by Lionesses of Africa Operations Department
Last weekend we highlighted that William Warshauer of Technoserve wrote (here): “Since 1960, the world has spent roughly $5.7 trillion on foreign aid…Of that enormous sum, how much has been effective in fighting poverty? The shocking truth is that we don’t really know.” “…we don’t really know.” - How is that possible?
Hot on the heels of our Lionesses of Africa 10-year Impact Report where we showed clearly what we had achieved through incredible support from our truly inspirational network members, our millions of supporters, and our deeply determined sponsors (see here), we note that the World has been shocked into recognising (at last) that if we just assume everyone knows the truth and therefore don’t need to shout about it, someone else will shout their truth and fill the vacuum. Once these views are bedded in, it is incredibly difficult to change. As the Policy Institute of King’s College, London, in their study on the false claims made and believed during the Brexit campaign (here), state: “Attempting to change people’s views…just with a more evidence-based description won’t be enough, and misses a large part of the point.” One simply can no longer be reactive. Whoever shouts first and shouts loudest, this becomes ‘The Truth’.
Nature abhors a vacuum.
Why is that relevant to us?
For many years now we have been told by those who hold the money, that cash and investment for the SDGs is coming, it is just taking time to trickle down, and that in fact:
“Blended Finance fills the gap.”
“Blended Finance is scaling rapidly.”
“The SDG faces a supply-side issue” (i.e. there are apparently not enough African Female Founded companies that are investable or lendable).
“Blended finance delivers equitable results.” (male or female, it is simply the same - meritocracy wins)
“Public finance should de-risk private investment.”
The problem (as we keep on saying) is that we have simply not seen this on the ground and each time we have spoken to certain players in the development world, rather than prove through transparency and publishing the proof that we are wrong, we have felt almost as if we were on the receiving end of a David Cameron put down (see here). Yet, for us, every time the data gurus at Africa: The Big Deal release another report on gender investing, women founders or female CEOs across Africa get a tiny 1%-2% amount of VC investment (here, P.45). Why is there this disconnect?
If female-founded firms really are so risky, given their well-known impact on jobs and communities, is that not where DFI money should sit as per point 5? The SDGs are not moving (some even moving backwards), is it not time we tried something different?
2X Challenge has moved a total of US$33.63 Billion to support gender equality and women’s economic empowerment since 2018, (here), but little has flowed into the first criteria, that of founders, yet if you invest in a women-founded business, all other criteria flow effortlessly from that. They will have far higher female leadership levels (Criteria 2) and female employment (Criteria 3), both of which build as a knock-on stronger local communities, there is also a larger chance that they will have female-owned firms in their supply chain (Criteria 4) and certainly a far larger chance that their products and services (Criteria 5) will significantly “…enhance(s) well-being of women/girls and/or drives gender equity”.
So why are women-founded businesses considered so risky that no one will touch them? Before anyone shouts we are being unfair - 2% of VC funding can only be described as a rounding error (1% in 2024 - $21million), likewise 2% to women CEO-run firms, and it is not a celebration to announce that if women add a man to their founding team there is an extra 5.5% gifted (yes it does seem like charity), whilst the balance of 93.5% (a whopping $2.1 billion) goes to male-only founded companies across Africa.
Whilst one could argue that VCs have their own mandate so need to be left alone to deliver for their LPs, as we wrote last weekend, (here) 43% of 2X investments were done indirectly through Criteria 6 - FIs (banks and funds), vs only 3% for Criteria 1 (that’s us). Yet as Publish What You Fund (‘PWYF’) shows, “It is not possible to track on-lending for most FI investments…Where investments flow through FIs, it’s difficult to attribute specific funding amounts as a 2X Challenge investment…"
So it is left to others to dig deep to find the truth and whilst ‘commercial confidentiality’ is often cited as a reason for a lack of transparency, as PWYF shows: “…in many instances the concept of commercial confidentiality is being used as a catch-all reason for not disclosing information, even where the concern may not legitimately apply.”
Or claim ‘data collection in and across Africa is so difficult’, but AfDB (one of our strong supporters) came in an impressive 2nd for transparency both for sovereign and non-sovereign DFIs (list here), and in the Aid review took the top spot (here) for sovereign with a near 100% result and a decent 13th for non-sov, so that’s totally wrong too. (For anyone wondering US AID - number 25.)
And so we find, thanks to the UN Special issue Policy Brief, (here) that whilst we have been assured that the trickle down effect is coming due to the above comments about the success of blended finance, instead there has been a clear failure:
Myth 1: “Blended finance fills the SDG gap”.
The Report found: “Blended finance is far from bridging the SDG financing gap, mobilising $15 billion annually.”
Myth 2: “Blended finance is scaling rapidly”.
The Report found: “Blended finance volumes have remained stable over the past 15 years.”
Myth 3: “The SDG faces a supply-side issue”.
The Report found: “The SDGs face significant demand-side constraints, including a lack of robust public investment pipelines.”
Myth 4: “Blended finance delivers equitable results”.
The Report found: “Blended finance is skewed towards lower-risk sectors and regions with higher returns.”
Myth 5: “Public finance should de-risk private investment”.
The Report found: “De-risking alone does not significantly scale private investment, nor does it ensure that resources are allocated effectively to high-impact projects."
The report also highlighted: “The absence of reliable metrics for additionality makes it unclear whether PDB participation adds value or merely reallocates public resources toward projects that would likely have moved forward without public support.” - which brings us back rather nicely to our previous article (here) that highlighted the DFI funding into a Singapore based premier global agricultural trading house (seriously - this large company couldn't get finance?), who was very kindly awarded cash flow support to purchase from smallholder farmers in Africa many of whom our Lionesses would have been supporting, training, and purchasing (at fair prices) from in the past. Note ‘in the past’ - no business, female or male founded, can compete against that cheap finance. It should be added that this was a follow-on investment by the DFI, the previous one in 2023 being for “capital expenditure (land, building warehousing facilities, machinery, and equipment) and…for working capital” (here and here) - just so we are clear, that covers the entire business process, nice!
As one of our members in this exact space (and is looking for investment to expand) wrote to us recently: “Thank you for always rooting for us women in business, the Lionesses of Africa that are scrambling for space to compete with large multinationals that are vertically integrated!” Scrambling for space? This is not space but Oxygen that is being squeezed out.
In a world where social media is king, in a world where Truth is not binary but more nuanced, in a world where millions depend on single decisions and where according to PWYF, transparency of actions and results from the development world is mostly lacking, we owe it upon ourselves to be as transparent as possible, to openly admit where mistakes were made and to show why we invested as we did because the knock-on effects were so positive. Our actions simply cannot continue to be hidden under a bushel.
Stay safe.