Special Post: #StopGivingTuesday

It’s Time to Invest in Africa’s Future

Stop Giving to Africa

It’s #GivingTuesday, and across the U.S., wallets are opening, charities are receiving, and people are feeling good about giving. Some of you may be considering giving to Africa. But here’s some hard truth: charity isn’t helping Africa. Worse, it’s holding the continent back. With the world’s youngest and fastest-growing workforce—but the fewest jobs to match—Africa needs more than charity. It needs investment.

I know—this sounds harsh. And yes, I’m biased. My wife Laura Davis and I run an investment firm in Africa. Over the past decade, we’ve personally invested in about 50 startups across the continent. We do this because we’ve seen firsthand how investment—not charity—transforms economies, creates jobs and builds wealth.

Let me offer two excellent reasons why you should consider moving from giving to investing in Africa: 

  1. The “Oh No!” reason, and

  2. The “Oh Wow!” reason

The “Oh No!” Reason: We’re Losing Africa

The U.S. and the West are losing influence in Africa to China and Russia. China-Africa trade hit $282B last year, dwarfing the U.S.’ $45B. While Beijing is building railways, roads and ports, we’re sending planeloads of Americans on service trips, wearing matching T-shirts, ready to “help” Africa. Many Africans I speak with see charity efforts as outdated and patronizing—a relic of the 1980s.

Meanwhile, China and Russia are treating Africa like the economic and geopolitical powerhouse it’s becoming. Ethiopia and Egypt recently joined BRICS+, signaling Africa’s shifting alliances and growing strategic importance. By 2050, 25% of the world’s population will live in Africa, and the continent will hold 28% of the UN Security Council votes. Yet African leaders feel the U.S. doesn’t take them seriously—and frankly, they’re right.

We’re falling behind because we’re stuck in an outdated view of Africa. Why are we still exporting handouts when we could invest in the entrepreneurs shaping Africa’s future? Capitalism works—it’s what we do best. 

Source: Gallup

The “Oh Wow” Reason: Africa is Booming

Now for the exciting part. Africa is booming. Nine of the world’s 20 fastest-growing economies are in Africa. The continent is urbanizing faster than anywhere else and will soon house 13 of the world’s largest cities. Yet population growth continues to outpace private sector expansion. The opportunity is enormous—but only if you come looking for it.

More than 60% of Africans are under the age of 25, and Africa’s youth are entrepreneurial, ambitious and ready to lead. A recent study found that 71% of African youth plan to start their own businesses within five years. Thanks to advancements in internet access, AI and mobile technology, launching a startup in Africa has never been easier—or more affordable.

Here are some examples: MPost, one of the startups we backed, is digitizing post office boxes in Africa. In some extreme cases, thousands of Africans have to share one P.O. box. MPost is making it possible to turn your mobile phone into a P.O. Box, enabling industries like e-commerce to flourish across Africa. Imagine the millions of jobs, economic value and wealth creation that could happen as this company scales. For a more traditional example, look at METAD, a specialty coffee company in Ethiopia. The founder had a vision of transforming Ethiopia’s coffee industry to make it specialty-grade before specialty coffee was all the rage. Today, METAD doesn’t just export world-class coffee to your favorite roasters and cafes—it employs thousands of workers, supports more than 10,000 smallholder farmers and provides health services and education to employees’ families, among other things. We don’t need to ask founders to go above and beyond making a profit; it’s just smart business in Africa. 

When young Africans see local founders securing investments, they think, “If they can do it, so can I.” That spark of hope spreads, fueling a ripple effect of ambition, innovation and a cycle of prosperity.

Why All Eyes Should Be on African Startups

Africa is the youngest continent on Earth, with a median age of 19. Each year, 8 to 10 million young Africans enter the workforce, but only 3 million formal jobs are created annually. This gap is a crisis—but it’s also the opportunity of a generation.

Startups are the solution. They create jobs, drive innovation and build economies. Yet Africa receives less than 1% of global venture capital—a ridiculous figure for a continent that will soon be home to one out of every four humans on the planet.

