Venture capitalists in Africa’s rapidly evolving tech startup sector are shifting their focus, increasingly favoring companies that prioritize social accountability. This trend reflects a growing commitment to investments that uphold strong environmental, social, and corporate governance (ESG) standards.
During a recent panel discussion titled “Conscious Capital: Investing in Africa,” held virtually at the SingularityU South Africa Summit 2021, experts underscored the importance of placing community impact alongside profit generation.
Moderated by Christina Gerakiteys, Co-CEO of SingularityU Australia, the discussion highlighted how conscious capitalism is gaining traction among investors who are keen to support businesses that operate ethically and demonstrate social responsibility. panelists pointed out that startups with lower ESG scores are missing out on significant funding opportunities as investment dollars increasingly flow towards companies championing strong ESG principles.
Hans Otterling, a general partner at Northzone, an early-stage venture capital firm, emphasized the potential of Africa’s youthful population—over 60% of the continent’s 1.2 billion residents are under 25. Many of these young individuals have access to smartphones, creating vast opportunities for tech entrepreneurs to build businesses focused on education, banking, and healthcare, thereby improving the livelihoods of the youth.
According to Otterling, investors are now on the lookout for ventures that strike a sustainable balance between business growth and social impact. Northzone, he noted, consciously avoids sectors such as weapons, pornography, and gambling, aligning its investment strategy with ethical considerations. South Africa’s high unemployment rate, he explained, underscores the necessity for funding that not only creates jobs but fosters a thriving labor environment.
Robert Herthoff, chairman of the UK-based investment platform Invest Africa, reported that four African startups have achieved unicorn status this year, with more anticipated before the year concludes. These emerging companies address real-world challenges and possess business models oriented towards significant social impact, particularly in sectors like edtech, healthtech, fintech, and agritech.
The technology landscape in Africa is undergoing a revolution, Herthoff remarked, urging that conscious capital must become an integral part of this transformation. As customer awareness grows regarding the ethics behind their purchases, investors are beginning to recognize the financial advantages linked to conscious investments, which are expected to outperform traditional investment approaches.
Furthermore, Otterling noted a shift in perception surrounding conscious and impact capital. Historically associated with philanthropy, these investment strategies are now increasingly considered viable avenues for financial growth. He highlighted the growing demand from financial institutions for robust ESG-oriented investment strategies, warning that funders who neglect these principles may face challenges in the future.
Herthoff concluded by emphasizing the critical need to equip Africa’s future workforce with science, technology, engineering, and mathematics (STEM) skills from an early age. He argued against the proliferation of professions unrelated to technological advancement and advocated for a broader understanding of fields such as blockchain, artificial intelligence, data analysis, and programming. Harnessing technology’s potential can change lives on a massive scale, he asserted.
