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Building a bridge between Western investors and companies in Africa

 

A native of Minnesota, Laura Davis is a partner with RENEW based in Ethiopia. RENEW is a company that is helping facilitate investment within Ethiopia as well help train the next generation of financial professionals within in the country. Prior to her work at RENEW, Laura worked as a consultant for Mayo Clinic and World Vision. Additionally, she worked as the media liaison and consultant for Mercy Ships, managing relationships with local and international journalists and acted as a cultural ambassador in Japan’s Ship for World Youth Program. With an accumulated work experience of 15 years in business relations and charity, she talked to Samuel Getachew of The Reporter regarding  RENEW, on training Ethiopia’s financial professionals and why foreign investment can be a force for good for Ethiopia. Excerpts:

The Reporter: It has been five years since RENEW started operation in Ethiopia. It is a new type of investment firm that describes itself as one that encourages people to focus on “opportunities in developing nations rather than on problems”. Tell me about that?

Laura Davis: Our philosophy is to focus on opportunities rather than on problems. Why? Because this philosophy is at the heart of real entrepreneurship and innovation. Anyone can point out something that is wrong. But legends – the people who write the pages of history – see opportunities where others see problems. So this is what we ask of ourselves and the people that choose to work with us. 

One thing that is unique about RENEW is its angels network. Share with me some of the highlights of its activities?

The Impact Angel Network (IAN) is a very critical part of our overall strategy at RENEW. The network is made up of more than 100 families from the US, Canada and part of Europe and Asia. The angels rely on RENEW to do much of the heavy lifting of an investment, but many are quite engaged in selecting which companies we should focus our time on, and then once we invest in those companies the angels can really help open up new markets because they are very well connected. Members of the IAN join monthly deal calls, come on semi-annual trips to Ethiopia to meet companies and review their portfolio, and meet once a year for the National Gathering.

It's a very powerful group of advocates that want to see Ethiopia and the rest of the continent become strong, sustainable and prosperous. Yes, they want a good return; any investor does. But they also want to make sure that return doesn't come at the expense of people, or the communities in which they invest. They want to make sure people working at the companies in which they invested are being treated well, and that the companies are being good stewards of the environment and their surroundings. 

RENEW recently graduated a dozen emerging leaders on financial literacy – a pioneering program in the country. Tell me about the program?

The CFO 100 program is one of two new programs recently launched by RENEW. We are very excited about both. The CFO 100 program is designed to address a major skill gap in Ethiopia. What we say is, that for years, CEOs in Ethiopia have longed for someone they trust to help them understand and manage their company’s financials. Someone who understands the business, can read through financial reports, and turn that into information needed to make critical decisions. Someone who demands quality and timeliness from their team.

Someone who can identify risks weeks before they become problems and make course corrections to avoid cash shortages. Someone who can plan, build budgets and set up systems to control a company’s most critical asset – cash. This is a Chief Financial Officer (CFO) and the CFO 100 program is designed to build an elite class of finance professionals in Ethiopia.

One of the noted supporters of RENEW in Ethiopia is Global Affairs of Canada. Why is such an investment worthy to make from the perspective of Canada?

Global Affairs Canada (GAC) is a very innovative development agency. Because of Global Affairs Canada and USAID, RENEW and the Impact Angel Network have become one of the most active equity investors in Ethiopia and created and supporting more than 1,500 jobs across our portfolio companies. The reason both organizations chose to support RENEW's public-private partnership is because it addresses a major development challenge, and becomes sustainable over time. The development challenge is that in Ethiopia, and many countries across Africa, SMEs cannot access growth capital: They are too large for micro-finance, too small for traditional private equity funds and too risky for banks. Who will finance SMEs, which studies have shown are the best creator of jobs in frontier markets?

No one. This is where RENEW's collaboration with GAC and the IAN fill the missing middle in the capital market in Ethiopia and fund qualified companies, that no one else can or will. GAC also allows RENEW to provide world-class business training and growth support for companies, which would normally only be available for very large companies.          

One of the successes of RENEW is its component advising investors to come to Ethiopia. Tell me about that?

RENEW is building a bridge between Western investors and companies in Africa. When we were starting RENEW almost a decade ago, we discovered that there were many people in the US that wanted to invest in companies in Africa, but they didn't trust the infrastructure to deploy meaningful sums of capital. So RENEW sets up a platform in country to services these investors. Our reporting, M&E, communications, analysis, portfolio management and other services should be no different than what our clients receive from their wealth managers or investment firms in California, New York and London.  

What are some of these companies that RENEW facilitated in their investment in the country?

Every investment is about the entrepreneur first, then the business. We say investing is like getting married, and we really see our investment work as a long term relationship. That said, getting married is not always easy - each side needs to make sacrifices and changes. But overall, we have been very pleased with the entrepreneurs we have invested in (married :). You can see all of our companies on our website, and they include Mama Fresh Injera, Desta (textiles), dVentus (clean energy) and METAD (specialty coffee). 

As you know, Ethiopia continues to emphasize the need for more foreign investment to the country rather than foreign aid. What are some of the direct benefits of foreign investment to Ethiopia as it emerges as one of the fastest growing economies within the continent?

There are benefits and drawbacks with joining hands with a foreign investor or partner; I believe the benefits outweigh the drawbacks, but only if both parties enter the relationship with their eyes wide open. My best advice to companies exploring a partnership with a foreign investor or partner is to make sure you know what you are getting into. This will help the benefits win. The main benefits should be a more diverse and strategic board of directors, a more accountable management plan and team, and clear and consistent management systems, and relationship/market expansion. These collectively should grow the top and bottom lines of the company.