Why East Africa is a darling destination for Impact Investors…

Introduction

In the summer of 2018, I was opportune to spend few months in East Africa, majorly Kenya and Uganda.

As a Kiva fellow, I was required to travel far and deep, to hard-to-reach areas meeting hard-to-reach borrowers.

During this my adventurous sojourn, I learned a lot about the east African financial inclusion space, and there is one strange discovery I made: There is a lot more happening in this space when compared to Nigeria.

Kenya and its capital city Nairobi are the center of East African impact investing. As the economic and financial capital of East Africa, Kenya boasts the largest concentration of impact investors and the most impact capital disbursed. I did not expect this, Nigeria being the giant of Africa, with a population of more than 200 million, I would not expect either Kenya or Uganda to be able to compare with Nigeria in this aspect. l have written about the East African financial inclusion space in my previous articles.

In Kenya and Uganda, for example, high impact microfinance products like clean energy loans, agriculture finance, micro pension and more are already easily accessible and affordable.

In Kenya and Uganda, for example, microfinancing has already developed from just a loan house to more all-inclusive finance.

There are a lot of Impact Investors doing wonders in Kenya and Uganda. These include international NGOs, Government Agencies, and private companies. Some of them also have a presence in Nigeria, while a lot are not. And the few ones that already have a presence in Nigeria, they are not doing as much work as they are in East Africa.

Companies like One Acre Fund, Fenix International, Impact Carbon, Green light Planet, Finca International and more entered Nigeria recently. These companies have been doing wonderful work in Uganda and Kenya for years. Kiva Micro funds, for example, have more than twenty field partners in Kenya and Uganda, while they have just one active field partner in Nigeria. And this brings the burning question, why do these investors prefer Uganda, Kenya to Nigeria?

If I were an impact investor, I would ordinarily prefer a location with the highest number of my target demography, so I can create maximum impact unless there are some other factors that would either hinder or facilitate my work.

Through research, my personal experience and discussion with the stakeholders, I was able to identify some of the reasons why impact investors prefer East Africa:

 

EASE OF DOING BUSINESS:

Base on my personal experience, it is easier to do business in Kenya and Uganda when compared to Nigeria.

Let us start with the Visa. Processing the Ugandan visa was seamless. They have a user-friendly and well-organized visa processing portal. My e-visa was approved within 48 hours. In addition, Visa stamping at the port of entry was straight-forward. The visa fee was 50 USD, and that was the only money I paid. Can we say the same for Nigeria? Uganda, for example, has specialized visas for NGO volunteers, making it easy for volunteers to do their work without going through the long process of getting a work permit. In addition, they have an East African tourist/business visa, with this, you can tour the whole of East Africa with just one visa. Is that not beautiful?

Besides the visa processing, it is generally easier to start a business in Uganda and Kenya.

Business registration can be done within 48 hours.

I met a Nigerian business owner while I was in Uganda.

He told me how easy it is to get the necessary documents needed for his restaurant and importation business.

I attended a workshop in Entebbe, Uganda.

It was organized by UNDP. I met many Impact investors at this workshop. Out of curiosity, I asked most of them the burning question on my mind: Why are you not interested in investing in Nigeria, despite the huge potential promised by the biggest black nation in the world?

From this discussion, I discovered some of these investors have tried to penetrate Nigeria in the past, and most of them had a discouraging experience.

A certain, Miss Kate (not a real name), founder of a clean energy finance company narrated her ordeal in Nigeria. In her words;

“My trouble started with getting my visa. There was little or no information online. It got worse at the point of entry. I made sure all my travel documents were intact, yet almost every immigration official I met with were asking for “something”. Madam, what did you bring for us? It was really frustrating. Registering my business took forever. The consultant in charge of this was not straightforward. He kept asking for more money. I just had to abandon everything. One thing I know about Nigeria is: You cannot get anything done without going through the back door”

According to her, things were easier in Uganda.

Most of the investors I interviewed believe Nigeria is a difficult terrain for foreign business owners, especially those not solely driven by making a profit.

 

STABLE, FRIENDLY POLITICAL AND ECONOMIC ATMOSPHERE:

The economic and political atmosphere of Uganda and Kenya are more stable when compared with that of Nigeria.

Uganda, for example, has had the same president for the past 34 years.

Similarly, Kenya, even though they have had different presidents in the past years, yet there is stability. You can predict what is coming.

Nigeria on the other hand, the political and economic have not been really stable. 

Currency devaluation today, border closure tomorrow. Expansionary fiscal policy today, Contractionary tomorrow.

With Nigeria, there is a certain kind of uncertainty in terms of government policy. You cannot really predict what would happen next.

In addition, the Ugandan government, for example, seem to keep an open arm for Impact investors. They have many policies in place to encourage social investors.

There is a tax holiday for any company that deals in clean energy or any other environmental protection business.

Above are the major reasons why Impact investors prefer East Africa.

And that is why East Africa is ahead of West Africa in terms of microfinance and financial inclusion. In fact, it was reported that when Central Bank of Nigeria wanted to launch microfinance banking in 2005, they sent delegates to Uganda to study their microfinance banking model.

 

WAY FORWARD?

The ease of doing business in Nigeria has to be improved drastically.

And this has to start with Visa processing. There should be an online portal where foreigners can easily apply for a tourist or business visas. In addition, Visas have to be properly categorized, so investors are able to get just the appropriate visas.

We would all agree that establishing a business in Nigeria can really frustrating, the bureaucracy can create an awkward bottleneck. The Nigerian government should review the business registration and licensing procedure. It should be made seamless as much as possible. In addition, the licenses should be categorized appropriately. In Ghana, for example, there is a special license for FNGO(Financial profit-making NGO). We need to be more innovative with our policies, to make doing business in our great nation as easy as possible.