 This is the Rethinking Impact Capital in Africa, Private Credit as an Asset Class. And I'm joined by our esteemed colleagues here, the stars of the show. We have Aubrey Ruby, who is co-founder of Tofino Capital and Insider PR. We have Abelé Okeke, who is managing partner of Altica Partners in Africa. And we have Saad Sheikh, partner at Enco Capital. And so thank you all for being here today. And I know from your esteemed careers that you have actually been preparing your whole lives for this moment. All right, so let's dive in so that we can hear as much from our panelists as we can today. But the truth is, with a small group like this, we'd love for it to be more interactive. We can actually do that with this size group. So please feel free to, if you want to raise your hand, please feel free, we're not gonna do the note cards for questions or anything, we want this to be interactive. These panelists are here for you. But just to start, I wanted to note, we're here to talk about private credit as an asset class. And Saad shared some data with me in preparation for this. And he really shared that Africa needs around 130 to 170 billion dollars annually to bridge its infrastructure gap and generate sustainable growth of 5% per year or more. And this really creates an immense opportunity for private investors. And yet the contributions of private investors remains notoriously low. And so this is where adequately priced private capital can demonstrate real results. And I think we can agree that the growth burden can't be on African governments alone, that the private sector has to play a meaningful role. And so in terms of impact, I know our panelists will say, as we prepared, our panelists will say that Africa is arguably the best region to showcase, implement, and measure impact. Specifically, once you inject impact capital into a company, there's multiplier effects that really brings numerous additional benefits to the community, in addition to just the jobs that it creates. And so I wanna start with asking each of you, really, if you could share some case studies where private credit investments have made a significant impact on communities and businesses in Africa, and what lessons can we draw from these experiences? Sure, I'll start. Thanks a lot. I'm sad, as Alison mentioned, and I've been running private credit or an aspect of private credit in Africa for the last 10 years. The learning outcome that I've seen is Africa is a nascent economy as general continent-wide asset. The challenges that Africa has is more predominant to what frontier markets have, and they're kind of edging towards the emerging markets as well. However, what we do realize is Africa's always seen as a little bit of a stepchild for a bizarre reason that I can't give you the answer to, being in this industry for 10 years. Now, some of the examples that I can share that we've invested in, let me go into healthcare. We were talking, Alison and I were talking about it a few minutes ago. We invested in an AIDS and malaria drugs manufacturing business in Uganda. The number of deaths from AIDS and malaria back in 2009 were over 2 million a year, and these are curable diseases. We're in, you know, past the noughties, and these are very curable diseases. But Uganda and the East Africa region was really struggling. The simpler quality chemicals plant that we were one of the first investors going in turned that situation around. The deaths dropped by 95% in the local kind of jurisdiction. That manufacturing became an epitome of world-class manufacturing capabilities on the continent. Yes, it got technical support and manufacturing capabilities from India, but we do believe in tech transfer. Yes, Africa needs tech transfer, but it has phenomenal talent. So one of the things that we were able to achieve was reduced deaths. The other thing that we were able to create was improved talent and capabilities across the continent. Lastly, in 2018, we listed it in the local stock exchange. So the global investors that previously had no idea about Africa as an example, JP Morgan, actually was taking a look at it. They'd never looked at Uganda before. So that really opened the doors to an opportunity in Uganda. So that's kind of one of the examples that I can share. But another one that I can go into, again staying on the healthcare theme is Liberia Mother and Child Care Clinic. This is private and government support, so PPP project, very mid-scale, nothing to elaborate. But we were the first Mother and Child Care Clinic in Liberia, in Monrovia, to support NATO post-NATO and even mental health post-delivery. And the amount of trauma that we saw through that was immense. We then partnered with the American Heart Foundation, and they would send surgeons for two weeks a year, and they would perform complex surgeries within our clinic. That immense amount of impact is very hard to create, but this is very low-hanging fruit in Africa. Because of the lack of infrastructure development, there are very simple problems that you can solve through adequately priced and structured capital. Sometimes we've seen capital go into Africa that is misaligned. Investors lose out, entrepreneurs lose out. And that's what we as practitioners on the African continent feel, needs to be corrected. So Allison, I hope that... No, that's fantastic. Thank you. And other, I know that when we were talking in advance of the session, we really wanted to get across the case studies and the feeling of when you invest private credit in Africa that you're not just helping the company or helping the community. So I'd love to hear from you too, other examples. Go ahead, Abel. Yeah, so I think the first thing I want to say is, this asset class is made for impact. And what I mean is, when you look at other asset classes, you look at private equity, where you have an investor injecting equity, actually buying a stake in the African company, and then turning around the business, selling on it for a few years, and then selling and exiting. In order to generate the return for the investor, they have to exit. And exits in Africa are not very easy. So you have a situation where an exit might end up going to a larger multinational. So there's actually a wealth transfer out of Africa to a larger multinational. When we look at the companies we look at in Africa, we are looking at supporting local businesses and basically trying to create African-owned and African-run champions. So we would go to them and say, hey, look, you need to grow. The African banks don't understand your business or you're just a bit too small for them for many of the banks. And you're giving them capital, you're helping them with their business, you're giving them some technical assistance, you're helping them with the banks, with trade, with marketing, a little bit similar to what you see in the PE space. But at the end of the day, they understand that