Africa Day: Reflecting on progress and investing for the future
May 25 is Africa Day, which recognizes the founding of the African Union in 1963. This year, the 50th anniversary of African unity provides an opportunity to highlight the great progress the continent has made, and encourages a look toward the future.
By almost all accounts, the future is bright. One commonly-cited statistic is that seven of the 10 fastest growing-economies are in Africa. In 2011, The Economist dubbed Africa The Hopeful Continent. Africa’s middle class is expanding rapidly and is expected to grow by 50 percent over the next 10 years. Many of those newly-middle class people are moving from rural areas to cities, creating new demand for modern infrastructure, goods and services for people with disposable income, and are helping foster the business activity that supports economic growth and stability.
At the same time, the continent continues to face multiple problems related to poverty, food insecurity and malnutrition. OPIC, which has a long history of supporting development and private sector investment in Africa, is today supporting a range of projects that address Africa’s widespread poverty as well as its booming economy. Last year, projects in Africa accounted for a quarter of OPIC’s global portfolio, up from just 6 percent ten years earlier.
From food security to healthcare, and with an eye to impact investing, OPIC supports businesses that are addressing the varied development challenges on the continent today. Here are four ways OPIC supports development in Africa:
1) Financial inclusion – The access to basic financial services like savings accounts and credit is an essential component to helping individuals lift themselves out of poverty. Rates of financial inclusion are particularly low in Sub-Saharan Africa where only 28 per 1,000 individuals have access to bank loans. OPIC has supported expanding financial inclusion in Sub-Saharan Africa by providing financing and political risk insurance for investments made by the Access Africa Fund, an investment vehicle managed by MicroVest Capital Management LLC.
2) Food security – Rwanda, like much of the developing world, continues to struggle with issues of food insecurity due to inefficient crops and limited supplies. When Steven Jones, a horticulturist from Tennessee, visited Africa on a trade mission, he was determined to improve crop yields so that Rwandan farmers could increase their output in less time. Jones received a $20 million loan from OPIC for his organization, Forestry and Agricultural Investment Management (FAIM). Today, the virus-free seedlings him and his colleagues use have the potential to produce 10 times more than similar crops in Rwanda.
3) Healthcare – In Sub-Saharan Africa, there is limited access to healthcare and it is often poor in quality. Adding to the strife, many health clinics are unable to get sufficient funding due to the lack of a solid financial track record. Last year, OPIC provided a $5.4 million loan to the Medical Credit Fund (MCF), a health investment fund, to support investments in clinics that are too large to qualify for regular funding or lack a financial track record. Loan recipients have used the funding to purchase new medical equipment such as ultrasounds and blood analyzers, improve their infrastructure and attract more patients.
4) Consumer services – Over the past decade, Africa’s middle class grew by 60 percent, and the number of households with discretionary income is expected to increase significantly over the next decade. As the middle class emerges, so too does the demand for consumer services such as affordable Internet, phone and television. OPIC recently provided $72 million in financing to the Wanachi Group Ltd. to help bring these services to underserved areas in East Africa. With OPIC’s financing, Wanachi Group can deliver quality educational, informational and entertaining programming to households in the area while creating more than 1,000 managerial and technical jobs.
For more about our work in Africa, please visit our interactive map.