Stop donating, start investing in entrepreneurship in Africa.

Social investment

The Royal Tropical Institute (KIT) plays an innovative role in sustainable international development. It developed from a colonial institute into an institute with expertise in development cooperation, and now towards being a partner in international cooperation. The focus is on pro-poor economic development. The importance of local business is part of this. KIT advises on sustainable value chain development and is currently investing in Africa through the Annona Sustainable Investment Fund. Value chain finance and sustainable investment are important themes. The institute supports companies to develop from a position of simply maximizing profit towards one which takes into account the needs of shareholders, stakeholders and society at large.

1.  Current projects

2.  Round Table 7 September 2010 'Stop Donating, Start Investing'

3.  Debate 10 November 2010 'Stop Donating, Start Investing'

4.  Annona

5.  KIT Publications, Projects, News

1. Current projects 

KIT has shares in the sustainable investment fund Annona. The Annona Sustainable Investment Fund was set up in January 2009 for the purpose of investing in small and medium-sized enterprises in Africa and Latin America by providing share capital. The shareholders of Annona are the Holding KIT B.V., instiutional investors such as the SPF Foundation (Dutch Railways PensionFund) and the SPOV Foundation (Public Transport Pension Fund). Applications from companies are assessed based on the following criteria: Economic sustainability, the impact on poverty and impact on the environment. For more information, see the header Annona below.

KIT is involved in several other projects that deal with social investment. New grounds are currently being explored through two meetings held in September and November 2010.

2.  Round Table 7 September 2010

Africa badly needs capital for local investments. While large amounts of capital are circulating throughout the international financial world, most of it does not reach Africa. Why is there not more investment in Africa? What are the barriers to investing and how can they be overcome? What are the experiences of Dutch investors in Africa?

On 7 September 2010, the Royal Tropical Institute organized a Round Table discussion to address these questions. Representatives of established banks, pension funds, multinationals and pioneering investors within the Dutch financial sector debated the possibilities - and even the necessity - for Dutch investors to stimulate the African economy through profitable yet sustainable investments. The central idea was that shareholding and financial participation are a much better way than distributing aid. Africa has enormous potential in terms of labour, raw materials, agricultural products and business. In many African countries, despite the international financial crises, there is stable economic growth and a rapidly-growing middle class. Countless African entrepreneurs have noticed this growth and want to make the most of it, and there is a growing need for capital to make these investments happen. Chinese investors are already active. Dutch investment funds and multinationals also invest in African countries, but face a number of challenges.

The outcome of this Round Table has been summarized in a communiqué called: Stop Donating, Start Investing. This communiqué can be read in the 'In depth' part of this dossier. 

3. Debate 10 November 2010

This debate is a follow up of the Round Table above. The communiqué written on the basis of the Round Table will be more widely discussed during this debate. Speakers from several institutions discuss issues around (social) investments in Africa and discuss outcomes of the Round Table held on September 7th. Among these organizations are (social) investment funds, banks, pension funds, academics, experts, politicians, government representatives, NGOs, journalists etc. What do development experts and practitioners think of the round table outcomes, and how can the Dutch government, through development and international cooperation learn from these lessons?
A report of the debate can be found here when finished.

4. Annona

The Royal Tropical Institute (KIT) and institutional investors, such as SPF Foundation (Dutch Railways Pension Fund) and SPOV Foundation (Public Transport Pension Fund), have set up a sustainable investment fund called Annona. The fund will be used to establish or expand 15-20 pro-poor enterprises in Africa and Latin America. A total of 8 million euro will be invested: 2 million in a start-up fund and 6 million in a growth fund.

The Annona fund has a new, integral approach according to fund manager Walter Hetterschijt: 'We don’t believe in subsidies or donations, they are not sufficient enough to alleviate poverty. Bringing together partners with sufficient capital and those with the necessary expertise has proved to be a successful concept. It is essential to combine institutional investors' capital and KIT’s expertise, because it is the lack of one or the other that has made it difficult for enterprises in developing countries to get off the ground. This investment fund, that founds healthy commercial enterprises with a sound financial base, has the potential to change that. It aims to work on the basis of a chain approach, which maximizes stakeholders’ (farmers and end users/clients) involvement by giving them a financial interest in the enterprises. Local traders form their own local network.”

The return on investment for the growth fund is targeted at 12 per cent. The consortium will focus on medium-sized enterprises in the agrarian, biofuel, agro-processing, sustainable energy, medical sectors and ecotourism. In Mali two ventures have been set up: a bio fuel factory Mali Biocarburant SA (www.malibiocarburant.com) and a trade company in organic cotton, soy and sesame Yiriwa SA (www.yiriwa.com).

Enterprises are set up or expanded completely at local level, using in the first three years capital and expertise from the pilot or start-up fund. Local producers and entrepreneurs are closely involved. KIT provides local training and on-the-job learning before and during the project. This is to guarantee maximum sustainability and success in the long term. The companies, which have local and external directors, must be able to develop into viable concerns within three years. After this period, Annona invests in potential enterprises - via the growth fund - for another five years. An important aspect is that local organisations and federations participate through share ownership and representation on the company boards. Once the company is able to stand on its own feet, the investment fund will sell its shares to a suitable buyer, preferably a local party.

The external managers, who are designated by the investment fund and play an important role in the start-up phase, will be expected to stand down after eight years. By then the companies should be able to function autonomously and have 100 per cent local management, though their progress will continue to be monitored at arm’s length for a number of years. Based on Annona’s experiences, SPF and KIT will also develop a useful and practical model organisations and investors can use when they set up sustainable enterprises. A Corporate Social Responsibility (CSR) model that is really efficient.

For more information, visit  www.annona.nl or send an e-mail to info@annona.nl

5. KIT Publications, Projects, News