they're using your capital to grow and in return, they need to give you back your capital plus a return. And in some cases, you could get an equity kick or a warrant and so on. And that way, you can clearly see and you're actually generating and that company may end up exporting and growing bigger and bigger and actually becoming a multi-country champion. And the impact and the wealth is still within the community and in country. In terms of examples, I mean, there's so many examples that come to mind. If you look at, we're looking at a mango producer in Ghana who's been producing mangoes, second generation producing mangoes for 15, 20 years and exporting it to Europe, to Germany and to Austria. And they came to us looking for a $7 million loan. And first of all, they went to African banks and African banks, well, mangoes grow on trees here all the time. What you do is just sell mangoes. What are you coming to us? We're not interested unless you can give us a lot of collateral on your farm, on your house, on your relatives' properties as well. So African banks tend to kind of over-collacterize on transactions. In this situation, all they wanted to do was to export was to create a processing plant where they could actually export the juice and the pulp as opposed to just exporting mangoes. So in the European Union, they're very sort of strict rules as to how fruit can look. And if the fruit has a different shape or has lots of spots on it, it won't be sold in the top tier supermarkets. So this is a situation where, coming in with capital, with private credit, helping them to create this facility, creates more jobs, brings in additional value, local value add, and it allows them to gain a higher price for their product as opposed to just selling mangoes. Anybody can export mangoes, but actually being able to create this, you know, purie or concentrate and being able to export is transformational for these communities. So you see a situation where not only are you providing jobs in the community in the facility, but you're, I mean, I remember the woman who actually runs the canteen, the staff canteen suddenly has more work to do and can employ more people and her kids don't have to help her on the business anymore. Her kids can now go to school. So it's just endless multiply effect. And you can see that very clearly. For every single dollar you put in, you can clearly calculate and measure what the impact is. So let me just say a little bit about my background and how I see what we do as impact. So I've been active in African markets for over 20 years. Now, when I started, think about a VIN diagram. All investing in Africa was impact investing, okay? Now, as the world of impact investing has changed over the years, those diagrams have kind of pulled apart to some extent, whereas some people view impact as about process and others are about just the outcomes in way. So I now these days, I spend a lot of my time not actually on the debt side, on the equity side, I'm with a venture fund. We have a small venture fund seed stage focused on frontier markets with a simple premise that we invest in markets where venture capital per capita is less than $10. Okay, so the impact is huge because it's a capital poor environment. That doesn't mean people don't have cash under their mattresses. That doesn't mean that there's not richness in other ways, but from a formal capital investing perspective. And just as a comparison, for example, so venture capital per capita in Nigeria is less than $10. It's about six, six and a half. You know, venture capital per capita in India is over 35. Okay, in the United States it's a thousand, right? So even some of the more advanced ecosystems have grown and have more penetration. Now, why do I care about this? And why does debt come in at the level that I even work in? Okay, one million Africans turn 18 every month. This is the problem for our generation, next generation in addition to climate change. Those are the two major problems. There's fundamentally not an opportunity frontier for them. Okay, so where are those jobs gonna be created? Now, the whole region creates one million a year, which means an 11 million deficit. So I back the entrepreneurs that are gonna change the change makers that are creating the jobs tomorrow. Now, what do they need in addition to equity? Any company, healthy balance sheet needs equity and debt. The average interest rate across African markets is 18 and a half to 23% depending on the market if you wanna borrow. It is prohibitive to grow a company with that in many ways. So some of the entrepreneurs that I deal with at the very early stage, even into series A and B are using equity for debt purposes, for working capital basically because they don't have working capital facilities. So one of the things I've helped to do is to figure out ways and structure and saw it and I've talked about this in local currency structures at his last job in Nigeria, for example, Naira dominated local currency so that founders and companies in their growth stage can access affordable debt, which is what's gonna allow them to scale. So the real message here is that I think we're all motivated by impact, which is I choose to do what I do in a very straightforward traditional structured LPGP structure, none of these other things, but in this space, I think we all have to come together to think how to expand the access to capital and if you're worried about risk, debt makes the most sense. Here, senior, I'm more willing to take risk. I'm an early stage investor in frontier markets, but for those who are on the sidelines and need to think about mitigating downside a little bit then debt's no brainer and I also like Saad fundamentally do not understand what has retarded the growth of the private credit market or has an asset class in Africa over the years. You can do dollar denominated, senior lending, it makes zero sense, except for some kind of sustained racial bias and misunderstanding of risk. So let me stop there and we can jump in with other questions or audience things as well. Yeah, as I mentioned at the beginning, we'd love for this to be interactive. If you have questions, please let us know. So we've talked a lot about, oh, did somebody raise it? Yeah, go ahead. Hi, I'm Crystal. I have two unrelated questions. Yeah. That's it, how well is the question time? I'm curious, you talked about equity and the conventional thinking is that there's so much money in private credit relative to equity equals to the exit challenge. I'm curious to hear your thought on the exit challenge. And then also if you're seeing innovative alternatives to assessing credit risk other than collateralizing more than conventional credit ratings. So I can speak to this. I mean, if you look at private debt as an asset class compared to private equity in African markets, no, it's not dwarfed. It's not what it should be from