Injaro Investments

We focus on three core areas with respect to impact investing: inclusive business, agriculture and infrastructure. In the Nigerian agribusiness space, for example, there is a large opportunity gap, exemplified by farmers from the North who lose about 60 percent of their produce value while travelling to markets in Lagos. Our main challenge is that impact investment deals are not available off the shelf, so to speak-you cannot just shop for them. We are frequently presented with two choices: ideas which create social impact but have no financial appeal, or pitches that are 'business as usual', but try to wedge in a social impact aspect. There simply are not many ready-made deals that focus on solving social issues with a business mindset. We avoid this pitfall by adopting proactive strategies to finding impact investing deals and identifying social needs that lead to the development of ideas. We then test these ideas in cooperation with our technical partners. For example, in our ICT investment strategy, TEF looked to enablers in the form of a business incubator called Co-Creation Hub (CcHub) and we arranged investors-pitch 'dating' sessions. From these efforts about 30 projects were carefully chosen, some of which TEF has already provided grants. If they prove to be viable, TEF has committed to deploying impact investment capital at a later stage. How would you present your impact investment portfolio? The portfolio is very young. The Tony Elumelu Foundation is merely two years old and the impact investment initiative is even newer, and we typically look at impact in the social sector such as education and ICT (information, communication and technology). Our deal sizes range from $50,000 to $500,000, although we engage in larger deals when we can bring partners together. Our preferred deal structure is equity, with a range of 15% to 20%, although some rates can be lower if the social impact is great. In addition to this preference, we engage in debt structures and with sponsors. The inaugural impact investment of TEF went to a farm-livestock business in Southern Tanzania, Mtanga Farms. The 2,200-hectare operation will launch a seed potato industry and ensure new varieties of potatoes in the region, which will benefit 125,000 farms. It is the first cross-border impact investment in Africa. We aim to be engaged all over Africa, although it might be necessary to streamline our focus areas in a few years. What are your thoughts on the need to train impact investing professionals? As impact investing is a nascent field, there is a strong need for experts to be developed. But it is important to be mindful about developing a balance between experts of both the financial and the social sector. Do you engage in measuring impact? How do you evaluate investments? We are continuously working with GIIN, The Global Impact Investing Network. They assess our portfolio and put forward recommendations, which naturally happens after the investment has been carried out. Long term, we aim to develop ways of analysing the potential impact of proposals before deploying resources in order to target the deals that are likely to have the most significant impact, and we are cooperating with GIIN on how to approach this matter as well. I am in regular contact with their professionals and we bounce ideas off each other. As the industry is new to everybody, knowledge sharing is imperative in order to develop frameworks that can guide the field. TEF is based in Nigeria, what is the potential for impact investment locally? Nigeria is often thought of as a capitalist business environment, does that influence your work? There is definitely a more 'strictly for profit' mindset in Nigeria, more so than in other African countries. The bulk of impact investing deals currently come in through East Africa, primarily Kenya and Tanzania. It should tell you something that our first deal as a Nigerian-based organisation was made in agriculture in Tanzania. It is our goal to work as a catalyst for driving these deals in 'our' part of Africa as well. How do you plan to merge the 'for profit' mindset, or 'instant reward' mindset with the 'patient capital' mindset that frames impact investing? We work with Africapitalism as a framework for everything we do. Africapitalism is about creating value long term, which will mitigate issues related to peak investment exit strategies. These exit strategies often have a negative impact on the entrepreneurial venture in question. It is still early days for impact investment, but momentum is certainly building. What are your thoughts on the future of the impact investing space? Impact investing is important for foundations such as TEF, but I also see it as an integrated part of private equity funds' portfolios as there is a strong need to focus funding where great impact can be made. I think the future returns will depend on business quality and creativity especially. Creative impact investing largely drives the innovative pay-per-use infrastructure system of the Edubridge project in India. I think we will see more of its kind in the future. Right now there is a large spectrum of returns in the field. NGOs engaged in impact investing went from providing grants to providing returns at about 2% whereas TEF expects returns in the range of 15% to 20%. Such expectations are not new to the private equity field and hopefully, we will see more of those players in the future; perhaps going from 30% returns on their 'normal' deals to about 20% on impact investing deals will be the financial sphere's contribution to increasing social impact.