A grant can fund a programme for a few years and produce measurable results. Another grant can help build an institution, strengthen a market, prepare investment opportunities or help businesses become capable of attracting finance. The second may be harder to measure in the short term, but its effects can extend well beyond the original grant.
Africa needs more of this kind of patient capital. There is no shortage of ambition. Governments are looking for investment. Entrepreneurs are building businesses in difficult markets. Development finance institutions and international investors are increasingly interested in the opportunities across the continent. But attracting capital is only part of the problem.
A government can identify a promising sector and still struggle to develop bankable projects that investors can finance. An investor can be interested in a market and still find the information, regulations or transaction costs too difficult to navigate. A small business can have customers and a good product and still be unable to get the finance or support it needs to grow. These are not always problems that commercial capital can solve on its own. They require institutions that can do some of the work before capital arrives, and this is where philanthropy has a role that deserves more attention.
Rather than concentrating only on individual projects and programmes, philanthropies can help build the organisations and platforms that make investment possible in the first place.
Two organisations, among many others across the continent, provide useful examples: the Global Africa Investment Summit, GAIS, and Inkomoko. They work at very different levels, but there is an important connection between them.
GAIS is concerned with the investment environment at a continental and government level. Inkomoko works directly with entrepreneurs and small businesses, including in communities affected by displacement and fragility. One is working on the conditions around investment. The other is helping people participate in the economy.
GAIS and the work behind investment
GAIS was created by Dr Akinwumi Adesina, former president of the African Development Bank, and Margery Kraus, founder and executive chair of APCO Worldwide. The idea is straightforward. Africa needs a stronger African owned platform through which governments, investors and development partners can work around actual investment opportunities.
That involves some fairly unglamorous work. Governments need support to develop and structure projects. Investors need reliable information. Different parts of government need to coordinate. Regulatory problems need to be identified and addressed. Projects need to move beyond being good ideas on paper and become opportunities that investors can properly assess.
This work rarely attracts much attention, but it is fundamental. People tend to notice the investment once the deal is announced. Less attention is paid to the years of work that can be required to get a project into a form investors can actually consider. Without that institutional work, countries can have significant resources and attractive opportunities and still struggle to convert them into investment. That is the space GAIS is trying to fill.
Inkomoko and the businesses people build
Inkomoko operates much closer to the ground. Founded by Julienne Oyler and Sara Leedom, the organisation works with entrepreneurs and small businesses, including refugees, women and young people. Its support includes business advice, access to finance, market connections, digital tools and ongoing enterprise support.
The value of this work becomes easier to understand when you look at what happens to an individual business. A trader gets working capital and is able to carry more stock. A small manufacturer improves its operations and takes on another employee. An entrepreneur moves from an informal operation towards a more established business. A refugee who has been dependent on assistance starts generating income and employing someone else.
None of this is particularly dramatic on its own, but this is how local economies grow. It is also why enterprise development should not be treated as separate from development policy or humanitarian work. Businesses are part of the economic infrastructure of communities. They provide goods, services, income and jobs, often in places where larger companies are reluctant to operate.
Where philanthropy comes in
Philanthropy has an advantage that commercial investors often do not have. It can take a longer view, supporting work that may not produce a financial return immediately but makes other investment possible later. For a philanthropy, that could mean helping a government turn investment priorities into bankable projects through GAIS, or giving entrepreneurs the support they need to become ready for commercial finance, whether that is better records, stronger management systems or access to the right markets. Sometimes it may simply mean taking on the early risk that commercial investors are not prepared to take.
The value of this kind of grant is not always in how many people it reaches directly. A philanthropic organisation can spend $1 million reaching a defined number of beneficiaries, which may be worthwhile on its own terms. But that same amount could instead help an institution build a platform, develop a pipeline, or reduce the risks other investors face. If that work then helps mobilise $10 million or $50 million in additional capital, the original grant has done something different. It has changed the conditions in which capital operates.
Why GAIS and Inkomoko belong in the same conversation
GAIS and Inkomoko are not doing the same thing, and there is no need to pretend that they are. Their value is partly in how different their work is. GAIS is working around governments, investment pipelines, investors and institutions. Inkomoko is working with entrepreneurs, small businesses, markets and communities. But both are addressing a gap that philanthropy is well placed to help close.
There is often a missing layer between opportunity and investment. At the government level, that can be the capacity to prepare a credible bankable project and bring the right people together. At the enterprise level, it can be the finance, business support and market access needed to turn a small operation into a sustainable business.
This is why philanthropies should look beyond the immediate visibility of a programme when deciding where to put their money. Africa does need humanitarian assistance. It needs schools, health services and social protection, and those needs are not going away anytime soon. But if philanthropic capital is always directed towards meeting needs without also helping build the systems that reduce those needs over time, the underlying problem remains.
The continent needs more organisations that help governments become better prepared for investment, more entrepreneurs who can build viable businesses, and more institutions capable of connecting capital to productive activity. GAIS and Inkomoko are working on different parts of that picture, and the opportunity for philanthropies is to help them go further. For GAIS, that means supporting the institutional capacity needed to build stronger investment pipelines, improve the conditions for investors and help African governments turn opportunities into transactions that benefit their people. For Inkomoko, it means giving more entrepreneurs the chance to build businesses that can survive, grow, employ people and eventually participate in commercial markets.
Neither is a substitute for commercial investment. That is precisely the point. They both help create the conditions in which commercial investment becomes more possible.
If philanthropy is looking for ways to move beyond financing needs and start financing the capacity to create lasting economic opportunity, GAIS and Inkomoko deserve serious consideration. The strongest philanthropic investment may not be the one that reaches the most people this year. It may be the one that helps build institutions and businesses capable of creating opportunity for many years afterwards. That is the kind of work worth financing.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
Dr. Wale Osofisan, PhD, is a seasoned governance strategist and policy analyst with over 23 years of experience advancing African-led, evidence-based solutions to political transitions, humanitarian crises and development challenges.
The chess nation: Iran, strategy, civilisation, leadership, and statecraft