normal ratios in normal markets. There's, I don't know, that's correct me guys. There's probably nearly 25, 30 African private equity funds and then the big, let's say 12 manage over a billion and a half to three billion, the DPI's, the ECPs, these guys. The number of debt funds for Africa, what are they, three, three, four now? Bluebeak, Vantage, I mean, so it's highly underdeveloped. In the venture debt space, there's no one. I actually don't think the economics work very well and I'm not arguing for venture debt. I'm arguing for working capital funds which are different things. And there are some innovative blended finance structures that I've seen to deal with working capital funds where someone in the kind of public sector, DFI or aid agency can put a first loss guarantee in, actually convince the bank to lend to someone to create a working capital facility for a company that, again, in my space may not be three years old yet. It may not have the track record yet. When you're talking about individual credit in the market, that's I think where more alternative credit scoring has been pioneered with Rufintech players, less so on the company side. And I mean, I'll just say it, African banks are some of the most profitable in the world. And I sometimes bemoan the fact that in English we only have kind of one word for bank because it makes people from the outside think that they're doing something different than they are. Especially if you grew up in a market like the US where retail banking is at core, like I'm from Denver, right? Many entrepreneurs, their first loan is from First Bank, Colorado, that's only in Colorado. It's a retail bank at its core service and small business. Most African banks at their core buy government paper and they lend to 12 corporates. And that's why they make a lot of money and retail banking is expensive. And so, yeah, you're dealing with a dearth of credit in the market, but I will. Yeah, I completely kind of want to build on what Aubrey said because the premise I think, and if we've gotten that right, fair enough, but if we've not, please correct us. The premise that there's more debt in the market than equity, I don't think stands to the effect that, for example, in the US, you've got 125% debt to GDP. In most African markets, you've got less than 10%, right? Now, when you look at debt from SME systems, there's negligible. For exactly the reasons that Aubrey's mentioned, banks have no appetite to lend. They are on an IFRS nine system where they have to provision for every dollar they give out to SMEs up to 20% and then kind of there on end, it can go up to 100%. So if you're starting to provision any capital you're deploying, you're putting your risk-weighted assets into negative territory. The regulator will come and shut you down. So as a consequence, what do banks do is exactly what Aubrey said, 75 to 80% of balance sheets are government paper. The rest of the 20% that is left is going to corporates that then go to the Nestleys. The Nestleys of this world will come to Africa and say, ooh, I wanna borrow from local banks. I don't wanna get capital one in the US to lend to me. Even though they can borrow from capital one, they'll go to Axis Bank in Nigeria and borrow from there. Now, what is left for the SME market is negligible. Not even 1% of the balance sheet is going into SME space. Now, SMEs employ 70 to 85% of the workforce on the continent and they have no access to capital. Some of the equity investors that do go in do plant the capital but then put their agenda on the table. And that is a killer to the business. And I was actually talking to, if you allow me to put an example on the table, without naming them, one of the larger hospitals in Nairobi was acquired by 56% by one of the defunct private equity funds out of Dubai. They wanted to cascade down their strategy into the business. That business went from $20 million revenue in 2006 to $2.5 million of revenue. Private equity came and killed the model. Now, this is barbarians at the gate all over again without the asset strip. So they didn't strip the assets. They didn't create any value. Neither for them, they went defunct. They didn't create any value for the underlying business. The entrepreneur now comes back who was kind of led to rot on the side and he had built the business but he was bought out in sideline. He comes back and he acquires the assets back. Huge discount. It was sold at $100 million valuation in I think 2008, 2009. And now a sense on the dollar. But private equity guys who now acquired it at zero value. So to them it's of no value. They're not concerned about how many lives that hospital is saving. They're just considered about how many dollars we're gonna make out of this transact. As Abelle mentioned, the private credit strategy is very closely aligned to the business model. You are counting the dollars the business is making and you're figuring out where our dollars as investors are going to increase the eventual cash flow of the business. So we're all for the most part cash flow investors. We want to build out the business to a level where the cash flows of the business increase and out of those increased cash flows we get benefit out of it. And I think that's a fair play of the situation. But the lack of that situation is rampant in Africa. As Aubrey mentioned, less than five proper credit fund managers operate in Africa, in a one point five billion dollar person market. And then if you look at the size of the economies it makes no sense, zero sense. So being so undercapitalized on the debt side we have all experienced kind of the hardware at least I have that equity is very difficult to make work in Africa. Now VC is a different play. VC is there is a secondary market that larger players if you go and seed you go and pre series A. Which is your answer to exit for me. I'm early in early out. Someone else come along. They'll deal with that problem. But then that bag of excrement is being passed to somebody else. We're not passing that bag to anyone else. We're saying get the business to a level that you can sustain it. That sustainability is where we're creating the impact. You're creating impact on the cash flows. You're creating impact on the job creation that you've created. Not for five years you've created jobs and then firing 80 to 90% of the workforce when you're exiting. That's not the play here. The play here is that sustainability through job creation that you've enhanced the model, enhanced the business model. That's what we're completely relying on. We're cash flow investors. We're looking at from an ESG perspective the environmental social impact the governance and how after us the governance is going to control this business in a way that it is going to create longevity. In addition to that we're a gender lens investing kind of savvy. So we look at the gender two x initiative and we focus on how to