By Charles Warria
In his recent reflections on why private equity funds have consistently experienced low returns in sub-Saharan Africa and why a change in approach in inevitable, Abhishek Mittal, a Partner at the Indian-based Aavishkaar Africa Fund / Aavishkaar Capital noted that while the budding entrepreneurial businesses in sub-Saharan Africa are targeting large local socio-economic problems, they are often relying on business models from developed markets, which do not have to navigate fragile infrastructure and under-developed fundraising ecosystems of the region.
Abhishek points out that access to crucial investment funds in emerging markets has repeatedly demonstrated that backing indigenous businesses and local entrepreneurs in finding solutions to large social and economic problems creates successful enterprises. In less than 20 years, Aavishkaar Capital has made 67 investments in India and South Asia that provide profitable solutions to complex social problems – and secured 36 exits along the way. Their portfolio is positively impacting more than 105 million lives (more than 50% of them women) and addresses 13 of 17 SDGs. Some of the fund recipients include Nepra, a dry waste recycling company that has cleaned up India’s congested cities (quite similar to Taka Taka Solutions), and Agrostar,an ag-tech company helping farmers to access quality inputs (similar to Moiben Solutions in Eldoret).
Businesses in Africa and especially in Kenya, operate in smaller markets and are handicapped by a dysfunctional credit access system and inadequate capital markets. The lessons from Aavishkaar Capital show that where investment funds can source exceptional local entrepreneurs with on-the-ground experience and back them with reasonable capital and technical assistance, they can execute a successful investment and enterprise development strategy that goes to scale.
By learning from others who have tried it and accumulated useful experiences, we at KCJF stand a better chance the how’s of what works and what doesn’t, strengthen our approach to administering the catalytic fund, navigating the terrain of enterprise path to scale and job creation and even generate more learnings for such future efforts.