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The COSEF story

COSEF story

Introduction

COSEF is an impact investment company that invests at the nexus of financial inclusion, gender equality and climate in high growth and high impact sectors of agribusiness, manufacturing, clean or renewable energy, education, tourism and hospitality, health and retail, through leveraging support of business development organizations as catalytic funders and technical assistance partners, so as to accelerate achievement of the SDGs in Africa.

 

Background

There is a $42bn financing gap for female entrepreneurs in Africa. These entrepreneurs are unable to attract loans from commercial banks because they lack adequate collaterals and are thus considered very risk. Private equity would have been a perfect option, but unfortunately private equity firms target larger investments of $10m-plus, particularly in the telecoms, consumer and commercial banking sectors, leaving out small growing companies which are the drivers of the African economy for they make upto 90% of the businesses. A few private equity firms making smaller investments target tech startups because they offer best exit opportunities, which yield substantial profits. And yet these make up less than 15% of the businesses on the continent. Moreover the undeveloped nature of African capital markets makes exiting investments extremely difficult.

 

Hence mezzanine debt, which has flexible terms is the only available long term financing option for women owned and led small businesses. However most investors consider Africa a very risky market and mezzanine a risky form of capital, and hence require de-risking instrument for their investments.

 

Technical assistance is equally important for these enterprises to grow, and if it’s to benefit many entrepreneurs on the continent, then there is need for a cost-effective delivery model.

 

With mezzanine debt as the primary long term financing option for women entrepreneurs, there is need for innovative partnerships to not only de-risk investments to attract more funding to close the financing gap for women entrepreneurs on the continent, but also to cost effectively grow the businesses.

 

COSEF supports women owned, led and focused small businesses working in 7 of the fastest growing sectors and engines for sustainable development of agribusiness, manufacturing, clean energy, education, tourism and hospitality, health and retail, through leveraging support of partner business development organizations as catalytic funders and technical assistance partners.

 

Thus through working in partnership with business development organizations not only as providers of catalytic first loss capital, but also as sustainable technical assistance partners, COSEF presents an innovative solution that; (i) de-risks investments, crowding in substantial funding for financing female enterprises on the continent, and (ii) cost effectively grows the businesses to create impact at scale.

 

COSEF’s vision is to mobilize atleast $5.4bn in private investments for women owned, led and focused businesses working with partner business development organizations and asset managers investing in other sectors on the continent, closing the $42 billion gender inequality gap in access to finance by atleast 13%.

 

Investment sectors

COSEF invests at the nexus of financial inclusion, gender equality and climate in agribusiness, clean energy, manufacturing, education, tourism and hospitality, health and retail, 7 of the fastest growing sectors and engines for sustainable development in Africa.

 

Agribusiness

Agriculture is a core sector of Africa’s economy, contributing over 23% of GDP at current prices and accounting for over 48.5% of total exports. The industry has provided a basis for growth in agricultural processing. 

 

We also focus on primary sustainable agriculture, and on companies supplying smallholder farmers with climate resilient and sustainable farming inputs and technologies.

 

Manufacturing

The manufacturing sector’s contribution to the continent’s GDP is growing steadily and shall lead to the creation of a number of quality jobs. We focus on the following subsectors with high growth potential (i) Textiles and Clothing-The sector is labour-intensive and so can provide strong job-creation benefits; moreover, it has scope for innovation in terms of both fashion and development of industrial textiles; (ii) Leather and Leather Products-The rapid expansion of the livestock sector provides the basis for a large supply of hides and skins which are highly regarded for their quality characteristics; (iii)Wood Products-Eastern Africa has the wood resources to develop a thriving furniture and building products industry targeted at the regional market itself; (iv) Pharmaceuticals-Africa has the highest disease burden of any continent but by far the lowest level of available medicines. The continent has a rich biological basis, over 80% of which not been subjected to standard scientific evaluation. Given that 67% of new medicines introduced worldwide from 1981 to 2002 were derived from natural sources, the region has a largely unexplored potential resource base to both develop manufacturing activity and to simultaneously generate major positive externalities for the region’s health care systems; (v) Industrial materials-The construction materials sector has been growing rapidly due to induced demand from infrastructure development and urbanization. This includes a diverse set of products, including ceramics (bricks, tiles and blocks), cement, structural steel products, basic hardware (wire, nails, etc.), and various chemical-based industrial products.

 

Clean or renewable energy

The energy economy in Africa is largely focused on collecting, distributing, and consuming wood fuels (wood and charcoal) to satisfy household demands for cooking. As much as 90% of all primary energy consumed in Africa is biomass based. Virtually, all of Africa’s wood fuel comes from forests-over 90% of all round wood harvests are for charcoal and fuel wood. As can be expected, much of the demand for fuel wood is satisfied through deforestation. Deforestation greatly affects measures to broadly affect the carbon balance in biomass (and soils) which are important in mitigating climate change. Such measures broadly involve conserving existing biomass resources, increasing carbon stocks in new forests, and substituting of wood products for more energy intensive materials. Because of the devastating effects of deforestation, African governments are advocating for ban on the usage of firewood and charcoal as household energy sources for cooking, leading to increased demand for alternative sources.

 

Concerning electricity generation, Africa has low installed capacity, mostly consisting of hydro power. Access to electricity in Africa is very low (much lower in rural areas). Annual demand for electricity is growing rapidly, and this has led to the emergence of innovative companies providing on and off-grid energy solutions.

 

Education

Africa’s population is projected to double by 2050, and there is a growing demand for quality education to meet the needs of this expanding population.

 

Government alone cannot meet this demand, and this has led to emergence of private schools and higher education institutions to fill in the gap, by offering affordable and high quality educational services.

 

Tourism and hospitality

Africa is fast emerging as a hot tourist destination for travellers from across the world as air connectivity and new road networks improve accessibility to the continent’s remote natural tourist spots and attract visitors from all across the globe. Clearly, improved air and ground connectivity has resulted in an increase in the number of travellers visiting the African continent for leisure and tourism.

 

A record 67 million tourists visited Africa in 2018, up from 58 million in 2016, the African continent is ranked as the second fastest growing region for tourists. According to a recent report by World Tourism Organisation, the number of tourist arrivals in Africa will more than double to 134 million by 2030.

 

As the number of airlines flying into Africa continues to grow, Africa is sure to attract a growing number of both leisure and business visitors in the coming years. This has led to emergence of small and large hotels to accommodate visitors.

 

Health

Africa has a high annual population growth rate, and hence there is enormous pressure on the African governments to provide health care services to the people. Less than 40% of the population have access to public health care facilities.

 

This has led to emergence of companies redefining accessibility and affordability of health care services, such as healthcare service delivery (i.e. private hospitals and clinics), support services (i.e. diagnostic and laboratory services); and supply chain and logistics to health financing (e.g. private insurance schemes).

 

Retail

Africa has the fastest rate of urbanization in the world. More than 40% of its population is currently living in urban centers. Additionally, Africa has as many cities with one million inhabitants as North America.

 

A growing population and larger cities translate into big opportunities for retail, leading to increase in the number of local and international brands. Wholesale and retail are among the largest contributors to the continent’s GDP.