create more efficiencies for women and not a glass ceiling for them. How do we encourage more women at the board level? So we're doing that. In addition to that we're doing resource efficiency. How much of energy utilization was in the business prior to our investment? And what are we changing by investing in that? We follow the TCFD framework, the greenhouse gas emissions, the reduction in all of that and or conversion of conventional power to solar power. So one of the examples I gave earlier of the mother and child care clinic had a diesel generator because power is just not so efficient in Africa. They had a diesel, big diesel generator. We swapped that out for solar panels and batteries. That was funded through technical assistance. So that's where philanthropic capital can come in but you also need to create capital that is commercial. You give that return to investors so they come back for more. I think that's what Africa lacks. People think that philanthropic capital is the way to enter into Africa but lose the bigger picture. We feel if you return capital to investors give them a return they'll come back for more. That's what we do with the private credit. And the other thing I think why this asset class is so important is we're now seeing private equity investors coming to us and saying, hey, we've got this, we're three years into our investment in this African company. They can't get credit to grow. They need leverage. And they're going to the African banks and the African banks are like, well, where's your land? Where's your collateral? Or we don't understand your business. I mean, for example, if you're in a fintech space, your digital lender, African banks are not really interested in lending to you because you're disrupting their market, right? So you've got these, and some of these private equity investors and North American investors, I mean, we have people in Silicon Valley who've invested in these startups and new businesses which African banks just don't understand. They're not traditional, typical, natural resource type of businesses. So you've got a situation where the private equity firm is nervous that no one is going to buy this business from them at the end of their fund life unless their companies get credit. We've also got an odd situation which is very different to what you see in Europe or North America where we have African banks calling us up and say, hey, we've got this really good company, right? It's really good. Then they're never going to default. We can give you all their track record and their history. You can see everything. We don't want to give them money. We just want to keep, we want to manage the salary accounts. We want to give all their employees credit cards. We want to do the effects. We want to do all the trade finance, but can you give them a loan? And then we go, why don't you give them a loan? We can't waste, we don't have enough dollars or we're trying to raise capital. We're servicing the bigger guys who can pay us in multiple income areas. I'd much rather lend to a startup like a Nestle or someone like that who's going to pay me in 10 different areas of my bank than lend to a guy who's making cookies like for children's parties. That's not my interest. So there's such a big gap in the market. It's a great asset class for if you're sort of dipping your toes into Africa for the first time. And then I think someone asked something about credit ratings. So the interesting thing is when you're assessing, if you're sitting in a developed institution and you're looking at developed markets and you're assessing credit risk of any particular country or any particular company in, so if you're assessing credit risk of a German electronics company, you would look at the credit rating of Germany that you look at and then you price on a premium on top of the sovereign. You look at the sovereign and you're priced on top. In Africa, you can't really do that because there are many corporates that borrow better and cheaper and they're better run than the sovereigns. So if you think, hey, look, I mean, remember when Zambia was going through a tough time on the credit markets because they had so much debt at the sovereign level from China, nobody wanted to invest in Zambian companies. But we some sort of great companies that were, we saw this company that was exporting blueberries. They've been exporting blueberries to France and the UK to the biggest supermarket chains until the last 12, 14 years and they were getting paid on time in London, in Pound Sterling and banks didn't want to lend to them because they're in Zambia. I'd much rather lend to them than the Zambian government any day, right? So there needs to be, there's a reverse view on credit, I mean, on looking at credit, which is kind of a little bit difficult to explain to people who do, you know, if you speak to someone that does like asset back lending or CDLs or CDS over here, it's like a complete different way of thinking about things. Yeah, one important distinction I want to bring in is, again, I just talked about the different, the use of the word bank and what you understand as a bank, but also private equity. Private equity in Africa is not an LBO situation. They're not coming in and levering up companies. They're growth equity and these are our friends and it wouldn't done well, that's right, but you're there to grow a company and you can't grow a company purely in a sustainable faction with just equity. And so, again, part of their goal, if it's done right, there's a right marriage there. They're there to access debt as well so the company can grow. Most of the companies are highly under leveraged that they, what they could be. So it's a different case of what, you know, private equity LBO raiders kind of story of the United States and other markets. So just wanted to kind of shape that idea out there. Yeah. I just focused on entrepreneur formation. Are you guys aware of any promising initiatives to do like investor education and to like create systems that would create the type of financial institutions to better serve kind of companies? What do you mean by investor education? What kind of investors? Like, what are the financial institutions that better serve the needs of investors? I'm not sure. I mean, the issue is this. Straight up, I've been doing this for 20 years, 20 plus years. I spend all my time trying to educate other investors. I put my own money and look, there are 2,500 people at Socap and this is how many people we can get. So it's, I'm not sure. There's all kinds of US government. I've seen six different programs. This is educated investors that road show. Listen, as soon as you start saying invest in African markets, only certain people walk through the door. So many of you in this room already invested. I already know you. Like, it's preaching to the choir all the damn time. So it's very hard. There's been