Let us introduce ourselves. We are sending the letter taking from our extensive field experience in sixteen African Countries – out of twenty-six worldwide. We could also mention a written eulogium granted by the Prime Minister of Somalia while with the Central Bank – before Barre Regime – and a reference letter issued by the Agricultural Development Bank (Guinea Conakry) at the end of the mission on behalf of UN/FAO in 1995. Recently, we can mention the partnership with International Valuators ((IV) aimed at assisting African entrepreneurs [1]. The French version is https://www.linkedin.com/feed/update/urn:li:ugcPost:6718969395927904256 /
As you know, Africa’s development has been making the headlines, again, since President Obama’s declaration to budget $ 2.5 billion Programme Power Africa Initiative, while visiting the Continent in 2013. In 2014 and in line with the above, T. Elumelu [2] proposed Africapitalism’s idea to promote African entrepreneurial spirit.
Meanwhile, African/Americans have been showing the way to do business[3].
Currently, the headlines are made by the Recovery Programmes after Covid-19, which could be an opportunity to rethink everyone’s behavior, first and foremost those who have the privilege of an important position within the Communities.
The demographic trend is the basic data to look at, to catch the development’s challenges. According to UN, Africa’s population will blow up and the unemployment rate among youngsters will continue to be alarming: the current 1.2 billion population shall double by the year 2050; that’s an expected growth of 42 million people every year. The importance and the implications of the above data don’t need to be emphasized.
The recent analyses of the economic trend aren’t encouraging and, in particular, it has been said that “African investors remain risk-averse” and …. the funding requests lack “speaking the language required for investment”[4]. The reasons behind African investors should deserve attention and maybe the sociologists could help and provide us with a comprehensive explanation. So, what to do?
In our view, there are some bottlenecks in both the methodology and the business practice, which we have already investigated. Whatsoever the case, the matter is twofold because it is not only a question of involving the capitalists in the development process, but also helping them to reposition their strategy in the light of changing market conditions. In a nutshell. The money is not lacking; so what to do about the risk aversion? Only a new analysis can sort out the impasse: we did it [5].
We have elaborated two Options: (A) Associate the Capitalists in the strategic decisions within the development schemes, (B) Provide Capitalists & Entrepreneurs & Investors with the seed capital to establish their own FUND.
OPTION A – National capitalists join development programs.
We do say that the best way to face the risk-averse behavior is to take the financiers on board, learning by doing is the appropriate way to disseminate the language required for the investments. Finally, having the national development actors take in their own hands the future of their communities is for itself an innovative approach.
Our proposal aims at reshaping the decision-making process by giving a chance to national investors and accepting them in the Board Rooms as Stakeholders committed to supporting the economies of their own country/region.
A practical example can be provided with reference to the program of the International Finance Corporation (IFC) in MENA countries. IFC could set up a Risk Fund in each of the twenty MENA countries stretching from Iran to Morocco using even a small slice of the $ 2 billion budget as seed capital and calling on national capitalists to act as shareholders who are truly committed to financing both start-up and growth of companies, which are the backbone of countries’ economies.
Under these conditions, IFC and any development agency along with the ADB could play the role of facilitator and advisor, their presence also being a guarantee of the operation.
However, the above option takes time to be fielded, considering that sharing the decision means sharing power. On the matter, it should be considered that the ultimate goal of financiers at all levels – from the World Bank, the IMF, to the bank around the corner – is not only to make a profit but to influence the budget of the debtors and therefore interfere in their choices (see national and international institutions).
Option B – National capitalists set up their own Risk Fund
Consequently, it is up to African capitalists to take on the charge of the future of their communities and to establish a National Fund for creating jobs and promoting opportunities, which can help to minimize the migration of unemployed youth to Europe. This does mean:
- To shift the paradigm of the financial interventions from the over-indebted economy at a micro and macro level to real people empowerment.
- To have private investors really involved in the development process
- To use the financial leverage for sustainable interventions.
- To digitalize the services with a sustainable and price-transparent product: [6].
Here are some of the Fund’s features and characteristics:
• To our knowledge, this is the first Risk Fund explicitly designed within the framework of the UN-Agenda 2030 (Vision & Objectives 1, 8, 17), while taking into account the guidelines of the Basel III Committee on financial inclusion together with Kampala Principles.
• It has been designed on the basis of a methodology with a new approach replacing the Credit-Based Economy with the Community-Based Economy. As a result, we have developed a conceptual framework to promote growth through the business approach.
• It is not just financing but much more: it is both a traditional and an innovative approach to the market.
• It will have a dual objective: to provide Entrepreneurs and Lenders with both resources and assistance: Banks, MFIs, are all facing three major challenges: Under-capitalization, Digitalization, and Management.
• Links between the Fund and financial intermediaries shall be established country by country, depending on the market situation.
• We have tested the viability and validity of the Model and in this understanding, specific requests will be considered.
• It will have a positive impact on the financial market by reducing the high cost of borrowing.
• Based on current lending activities on the continent, the Fund can guarantee, at least, a ROI greater than 3%; in addition, there is the image return for investors acting as Development Actors.
• The institutional and organizational framework has been developed together with a provisional timetable, which will be further developed during round-up meetings.
• The requested seed capital, as well as the legal entity of the Fund, will be discussed with a small group of founders: investment companies, private investors, donors, and financial institutions; on this occasion, the number and the countries where to launch of the Program will be examined.
We are available to provide any additional information on the setting up of the Fund [7], upon request, without any commitment.
The Fund will make history of promoting inclusive growth in African countries, the day after the Pandemic. This step will open a new beginning to allow the Communities and you to have confidence in the future.
[1] https://www.linkedin.com/pulse/accelerators-help-change-business-landscape-africa-alaa-badran-icvs/?trackingId
[2] https://www.linkedin.com/pulse/africapitalism-creating-shared-value-community-based-economy-ascanio/
[3] https://www.cfr.org/blog/africa-remains-untapped-market-booming-black-businesses-america
[4] https://ascaniograziosi.net/2018/05/28/the-digital-economy-in-africa-could-be-a-gamble-because-investments-matter/
[5] THE THEORY OF CHANGE APPLIED TO FINANCE FOR DEVELOPMENT http://reader.ilmiolibro.kataweb.it/v/1252660/the-theory-of-change-applied-to-finance-for-development_1268103
[6] https://www.linkedin.com/pulse/open-letter-fintech-ascanio-graziosi/.
[7] In the following Countries, we have designed, managed, and evaluated risk funds, revolving funds, and guarantee funds: Tunisia, Bosnia, Caribbean, Romania, Mali, Albania, Netherlands Antilles, Malawi, Algeria, Morocco Ghana, and Russia Federation.
Ascanio Graziosi 