred flavour of impact investment.
S.A: How does the Western view around impact tally with the local realities?
J.P: Given the evolution of the impact investment space in Western economies, and the extent of capital flows from the West, whether donor funds, Development Finance Institutions (DFIs), High Net Worth Individuals (HNWI) or else, the (Western) view of what positively impacts a society can sometimes be out of sync with local opinions of developmental needs. A real estate business for instance which employs locally and uses locally-made products, may not meet the [classic] definition of impact, but in the local African context, that could be considered to be as impactful as an agriculture-focused fund.
S.A: So without a universal concept of impact, how can we make progress?
J.P: Once you get the portfolio of investors, you define impact and that frames the model. But even among the investors there can be divergent views. That which may resemble economic empowerment to one investor is not necessarily universal. For instance, a woman at a forum once made the comment that creating income earning opportunities for rural women may solve a social issue by improving her wealth, but on the other hand, could create the unintended consequence of marital instability given the change in family power dynamics.
S.A: So is it fair to say that the sector is evolving and that we should make room for the unintended consequences of impact (which may need to be solved differently)?
J.P: Probably. This is not a simple thing to unpack so impact investing must be practised with open-mindedness and sensitivity.
S.A. What role do African or Ghanaian investors have to play in this arena?
J.P: There needs to be more local social impact investors. But this is a big challenge because most HNWI in Ghana tend to be commercially-oriented. Their risk capital first goes to their extended families or trusted networks. “Unconnected” entrepreneurs therefore find it incredibly difficult to raise equity capital for any business, let alone social enterprises (SEs) which tend to be seen as risky.
S.A: Speaking of SEs, is there a certain posture that they should adopt, in order to attract the sort of investment that’s required?
J.P: Social entrepreneurs must focus on an impact mission to which they can commit for the long term. They also need to think critically about how they can make their business financially viable in the medium to long term. I believe that long-term financial sustainability is non-negotiable for any impact investment if we want the positive benefits to be sustained. The next step is to develop an effective fundraising approach that takes into account different investor types and preferences. Fundraising success improves significantly when the enterprises finance-impact mix closely matches with that of targeted investors. I do acknowledge that achieving this is a lot easier said than done.
S.A. What was important to you when deciding which impact investments to invest in?
J.P: We decided early on to track our impact primarily through the number of people who would benefit economically through improved incomes or products/services that enhance their lives. Given that around 70% of West African populations earn part of their livelihoods from agriculture and that most rural dwellers also tend to have low incomes, we decided to launch an agricultural fund. However, the final investment decision depends on our assessment of financial sustainability within the context of the fund’s return objectives. As a manager, we will continue to look for new strategies that offer the opportunity to proactively target underserved markets and communities in a financially sustainable way.
S.A: Over 5 years ago, Injaro invested in SEKAF, which procures and processes shea nuts and soya beans for consumption and cosmetics from over 2500 women in northern Ghana. Could you tell us a bit about your investment here and the target beneficiaries?
J.P: In Ghana’s north, the collection of shea is seen as a female thing; the men generally don’t touch any money that comes from the proceeds. So, with this model, the direct beneficiaries were clearly the women. Sekaf’s model, which involves the sourcing of certified organic nuts and local value addition for sale to local and foreign consumers, enables us to use the purchasing power of the end consumer to pay these women a premium for their effort. Strong African consumer brands can be a significant contributor to delivering positive social impact.
S.A: Ghana’s currency has been going through various twists and turns. How should investors think about currency depreciation?
J.P: This definitely introduces an additional investment consideration that may not exist in developed markets. Many investors will be drawn to invest in companies with demonstrable export potential, in the first instance, or to businesses with strong enough local growth and profitability to counter the effects of local currency depreciation against the US dollar. Regarding Sekaf for instance, shea was a product for which we (Ghana) naturally have a comparative advantage. Shea nuts and butter have a proven export market, which means that the investor can be shielded from FX losses.
Once again, many thanks to Jerry for sharing his time and thoughts with us as we continue to discover, learn and share more about the stories of transformation around the continent.
For more insights on impact investment in Sub Saharan Africa or to learn more from our team of experts, please get in touch: firstname.lastname@example.org