some experiments and I think they need to be more that remove the geography from the marketing. So for example, like before OPIC, the overseas private investment corporation became the USDFC. By the way, I live in Washington so I'm going to could speak to some of the US government agencies. They did an effort on a road show where they did one time, you know, they've done, you know, look at these Africa energy deals or whatever. Then the year after, they're like, let's just do this experiment and let's just do a renewable energy road show, right? And all the deals we're going to show are in Africa but we're not going to say that until people come to the room. It's a big difference. So I think you have to do things like that. The problem is the money that can fund that kind of thing and the programmatic players that can fund that kind of thing take now in this administration at USAID, there's something called Prosper Africa that's supposed to actually go mobilize US investment for African markets. Africa is in their name. So they can't like do that kind of experiment in a way. So, you know, I think those are the challenges and I'm really not sure the space that we operate, not me as a venture investor now, but these guys, if you're trying, let me just say it this way, independent of asset class, if you're trying to raise a fund over $50 million, even over $30 million, you are dependent on the DFIs, the Development Finance Institutions. They are king makers, they market make, they've done that for private equity in Africa 20 plus years ago and they still play an outsized role in the importance of the sector. If you're going to raise a debt fund, a private equity fund at a meaning economic size, you need them. So, you know, in a way, like we're talking about educating the investors, but the universe of DFIs is like 30 of them. So we've been actively trying to educate on private debt as an asset class for years and we don't really know why it's not working, but it's not. So that's, or it's slow to work or whatever the case, but DFIs we've been pushing. So I don't know if that answers your question. I think one of the things we talked about in preparation for this panel was that the misconception that investing in Africa is overly risky, right? A lot more risky than other places. So I'd love to hear from you about is investing in Africa really as risky as it seems? I'm guessing not. And why or why not? Because I think that's part of the barrier, right? So tell me about that. Well, let me just jump in to say that's why we're talking about debt. It is the easiest risk downside mitigator, period. Like that's why we're talking. And then to frame the conversation, I know both of you guys have this. There's real risk, number one of which is currency risk, by far. The Naira to the dollar is what, 1,015 or something like this. You know, currency risk by far, that's why you're gonna have debt funds or other things that are trying, you're gonna try to hard currency to nominate it. Abela just talked about blueberry export in pounds. Currency risk is number one, real risk. Then there's a whole slate of misperceived and mispriced risk. And that's why we do what we do, because we think we have a way to capture a real value, create value because we can push away what we see as the mispricing of the risk. So, I mean, just on that point, I think there's that elevated perception of risk. I think Moody's did a, there's some good data out there. Some Moody's and also Avca which is the Africa Aventure Capital Association. If you look at default rates, specifically in African credit, they're actually, they're extremely low. If you compare them to US, to North America, to Europe, actually the, I think the region with the highest default rate was actually Eastern Europe. For some reason, I don't know why. The default rate in North America is actually higher than Africa. It's a Moody's study that is about energy infrastructure projects. And its default rate is 9% North America, 3% Africa. Yeah. So in North America, you have the chapter 11 process. Many African countries, they haven't gone round to thinking about that. So it's pretty easy to kind of say, hey look, sorry, can't pay you back. In many African countries, just that concepts. First of all, there's so many deals and just because there's such a, there's so little amount of capital, there's a filtering process, natural filtering process. And most of the good deals, typically the good deals get done. People don't do silly deals, right? There's also a cultural thing as well. In many African countries just owing money. And maybe it's also, I don't know, maybe it's colonial. Maybe it's like, why would we borrow money from you in Europe or in the US or your money? It's also that. And that's what, there's a lot of extreme structuring. There's a lot of structuring. The minute you say, I'm lending to this African company, I mean, when I talk to LPs here, the first question is, oh, what if it goes to court? How do you handle litigation and all that? Well, we've structured it so well that we're thinking about the downside from day one. We're not even thinking about the upside. We're crossing all the TEs with all the dots. We're thinking about every single thing that could go wrong. Even a coup happening. What happens if there's a coup? What happens if the new president says, oh, I want this company, it's mine? We've put in all kinds of insurance policies and everything else in there. So just so well structured that we think about all these different things and the default rate is extremely low. So yeah, so I think the data's out there. The one part of Africa credit, which is extremely risky, which the data shows is risky, is when you lend to a state-owned enterprise, right? So if you lend to a company that's owned by a specific government or you lend to a power company that's owned by the government, government can do what they want to do. So when you're looking at private businesses, real businesses that generate jobs, it's not as risky as it seems. So if I could just take that question on perceived risk and give you a couple of examples. The Naira's devalued like crazy. And you've just mentioned it went from, what I've seen from 260 is when I first looked at it. It's over 1,000 now, right? But if you compare that to what the Venezuelan currency's done, what the Turkish lira's done, what even the Pakistani rupee's done, right? These are non-African geographies, yet. The moment an investor goes into Asia, they're not going to say, oh, hang on a minute, we've got Cambodia, we've got Vietnam, we've got Pakistan in these geographies, ooh, I'm not going to invest in Asia. No, they still go into Asia bearing in mind that the last six defaults on sovereign debt happened in Asia. Three sovereign debts happened in Latin America. Only two have happened in the whole of the African continent and still everybody's freaked