SDG, an investment, consulting and advisory group that focuses on investing in and building scalable businesses in the sustainability sector, has been operating in Africa and other emerging markets since the 1980s. The SDG team is highly experienced at bridging the gap between the requirements and expectations of international investors, organisations and businesses, and the realities and difficulties of operating in emerging markets.
Simon Littlewood, CEO of SDG, says: “The sustainable development of Africa is important not just for the continent, but for the entire planet. With projections that, by 2050, one in four people in the world will be living in Africa, it is a market that businesses and investors cannot ignore, but which few currently have exposure to. Our range of funds and other products aim to reduce the risk for international investors, whilst providing the funding for businesses and entrepreneurs in Africa to be able to grow and develop the continent sustainably and fairly, generating wealth creation within Africa for all Africans, and promoting the aims of the UN’s SDGs.”
Lemao Ditodi, Tip One FD, says: “TIP One’s ability to impact and facilitate economic transformation in South Africa, while at the same time offering attractive returns to investors, is most compelling. In partnering with SDG and its global footprint, we aim to raise capital not only to invest into TIP One, but other high impact projects across the continent. Our ability to list more of these instruments meets international investor requirements for transparency, governance, impact reporting, market pricing and regulatory comfort.”
Littlewood continues: “In addition to our funds and bringing investors, we use our international network to identify business partners, markets, and trade opportunities for our projects in Africa. Working with TIP One strengthens our presence on the ground in South Africa and gives us access to experts in BEE. Our growing network affords us access to an increasing range of businesses and investment opportunities to service the needs of international organisations, businesses and investors looking at Africa.”
TIP One is supported by the African Financial Group (AFG), which has 20 years of experience in investment and advisory work in Africa, initially with a focus on healthcare, before broadening across the market. AFG has in-depth knowledge of impact projects and economic transformation. Dr Gil Mahlati, founder and chairman of AFG says: “The combination of SDG’s global knowledge and networks, with the on-the-ground presence of AFG, and TIP One’s model makes for a compelling and powerful impact proposition.”
The SDG team has been active in the sustainability sector since the 1980s and has witnessed the damage of development when it is not carried out sustainably. Africa’s current population of 1.2-billion is projected to grow to 2.5-billion by 2050, with urbanisation rising from around 30% to the world average of 50%+, meaning cities and towns will need to be built for an extra billion people – double China’s experience. Providing the additional food, power, education, jobs, infrastructure, housing, water, financing and other resources, at a time when the world faces the consequences of climate change and dwindling natural resources, presents one of the greatest challenges – and opportunities – for financiers, entrepreneurs, businesses and technologists.
“As one of the earliest foreign investors in China, the SDG team experienced the transformation of China from a poor, primarily agricultural economy to an economic super-power through urbanisation, industrialisation, technological adoption, financial innovation and entrepreneurship,” adds Littlewood. “Africa is going through a similar surge of development and wealth creation, but at an accelerated pace due to its higher population growth, advances in technology, and the global commitment to sustainability.
“Despite a 1.2-billion population, annual start-up investing in Africa is estimated at only $2-billion. Its financial system, private equity and venture capital (VC) industries, and securities exchanges are relatively undeveloped. A significant amount of recent VC funding into Africa has been in fintech, recognising the need and opportunity.”
Transformation Investment Portfolio (TIP) One is the first of a new generation of Impact instruments listed on the ZAR X stock exchange. It is designed to facilitate, fund and transform ownership in the SA economy and drive financial inclusion. TIP One is building a portfolio of BEE schemes that are in turn invested into listed companies. These investments can be acquired at compelling prices given the large BEE discounts that typically exist between these schemes and their underlying investments.
Given the historic imbalances in South Africa, government policy aims to increase black participation in the economy through promoting BEE schemes that are designed to raise black ownership of the economy. It is estimated that BEE Schemes own R400bn of listed equity in South Africa, but these schemes often suffer from a lack of capital and liquidity, despite been valued at significant discounts to their underlying holdings. By building a portfolio of these Schemes, TIP One is not only providing liquidity into this market, but also unlocking value for existing owners. This creates an attractive combination of impact and returns. It drives financial inclusion by giving smaller black investors that do not normally have access to such BEE Schemes the ability to participate in a portfolio of them in a transparent, low cost and easy to access vehicle.