By: David Moore, Head of Alternative Investments, Alexander Forbes Investments
Africa continues to be prime for institutional grade, private sector investment, with its backdrop of high rates of GDP growth and a rapidly urbanising consumer who is embracing technology in accessing goods and services.
However, Africa’s growth potential remains constrained by:
- its widening infrastructure deficit
- a legacy of recurring conflict
- widespread instances of corruption in public office
The infrastructure deficit alone, which spans sub-sectors such as information communication technology, power, transport and water, is estimated at more than USD 100 billion a year. In order for Africa to realise its inherent growth potential, it is in dire need of truly sustainable investment initiatives.
‘Sustainable investment’ in Africa refers to the integration of priorities other than commercial return into the investment processes of practitioners. These priorities are governance, climate change, human rights, job creation and education. Local and international development finance institutions have led the charge in this regard, having deployed most of the USD 25bn of sustainable investment over 2012–2017 through the private market asset class.
Private market investment affords practitioners and investors the ability to more meaningfully integrate the priorities of a sustainable investment thesis per asset, given the positions of control held and longer than average holding periods relative to the traditional asset class managers. Africa abounds with success stories of assets accessed through a sustainable investment lens.
Albatros Energy in western Mali
A case in point can be found near the remote village of Medine in western Mali in the form of Albatros Energy (Albatros), the country’s first independent power producer (IPP) project to feed into the national grid. Mali’s power grid is grossly inadequate to provide sufficient, reliable power for its population. Mali is among the world’s 25 poorest countries and only 25.6% of its 17.6 million people have access to electricity, with this level falling to 15% in rural areas.
Albatros, a thermal-power plant completed in late 2018, provides enough energy to power just short of one million households and represents over a quarter of the country’s base load capacity. The Albatros investment held sustainability front and centre as part of its investment thesis considering the following over and above commercial return:
- Economic impact: Albatros is one of the lowest cost thermal power producers supporting long-term reductions in overall cost of energy for the national utility and providing a platform for increased economic activity in compliance with international environmental guidelines.
- Governance:As Mali’s first IPP, the project created an effective blueprint of engagement for all future IPPs in Mali, which has already begun to bear fruit with two solar plants being developed off the back of the Albatros success story.
- Job creation: During construction, Albatros employed 139 people from the local community (25% of workforce).
- Social impact: The Albatros project facilitated the upgrade of a range of social infrastructure in the surrounding community, which included upgrading the local dispensary, creating a maternity facility and purchasing a 4×4 ambulance.
South Africa brings with it its own challenges that warrant investment through a truly sustainable investment lens. An unemployment rate close to 30%, an ailing power sector as well as widespread corruption within many public and private enterprises are stifling the nation’s ability to grow.
However, here once again one can demonstrate that private market investments successfully integrate these competing sustainability-focused priorities such as job creation, human rights and good corporate governance into their investment processes. In so doing, they create compelling development and social impact whilst achieving institutional grade return outcomes. We need to look no further than the logistics truck passing us by in traffic every morning to see a sustainable investment at work.
Laser Logistics in South Africa
Laser Logistics (Laser), an empowered South African owned SME is a multi-line logistics company with over 130 branches across the country. Laser employs almost 2 000 semi-skilled workers and around 500 unskilled workers nationwide, most of which are outside the major metros and in more rural areas by virtue of their branch locations. Laser has pioneered a pilot project with the National Department of Health to facilitate the delivery of chronic medicines to consumers in remote, rural areas that can’t just pop to their local pharmacy to collect their prescription, but rather have to travel vast distances to collect essential medicines at huge personal cost. Laser, through this project, is facilitating the handout of approximately 50 000 prescriptions a month to patients, addressing a basic human right (access to critical, therapeutic medicines) whilst expanding its revenue base by adding a high-growth business line.
Retail Capital in South Africa
SMEs like Laser are the lifeblood and growth engine of any developing economy and are in dire need of support from both public and private sector practitioners in South Africa. A great example of a privately-backed SME-focused business is Retail Capital, a merchant cash advance business that provides innovative working capital and growth finance solutions sustainably to SMEs. Retail Capital purchases the future income streams from debit and credit card transactions completed by retailers in return for upfront cash advances, which these SMEs can then use to make meaningful capital investments to grow their businesses. Over and above an attractive commercial return, investing in a business such as Retail Capital aids in driving economic growth owing to its niche, SME-focused business model coupled with explicit job creation benefit of approximately 850 new jobs created over three years since its inception.
Sustainable investment in Africa is not only a topical investment theme but more over a critically required one. Solving the pervasive infrastructure deficits and governance failures continentwide can only be achieved through multi-faceted investment approaches that target both commercial returns and some if not all of the sustainability metrics discussed. Let us hope that case studies such as these can serve to catalyse both local and international institutional funds to allow Africa to become a force to be reckoned with in the global economy.