out about Africa. So there is this elevated perceived risk of Africa that none of us can give you a solid answer why that exists. The perception of that perceived risk is what we're trying to diminish. And as Aubrey said, if you want to dip you toes, if you want to go into an asset class in Africa that you want to take less risk, then here's a product for you. It's led and led and led with down risk mitigation. Be it a sovereign, be it a guarantee from the US state, be it a guarantee from multilaterals in Africa themselves backed by the G7 governments, right? Be it a further de-risking mechanisms through MIGA platforms or other sovereign risk de-risking mechanism. When you layer all of that, the way that we invest we'll take that sovereign risk and equate it to the underlying business. So let's say it's triple B minus right now in Nigeria. So let's say we take a business with exporting to the US and we rate it triple B minus. We then put a 50% guarantee from the DFC on it which is triple A, which is now triple A, right? They've been downgraded as well. So you layer that. Above that you've got a multilateral guarantee that is A plus, right? So like the Islamic Development Bank or the IDB or these types of institutions, they are A rated, they're better than the US government. You take that and above that you've got some layer of de-risking mechanism through local collateral. You're not taking 200, 300%, you're taking probably 20, 30, 40, 50% of collateral. So you've got these layers embedded in it. That total de-risking mechanism to your question is then granting that asset a rating of, let's say collective rating of A minus. So it's significantly superior to the triple B minus rating that Moody's has for Nigeria. As a consequence, you're getting A minus risk that in US, Europe, unlevered, is probably gonna give you 6%, 5%. Even right now, 6% is the rate that you can get with Fed rates of 5.25. However, with an A minus rating, you're getting 15% gross return in Africa. My question then becomes, what is not to like? Where is the hindrance for investors to get over that line and see that significant de-risking platforms significantly improving the rating, still having that great return guaranteed for the most part because this is debt, this is self-liquidating. Why would you then shy away from that? That's the risk mitigation. That's the perceived risk versus actualized risk that we have to bear in mind. And the second area is the risk reward that you're gonna get on this. Those are two areas that I feel investors like and to your question, who's educating the investors? Aubrey, I can tell you, stood up with the BII's head of credit and said, why don't you do more of private credit? And that is one institution that has now gone and developed a private credit arm, but that is the only DFI in the entire industry that has a focus on private credit. If the DFI's are the market makers for Africa, you can clearly see the problem that it's creating. Lack of private capital is the next stage of the problem. If you want to see Africa as a developing market, which the Biden administration is really pushing for, then you've got to mobilize this private capital. You've got to encourage this private capital. And what we're trying to figure out, and I was having this conversation with Allison, is why aren't they even coming to the table? What is holding people back from a conversation around A-risk with a 15% return, creating significant impact? What are we missing? Yeah, it's just unwinding like the zillion years of narrative and all of that. I was just in London this past week and there was exchange like this. And Senegal is a former minister of budget in Senegal. And then there was Argentinian on the panel. And he says, can you please teach us how to default? Cause like why on earth, how can you keep doing this and still getting investment? It's really amazing. That's what he kept being is like, let me show us how to default like this, man, to the Argentinian. And it was like a good laugh because, and he can run through. He's like, when I was restructuring in Senegal, we had the same rating as Greece at that time, but he had to borrow at 2% of point more when they did a Euro bond. Like the pricing on this is mispriced. This is fundamentally mispriced. And now also look at the African economies are quite simple to understand, right? So most African economies generate their foreign currency from one or two natural resources. It's Nigeria, it's oil. If the oil price goes down and stays down for a long time, there's a chance the currency is likely to devalue. How do you figure out the currency of the Vietnamese currency or the Cambodian currency or all these other, and most current, all the currencies are quite complex, right? So these economies are not opaque. I think people just, we just see people using the wrong lenses to analyze the risk and just assuming. I mean, I spoke to a CEO of a large Middle Eastern fund and he said, I really want to do this, but my CIO just watches too much CNN. And every time they see, oh, there's a coup in Burkina Faso. He has no idea where Burkina Faso is. He's just like, oh, I'm not doing this Africa thing. Put it on ice for now. So that is just what we need to, we need everyone's help in this room to go out there and explain it. And we're sitting in the world's largest, deepest, most sophisticated credit market, right? So some of the things that we are doing in Africa and a very simple structures, right? They're credit, it's credit 101. So we would like to see the North American and European institutions lead in the credit space. Well, Abela, you mentioned that you need everyone's help. So I want to actually capitalize on that and ask each of you, how can investors and other stakeholders, the people in this room, how can they collaborate to accelerate the adoption and impact of investing in Africa? Give them some homework, bring them along. I mean, again, from my point of view, to just broaden and thinking about different asset classes across the board and that the impact that they have, period. In markets, where credit and where equity and venture money is still scarce. It's still scarce. So, and therefore like, whether it's a philanthropy that has an arm that can actually make LP investments, for example, whether it's people's personal capacity, there's all different sizes. I mean, I have a small fund. We take small investments from private LPs. I think, so there's just a variety of players and I think it's pushing the dialogue just to be more front and center, that bringing efficient capital markets is transformative in the countries that we focus on. And if you don't have those, then people, economies continue to stay informal, cash stays under the bed. I mean, all of the things that we see and the inefficiencies hold back growth. I'd say, I think it comes down to asset allocation as well. Be really serious about