by Lionesses of Africa Operations Department
As we reach the end of our four-parter look at the investing and funding world and how we can gain more of it, here, here, and here, so this weekend we dive into why collecting data on the jobs we have created, the wages we pay, the lives we have changed is so important, and why now is the best time to start.
Reading the recently published Impact Taskforce report entitled ‘The State Of Play 2023’ (here) initially leaves one very concerned about the future. As they write: "Public sector debt has risen and private sector appetite for risk has arguably fallen. Against that backdrop, the funding gap for achieving the Sustainable Development Goals (SDGs) and climate goals in EMDEs [emerging markets and developing economies] has increased.” Something we too have noticed and written about many times is that we are running out of time if this Decade of Action (see UN here) is ever going to deliver.
They continue: “…there will never be enough public money to close an annual funding gap of at least $4 trillion in EMDEs. Therefore, 2024 needs to be a pivotal year in terms of finding more effective ways to mobilize incremental percentages of the estimated $270 trillion of global financial wealth, with the goal of delivering real impact to where it is most needed.”
We could not agree more, but as regulations become more complex over ESG and the world tries to regulate away such issues as ‘greenwashing’, so too does the fear within banks and funds of ‘getting it wrong’ (with the subsequent massive fines). The net result is that less capital flows into the parts of the world where it is most needed, as a flagship UK government programme, Mobilising Institutional Capital Through Listed Product Structures (thankfully shortened to) MOBILIST, show in their recent survey (here): “Critically, the study finds that the growing role of…ESG considerations in institutional investors’ allocation strategies may risk diverting capital flows away from emerging and frontier markets, which tend to lack data or score poorly on ESG metrics as presently constructed.”
Sadly it is not just the lack of data, it is also the inability of DFIs and Banks to collect the data, as Andrew Herscowitz, ex Chief Development Officer of the US DFI DFC (so he should know) wrote (here): “DFC needs more staff to make sure its deals have development impact. It does not have enough people to oversee the development performance of its transactions.”
…and of Banks, the UK’s DFI BII makes it clear (here): “…structural challenges reveal a set of principles that underpin effective approaches to SME financing:
1)The fundamental problem in SME finance is information – lenders find it too costly to both gather information and use it effectively to accurately assess borrowers’ prospects.”
Although we can’t do anything about the construction of ESG metrics, we can change the lack of relevant data.
Luckily for us there are some inspirational Lionesses (actual and honorary) within the VC and PE world who are taking this very seriously. Three of these are, Dr. Ola Brown whose book we recently reviewed here, the Founder of Health Cap and highly respected guru on all things PE; Adesuwa Okunbo Rhodes, Founder and Managing Partner of Aruwa Capital Management who kindly was part of our closed room panel of experts at our Harvard 2 day event; and Sarah Dusek, entrepreneur extraordinaire, who sold her highly successful company called Under Canvas Inc - see here! - and then put her own money where her belief was by investing, supporting and mentoring many southern Africa SME’s through her private investment fund Enygma Ventures, focusing on investing in women-led businesses in Southern Africa. Oh, and she was the powerful and insightful voice behind the fabulous podcast series for Lioness Radio called The Business of Funding (here) - well worth a listen).
Sarah says it so well: “A really key point for us is how we help women transition from thinking about building a small business that just provides for you and your family and maybe your employees; to thinking about could you build a big business that affects your entire community, that employs hundreds of people, that maybe affects the GDP of your town or your city and maybe your nation.”, a view that is clearly echoed in the actions and results of Dr. Ola and Adesuwa, as shown in the data they collect and data within which they are rightfully very proud.
Dr.Ola’s impact report shows 12,000 indirect jobs created, 1,000 direct jobs created, 56.7% women employed, 41.5% women in management and what we love, US$80 million follow on capital raised - showing that other investors recognised the great value within her portfolio and followed her in (here). As her portfolio happens to include a number of our 100 Lionesses, we are not surprised, but hey - someone has to write that first cheque, and that’s the point, without her first cheque, her support and mentoring, who knows what might have been - all we know is that it would have been less.
Adesuwa: “…supporting c.360,000 direct and indirect jobs through our portfolio companies, where 56% of those jobs are occupied by women…actively contributed to the creation of 709 direct jobs and counting…supporting 1,866 direct jobs of which 41% [of] jobs are occupied by women…70% either founded or led by women…”, see here for the rest of her truly incredible list - serious impact. Again, she believed and wrote that first cheque.
Sarah: Her equally impressive portfolio included: 100% female founders or co-owners and CEOs; 363+ directly employed; increase in employment before vs after investment equalling a massive 5x (showing the power of VC); with revenue before vs after investment an incredible 14x (ditto!), BUT her review (here) also helpfully lists metrics and data that many within the major impact investing world find extremely useful in order to gauge potential investment of funding and it is that data that we as Lionesses must collect. (As an aside, great to see her showcasing three Lionesses, Chilufya Mutale, Evelyn Kaingu and Claudia Castellanos within this brilliant review of her portfolio!)
Data on the percentage of female ownership, of management and the share of women in the workforce is one area; job creation and gender wage equity (yes crazy to note that there are still parts of the world where men get paid more than women for the same job) is another. All of these data points that are mentioned in Sarah’s review are important, not only to attract potential investment or funding, but also from a business management point of view. If you are creating jobs you are changing lives in a seriously meaningful way. If you are paying above the basic wage, then this too is something to celebrate with your employees.
If as the globe desperately needs, 2024 is to be “…a pivotal year in terms of finding more effective ways to mobilize incremental percentages of the estimated $270 trillion of global financial wealth”, then the financial and development world must deliver real impact to where it is most needed. We, as Lionesses must shine a light on our own work to guide and direct this potential investment to where it will make and create the most impact. It is one thing to say that women-owned and led businesses create fabulous communities around them. But we have to show them through our data that this is happening naturally through our own endeavours - this is the baseline, the starting point, so that there is a recognition that with investment and funding directed as a laser towards us, the impact will be exponential.
UK BII’s write here: “The single largest contributor to poverty reduction is better paid work…This is the foundation of the impact case for investing to improve the supply of finance to SMEs...There are several constraints holding SMEs back, and access to finance is one of their most pressing problems. If development finance institutions (DFIs) can help to solve that problem, the development consequences will be enormous.”
As we have argued over the past weekends as we have looked at the lack of finance not through anger, but as an opportunity to change the discussion and therefore the route the world’s finances are taking. So too, we have to see this inability of the investors, of DFIs and banks to collect and collate our data meaningfully as an opportunity - an opportunity to make 2024 a pivotal year for us all.
Stay safe.