Imagine the possibilities if we focused our collective efforts on startups. In 2022, aid to Africa totaled $53B. Redirecting even a fraction of that to support startups could spark an economic renaissance. This shift is already happening in small pockets. Forward-thinking development organizations are working on blended finance projects, partnering with investors to lower the costs and risks for them to invest in Africa. But we need more charity checks to become investment checks.

If we focus, Western nations could accomplish a new vision: to invest in 10,000 startups every year within three years—a scale about 10 times Africa’s peak in 2022. At $100K per investment, this would require roughly $1B annually in pre-seed and seed-stage capital, or about 10% of what we currently give as charity to Africa each year. Combined with another $500M annually for technical assistance and ecosystem-building support from blended finance projects to prepare startups and provide post-investment support, this effort could create approximately 3.3 million jobs annually—closing the jobs gap by about 40%—at a cost to taxpayers of around $150 per job created. These are my own rough estimates, but imagine if we all focused on a bold target like this? Also, private capital doesn’t just generate employment; it catalyzes ecosystems, drives innovation and renews Africa’s image on the global stage. What a legacy.

In Closing

Obviously, I know we can’t stop all giving cold turkey—there’s too much entrenched infrastructure to dismantle overnight. But the time has come to move from giving to investing in Africa.

And rest assured, there’s wealth in Africa. No matter how well-intentioned your charity or impactful your project is, there’s likely someone local who could be funding it and doing it better than you. 

I vote we replace #GivingTuesday (for Africa) with #StartupAfrica.

I’d love to hear your thoughts. My objective is not to offend but to challenge us to think differently. Here are some questions that I’d love your thoughts on: 

  • Do you think giving is working?

  • Do you think investing will do more than giving?

  • What do you think is stopping the West from shifting its focus from giving to investing in Africa?

  • What else should we do to encourage Africa’s growth?

Wondering How to Get Started?

  1. Think Differently: Poverty isn’t solved by giving; prosperity is created by investing. Read The Prosperity Paradox by Clayton Christensen.

  2. Take an Investment Trip to Africa: Be part of a movement to create jobs and drive innovation. Join an investment tour to Africa. Meet entrepreneurs and see opportunities. We’ve got a group coming to GITEX Africa in April.

  3. Start Small and Diversify: You don’t need millions to begin, but no matter the dollar value, it’s best to diversify across countries. U.S.-based donors can use donor-advised funds to start. Join angel networks or explore Africa-focused VC firms.

  4. Get Africa Smart: Subscribe to curated content on African startups. Check out The Africa Brief (ours) or This Week in Fintech, Africa (one of my favorites).

  5. Be You: Be generous locally. If you want to help Africa, use your expertise to guide businesses and share your skills with African entrepreneurs.

Reposted from LinkedIn.

Disclaimer:
This summary is intended for informational purposes only, is subject to change, and does not constitute investment advice or a recommendation to you. This summary is not intended as an offer to sell or a solicitation of an offer to buy an interest in any company (a “Company”) managed by Renew Capital or its affiliates. Such an offer to sell or solicitation to buy an interest in a Company may be made only by the delivery of subscription agreements relating to such Company and specifically delivered by Renew Capital to the recipient thereof. Investment in a Company is open solely to “accredited investors” (as defined by the SEC under the Securities Act of 1933, as amended) and, in addition, is intended only for sophisticated investors who meet the investor suitability requirements described in the subscription agreements and who can bear the risk of investment losses, including the potential loss of their entire investment.
Investments with Renew Capital are speculative in nature and involve a high degree of risk. Renew Capital invests in companies located and doing business in sub-Saharan Africa. Investors should understand and be willing and able to handle the risks of investing in such frontier markets, which are more significant than the risks associated with investing in securities of U.S. companies or in other developed countries and include the risk of total loss of an investor’s entire investment. Investors should consult with their independent financial, legal and tax advisors to determine whether any particular investment or investment strategy is appropriate for them. Renew Capital does not make any recommendation regarding the appropriateness of any specific investment opportunity for any specific investor.

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