asset allocation. So, we see a lot of investors who have an emerging market bucket and they've done tick, we've done emerging markets. But actually, how much of Africa is in that emerging markets? And most of the time people say, oh, we have a South African bond. Well, you know, that's North Africa, right? Even if you, and even if you have a fixed income strategy, you've invested in multiple African bonds. I'd say 99.9% of the top African companies have never issued a bond and are very unlikely to ever issue a bond in the next 10 years. So, you're missing a whole market. So, if you think you've invested in a couple of African bank bonds or a couple of sovereign bonds, you're not even seeing the market. You're not seeing the market at all. So, I'm saying be deliberative about about your emerging market allocation. If you don't want to do an emerging market allocation, do it in the impact allocation. If you don't want to do it there, do it in the ESG allocation. If there's no need to greenwash in Africa, it's obvious as soon as you do stuff, you see the impact, you see everything. So, I think if you're consultants, people who listen to the consultants, if a consultant's saying do emerging markets, think about how much of that emerging market is in Africa. You can do so much, do all your Argentina, do all your Brazil, do all your Vietnam, but Africa and not just South Africa. It's a great question what we can leave with any allocator sitting in the room, right? So, I think one is I completely agree with the ballet around the allocation piece. And what I want to- But I think the problem is there are no asset allocators in this room. Yeah, probably, yeah. That is the problem. Oh, we have one, woohoo. Awesome, one left, one left. So, again, I think that's the big issue. And you can continue, but I think we have to think about that. Yeah, exactly. While we have one allocator for which we're very kind of grateful, the idea is this should attract a lot more allocators because to your point, which is how do we educate investors? Well, have a dialogue with us. It should be around kind of platforms that have done well, accomplished returns. Why aren't allocators having a real conversation with them? From our side, we've got a hedge fund that does sovereign debt, that by the way has no impact. It only creates money or money. So, if you want to see that and you want to do sovereign, have a conversation, but we're real one, right? Most allocators that we've spoken to just are like, yes, we want to know more, send us more information about Africa. Yes, it's very exhilarating, but then no action. It's that call to action that we think is lacking. Then the second thing is, okay, if you've done your hedge fund allocation or if you've done your sovereign debt allocation, which by the way, I think is a bad idea right now, given emerging market sovereign debt is just on a massive decline. So is, by the way, the bonds in the US. The question that you ask is, how do I then allocate capital and diversify my portfolio or get more access to the verticals that Bella mentioned impact or ESG through this dialogue with managers who are efficient, who operate in this market. That dialogue will help you understand that there's significant value to be created and that value you don't have to work too hard for it. It is really just barely scratching the surface and you're creating that value. So I think if allocators have that real motivation to this Africa strategy, and Africa strategy can't just be sovereign. It has to be deeper than that. I think that will go a long way. And what that will then encourage is local players. And by the way, we've been kind of harping on the global industry to come in to Africa. The first question that global industry will ask is, what about African capital? There's a lot of African local currency capital sloshing around, what's that doing? There's a motivation now within pension funds locally to mobilize that capital in Pan-African projects. Kenny is doing that, Rwanda is trying to do that, Nigeria started it. But if we're able to attract foreign investment from developed markets, we have a real story to narrate to those local players and say, if we can attract international capital, what's stopping you? So you're helping us galvanize capital which otherwise is really just blocked. So I think that the ask here today from the allocators or whoever the thought leaders are here is put that story out there. Do some critical thinking around the asset class. There's a lot of CNN perceptions or BBC perceptions. Look through that. Walk through the journey with us who have real boots on the ground, who've done this, who've lived the experiences, right? And we've got war wounds to share, the currency war wounds, how we've gone about and figured out a way to hedge our currency without going to the hedging market. There's swap mechanisms available. Let's have a conversation around that. So I think there's a lot of perception that we need to, those barriers we need to bring down. And we hope that these types of conversations will help. I think the SoCAP community too can do something which is to like avoid knee-jerk reactions. So in the markets that we care about, for example, if you care about, like I'm just bringing up the ESG part and those kind of things, like me as an American, at some point I'm gonna log into my 401k and it's going to say, do you want your 401k invested in fossil fuels? And you will say no. And not recognize that that has massive issues and developmently slowing issues in African markets. Because if there are 600 million people without reliable access to electricity, you are not going to create reliable base load for national grids without natural gas. You are not, especially in countries like Nigeria. You cannot do base load with solar in the same way. So if you have a knee-jerk reaction on ESG and then not think through some of these issues, and this is more of a SoCAP discussion. And those, you know, me checking a box on my 401k, that means that like the asset allocation behind the scenes dramatically changes what's available for the space in which larger infrastructure projects investing takes place in African markets. So I think it's incumbent to kind of have those real conversations and not have knee-jerk reactions to certain things that are more traditional or mainstream ESG, mainstream impact, because it may not have the impact that you think it will have in the markets that need the impact the most. I think that goes back to Saad's critical thinking idea, so that's great. I think we have time for one question, and I saw one over here, so we'll go there. All right, thank you. My name is Kwabnam Boatan. And listening to you all, I get the sense that there could also be a systemic problem besides the evangelizing that you're advocating for. I've seen in the past, the Minister of Finance, Afghanistan, for example, write an article about we are living in a post-Second World War economic architecture, and it doesn't, to be near to the benefit of Africa. Just one of your perspective on, is that really true? Is there a systemic issue beyond some of the concerns that I've been shared? There are zillion systemic issues. 