In recent years, there have been growing calls for more diversity in international funding destined for Africa. There has also been debate over how the continent can encourage more local African asset owners to invest in impactful, sustainable, and profitable sectors of the productive economy, like its burgeoning tech ecosystem.
According to Devex, “organizations led by Africans tend to get less money—with more strings attached—compared with those led by others.” For the African tech sector alone, insights from TechCabal illustrate that “only two out of 10 investors who participated in VC deals in Africa between 2014 and 2019 were local.”
This rolling conversation has been sparked by the notoriously high proportion of venture capital that goes to white founders operating in Kenya, for example, and due to the controversial positioning of companies like Jumia, as “African.” Furthermore, there has been a lot of pushback against a heavy-handed reporting culture of mistrust which, in practice, constrains rather than enables the recipients of international grant funding from big philanthropy and development financing, hindering their ability to run their innovative initiatives and interventions.
Despite the essential nature of the services provided by African NGOs—which themselves often lack the business capacity to execute sustainable projects – and local private sector intermediary firms, such organizations are unknowingly exposed to highly politicized and opaque bid processes which result in applications that have little to no chance of succeeding.
What we see is a huge disparity of funding in favor of advisory firms from the Global North, to the detriment of local expertise from the Global South, with a clear proximity advantage.
During a recent event discussing angel investing, Frank Aswani, CEO of the African Venture Philanthropy Alliance (AVPA), made a case for foundations and donor agencies to become more “innovative, catalytic investors—instead of just giving money away as grants.” AVPA has been at the forefront of promoting innovative new approaches to development finance such as venture philanthropy and blended finance.
Countries that have achieved middle income status, like Ghana, have seen international funding cuts but have not been immune to the economic shocks of the pandemic as such leaders from the worlds of philanthropy, development finance and corporate sustainability are under pressure to do more to help regions like Africa on their way to economic recovery. This is an opportunity for leaders in these fields to take on a more entrepreneurial and radical approach to funding ambitious, radical, creative and self-sustaining development initiatives.
A good starting point would be to adopt the role of social investor, supporting the local private sector to build capacity and prosperity through what microfinance pioneer, Nobel prize Laureate, Muhammad Yunus calls “social businesses.” International development funding would go further by, in effect, seeding viable social business models that can be scaled to sustain hundreds of thousands of women and youth.
Furthermore, if Africa is to achieve the UN’s Sustainable Development Goals, there must be more intentionality around getting global funding resources to filter down to intermediaries, experts, and advisors on the ground and close to the action—not thousands of miles away from developing regions.
Learn more about Gyampo’s call for international development funding to be disrupted by seeding social business investment initiatives rather than continuing with the traditional more rigid, light-touch grant approach in her Tedx Talk.
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