AVPA: How the private sector can help bridge Africa’s SDG financing gap

Africa is facing a significant challenge in meeting its Sustainable Development Goals (SDGs) financing gap, which is estimated at $200 billion annually as per the United Nations Conference on Trade and Development. Traditional sources of social investment, such as aid and government funding, are unable to bridge this gap. In this context, global financial and capital markets have emerged as potential solutions to address the continent's financing needs. Dr. Frank Aswani, CEO of the Africa Venture Philanthropy Alliance, sheds light on the current state of the social investment landscape in Africa. Dr. Aswani emphasizes the critical need for alternative funding models as aid to Africa has decreased significantly over the years. With governments facing financial constraints due to rising public debt, the private sector has become a viable option to mobilize funds, given the substantial capital available in global markets. The shift towards innovative financing models is reshaping social investments in Africa. Impact bonds, outcome-based financing, and blending grants with private capital are some of the innovative approaches gaining traction. These models not only address social challenges but also attract investors by offering financial returns alongside social impact. Ensuring that investors are de-risked is pivotal for mobilizing private capital into social projects. By demonstrating that social investments can deliver both financial and social returns, Africa is fostering a new narrative where investors can ``do well as they do good.'' Dr. Aswani highlights the importance of educating investors from various markets and breaking silos to drive collaborative efforts. The Africa Venture Philanthropy Alliance serves as a network of social investors dedicated to deploying human, intellectual, and financial capital to enhance impact. By blending different types of capital, the organization aims to maximize the effectiveness of deployed funds. Capacity-building programs and research initiatives are key focus areas to overcome barriers such as lack of expertise and unconscious incompetence among investors. Looking ahead to 2022, Dr. Aswani sees a bright future for the social investment space in Africa. The continent's unique challenges present opportunities for testing and implementing innovative models that can drive sustainable impact. With a growing interest in Africa as a hub for social investments, there is potential to unlock significant private capital for impactful projects. The outlook is optimistic, with Africa poised to lead the way in transformative social investments. As Africa navigates the complexities of financing its SDGs, the role of the private sector in driving social investments is becoming increasingly crucial. By leveraging global financial markets, embracing innovative financing models, and fostering collaboration among investors, Africa is charting a path towards a more sustainable and prosperous future.