3% of the world live in small landlocked countries. 33% of Africans do. Automatically making the cost of production and transport higher. Automatically making a lot of things uneconomic. And it's just a matter of, those are systemic obstacles that we are trying to overcome. There's efforts to get a larger market, the integration, all of that. We are talking about countries like Nigeria, Egypt, Zambia, bigger, but many, many African countries are, Sierra Leone has 4.5 million people, Namibia is less than two. I mean, there's so many small, small countries as well. Now that doesn't mean that there aren't interesting opportunities because of the different assets those markets have, but we are dealing with, if you're doing a cross-border project, and you have four political risk issues across the border, you might have different currencies you're dealing with. So, it's 54 countries. It's systemically a product of all of those challenges, and that doesn't even begin to talk about, let's say, the bias among rating agencies or whatever you wanna dig into, or the structure of everything from the Bretton Woods institutions and who votes on them, that's just, there's so many, you can't even begin, but we at least need to make progress where we are, and that's what we're talking about, I think, and bridging a gap from where there's a capital concentration, which is North America and the US, slowly, slowly in Asia, but this is compound interest, so why do we have capital accumulation and concentration to where there's opportunity of the future? No, I think we're not here to try and fight the systemic issues, as has always said. I mean, there is capital in this asset class in other parts of the world, right? I mean, look at India private credit, it's growing, look at, it's big, right? We're just saying, look at us, this is real, this is happening, and I can actually think before the pandemic, we were starting to see some early signs of European private credit investors looking into Africa because there's a big issue, there's lots of deals, there was short of deals, there's lots of covenant light lending going on in Europe, and we were thinking, this is the time, but actually what happened, the pandemic just created a lot of issues, lots of companies in Europe required restructuring, so people just kind of like, okay, let's just carry on doing what we're doing, focusing there, but yeah, I think we're just saying, look, this is low risk, lower risk, this is good returns, this is impact, you can see all of this, you can count it, you can measure it, you can feel it, and there are lots of good stories that come out of it, and African banks make money, I mean, they make so much money, look at that, compare African banks, equity results with European, Eastern Europe, all the parts of the emerging markets, they do very well, you try and get a loan in an African bank, see what their price here are. No, there's a McKinsey study on African bank profitability, anyone can access it, check it out. And on systemic risk, I think that's a fair question, right, so let's kind of quantify systemic risk, a container from China to Kenya costs $40, a container from Kenya to Abidjan costs $4,000, what's the underpinning problem there? The underpinning problem there is Kenya cannot transact with Abidjan in any other currency but dollars. Now the Africa is trying to solve that, but these are the systemic risks that we're having to deal with in Africa. You don't have the same issues of, and by the way, one of the Chinese projects that is ongoing is this kind of single belt road initiative, right, and they wanna basically just cut across the whole continent from the east to the west and really bring down or create efficiencies across those processes. Between Uganda to Tanzania, the railway system does not work. There is a railway line, but the system does not work and that's just gonna neglect lack of capital. We're not even going there, we're not trying to solve those larger issues that are kind of bubbling up that need to get resolved, right, the pipeline that had to be laid between Uganda to Tanzania to export oil out of Uganda was a $12 billion project that Russia wanted to do and it's on kind of the back burner now. But all of these things, yes, it's not efficient. So the cost of exporting or extracting oil out of Qatar is $11. The cost of extracting oil out of Ghana and Uganda is about 60, 70. So yes, those are all systemic issues. That's why in Nigeria I think it's about 25 or something like that. So you need oil prices to be above that as Ibele kind of started with, there are a few commodities on which the governments rely. Copper is a big commodity for Zambia. When it goes up, Zambia does well. When it goes down, Zambia is not doing well. It's diversification of those economies that we're talking about and that will come through industrialization. If you don't industrialize Africa, you have a problem on your hands with the demographic that is coming up, 18-year-olds not having access to jobs. That is going to become a systemic problem that worldwide, exactly. You need to stop that, curb that issue right now by being smarter about how you take your capital and deploy it. The US wants to do more in Africa because they see this as a boiling point. They see this as also a territorial war, but let's not go into politics. But there are a little bit of both. Now, there is the positive aspect that we're seeing, but we're not seeing the capital cascading down. What we're, I guess, suggesting is, let's have that dialogue around private capital cascading down into industrialization into creating value on the continent. That blueberry example, that mango example, they're perfect examples of creating value. We're looking at an apparel manufacturer in Ghana that exports to the US. Yeah, exactly. And 80,000 women work there. It's huge, huge infrastructure play. And it's bringing dollars into the country. Again, what's not to like? Nancy Pelosi was in that facility. Again, apolitical, right? So I'm not saying what is good, what is bad, but I'm just saying that that has brought in interest from the US. But capital flow is still very small, right? So we're there to provide that capital, but we need larger pools of capital to access to be able to do that. I think that's great. Thank you all. I think the lesson here is we need to bring allocators to the table, but we also talked about how there are a number of different asset classes, a number of different ways you can invest in Africa and why private credit is actually an excellent way to invest in Africa, especially right now.