Can impact financing be profitable?

Can blended finance deals be profitable for private sector investors, while at the same time having the impact on communities with purposeful and sustainable development? And does this affect the ability to raise capital?

This is one of the questions that was asked in the session on Unlocking Right-Priced Capital at Africa’s Green Economic Summit in Cape Town in February.

“I think before I went to business school, I was a bit of a crazy idealist. Then I went to business school and I became more of an idealist,” was the reply of Baafour Out-Boateng, Investment Director at KawiSafi Ventures in Ghana.

He added that when he returned to West Africa to work in investment, “that’s when the rubber hit the road, right? You cannot generate sustainability without sustainable returns.”

KawiSafi Ventures was created to unlock the potential of renewable off-grid energy as a faster, cheaper and cleaner way to bring power to Africa’s energy poor communities than extending the grid.

Out-Boateng: “What we have seen with KawiSafi’s portfolio companies is that the commercial returns multiply the impact. So, I am still an idealist, but I am also pragmatic. Even from the ground perspective, incentives matter.”

Business must be business
Fellow panellist Iraj Abedian, who calls himself an impact investor and is the founder and chairman of Pan-African Capital Holdings, agreed. “I am even more of a hardliner than Baafour. I say business must be business. In the course of doing business there must be a positive, measurable and collectable impact.” He said that securing profitability impacts job security and job creation.

Abedian focuses on improving the use of technology for the greenification of the agriculture sector.

He explains: “Why is agriculture important? I’m an economist by training, and I am always looking at the next five to ten years. The South African production and export of fruit, and potentially more broadly in Africa, are currently at a huge risk of having a high carbon footprint. Therefore, there is a huge risk of sudden death. How do we deal with that?”

At the same time, says Abedian, in the continuum of financial service provision, there is a massive gap when it comes to medium to smaller size projects. He has been focusing on financial intermediation for commercial farmers who are 100% dependent on Eskom and whose production technology is outdated. Emphasis is placed on identifying the sector’s risk, precision farming, production and marketing. “The last element that is added is a partner to help them decarbonise their production processes.”

This session also delved into innovative examples of structured blends of finance and the importance of securing competitive financing for sustainable projects. The experts explored strategies to attract responsible investors, blending public-private funds strategically and aligning financial incentives with environmental goals to accelerate Africa’s green transition.