FIVE REASONS WHY YOUR BUSINESS’ PROCUREMENT TEAM SHOULD BE USING A CONTRACT MANAGEMENT SYSTEM
By Daniel Ball, business development director at Wax Digital
Even in today’s digital-first environment some businesses are still storing documents, such as contracts, in filing cabinets making it labour intensive to retrieve, manage and even identify important paperwork. In fact, it is calculated that poor contract management practices are costing companies an average of nine percent of their annual revenues.
Moving to a contract management system online can speed up the retrieval process and help decrease the amount of time and resources required to manage contracts. Using a CMS companies can create an online database to centralise information and store documents. Not only does this help ensure contracts are well managed and kept up-to-date, but it can also help businesses save up to 20 percent of overall costs per year.
From legal departments overseeing regulation compliance to finance teams ensuring payment deadlines are met, contract management technology benefits many areas of an organisation. So, how can a good CMS help your procurement team?
How will a good CMS help your procurement team?
The number of suppliers your procurement team must oversee varies depending on the size of your business. It’s not uncommon for large enterprises to be working with thousands of suppliers at one time. A CMS will use automation to record, manage and streamline data, providing procurement teams with important contract details including time and location information, as well as real time alerts such as contract breaches.
Here are five reasons why your business should be using an online contract management platform:
- Increased spend visibility
Using a CMS can give procurement professionals full visibility of suppliers, including the company name and location of where a product is coming from and in what quantity. This transparency will also help contribute to the risk management strategy of your business as it enables you to spot vendors who may be prone to environmental, economic and political uncertainty. In the current environment, for example, suppliers’ may have decreased or ceased production due to COVID-19 or could have been heavily impacted by the negative price of oil, making visibility increasingly important for businesses.
- Eliminates maverick spend
Centralising and streamlining contract documents will ensure that buyers can instantly access up-to-date information to see if a contract already exists. This helps buyers avoid simple and common mistakes that often occur when using manual filing systems, such as onboarding new vendors when existing agreements are in place with another supplier.
- Keeps track of contract renewals
It’s easy to forget about contract renewals or sign up for another term without ending an existing agreement, especially when using a traditional filing system. Businesses using an online CMS can set up renewal alerts in advance, allowing buyers sufficient time to source new vendors or negotiate better prices.
- Improves spend management
A centralised database means that all negotiated prices, contract conditions and other important transactions can be accessed in one place, making it easier to analyse spend. A CMS can help identify discrepancies, find where contract violations have occurred and deal with any associated problems.
- Adhering to regulatory and legislative compliance
It’s important to ensure that all suppliers are meeting the terms of their contracts. A CMS will automatically audit supplier information, meaning that any failures are immediately raised to procurement teams. The platform will also provide notifications if any new data is required or updates need to be made, avoiding potential legal issues.
It’s clear that using an online CMS will benefit your business and procurement teams by increasing spend visibility, enabling access to up to date information, ensuring contracts are closely monitored while contributing to the reduction of unnecessary spend. So, now’s the time to stop relying on those dusty old filing cabinets and start using a CMS.
PROTECTING YOURSELF AGAINST A RECESSION
James Turner, Director at Turner Little
The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the steepest economic downturn since the Great Depression.
So, what does that mean for you? James Turner, Director at company formation specialists, Turner Little, suggests “While there’s no fool proof way to ‘recession-proof’ your finances, establishing a solid base now will put you in a better position to weather the storm.”
“Whilst the future of the global economic landscape is simply too complex to predict, it’s not hard to spot imbalances that have built up, as central banks and governments around the world talk about introducing further fiscal stimulus and monetary expansion, the consequences could be significant,” adds James.
A good wealth management agent will recommend starting by saving a substantial cash emergency fund in a high-yield savings account, understanding your spending habits and where you could cut back if you needed to, and establishing your long-term investing strategy now, so you can stick to it.
If you were to solely invest based on the inevitability of a recession, you are likely to miss returns that are immediately available. If you truly want to recession-proof your assets, the best thing to do is develop a long-term strategy and invest wisely.
Diversification still matters
It’s dangerous to pile all your investments into a single sector, including consumer staples. Diversification is especially important during a recession when particular companies and industries can get hammered. Creating a diversified portfolio of assets blended across asset classes—such as fixed income and commodities, in addition to equities, sectors, geographies and strategies—can also act as a check on portfolio losses.
Build a reserve
To keep your money protected before, during and after a recession, it’s recommended to have an income generation conversation with a financial advisor. This will cover a lot of different topics, but one of the most important is the emergency fund. You’ve likely heard many times that it’s good to have between three and six months’ worth of living expenses set aside in the event of a job loss, health crisis, or other unforeseen circumstance.
Protect your assets
If you’re interested in talking about protecting your assets and your investment portfolio, do get in touch. We specialise in creating bespoke solutions for individuals and businesses of all sizes. The knowledge and expertise of our specialists will be able to assist with any enquires, no matter how complex.
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