Turn to the corporate social responsibility (CSR) pages in the annual reports of many big companies and you will see many examples of clinics being opened and schools built.
But businesses should cater to their own strengths. For instance, General Electric (GE) generally links its CSR programmes to their core businesses like energy and healthcare.
Strengthening small and medium-sized enterprises in the community is also highly recommended. For example, while I was working as managing director for sales and project finance for GE Africa, my team designed and set up a supply chain investment vehicle dedicated to support our suppliers with the necessary capital, enabling them to produce spare parts according to global standards.
This helped local companies skill up and participate. In that effort we brought partners on board such as the International Finance Corporation (IFC) to provide both equity and affordable long-term loans.
The significant job creation impact and business growth became obvious for our stakeholders, including communities, suppliers and customers.
In order to reinforce skills, we set up customer innovation centres around the world – one is currently being built in South Africa – allowing young engineers and suppliers to gain experience on GE’s most advanced technologies.
So building schools, certainly that has some impact. But if you link schools to your business, you can address the double bottom line with both financial and social return, and create real long-term impact.
I created Ubuntu Capital as an investment firm focused on advisory and co-investment for that purpose. I call this new approach equitable investment.
This is where funds are not just deployed to maximise project returns but also deployed around the project ecosystem. This helps multiply sources of returns while maximising social return.
An example of such a policy is using investment and capacity-building to strengthen the supply chain and consumer value chain. If you are a mining company, who supplies your gloves? Can they be made locally?
Statistics have shown that projects that have the highest financial return in emerging markets are the ones that also take into consideration social return.
In my days as investment officer at the IFC, we paid critical attention to ensure that social and economic developmental targets were assigned to sponsors in Africa. Our average 10-year blended return on equity from 2002 to 2012 exceeded 26%.
What happens if you fail to take the social dimension into account? Look at Shell or Conoco-Phillips exiting the Nigeria oil market and selling to locals. They failed to empower communities and create a solid ecosystem around their investments. They were faced with sabotages, strikes and poor supply chains, which ultimately affected their returns.
An adage says: “In Africa, it takes a village to raise a child”. We could easily say: “In Africa, it takes a village for a business to rise”.
Ubuntu Capital is currently working with global and leading regional corporations as project investment adviser and co-investor to help create these ecosystems.
According to various studies, 70% of impact investors have exceeded their return targets. There is $22bn in impact investing capital around the world, and Africa is the second destination globally. Very little of such capital is sourced from Africa, so companies and pension funds on the continent should see this as a real opportunity.
This article was taken from here.