As with global impact investment trends, practice remains nascent in Africa but has the potential to grow and significantly contribute to the continent’s economic growth and development objectives. African governments have historically supplemented public spending with inflows of official development assistance
(ODA) from developed and other emerging markets, in order to meet the basic service needs of their populations. The 2008 financial crisis and the resultant volatility of ODA inflows left the governments of many African economies. Vulnerable to unpredictable fluctuations in available public expenditure. Studies have shown that declines in ODA lead to subsequent declines in public spending on development priorities, which could potentially jeopardize poor households’ability to access necessary basic good and services6. Therefore, there is ample room for private sources of capital to play a larger role in improving access to these services in Africa.
Over the last decade, private financial flows7 to Africa started to rise, growing from
63 percent of total external resources in 2002-06 to over 70 percent in 2010-148. As private flows increase and traditional ODA declines, African governments will need to harness this increased private investment to address socio-economic challenges by finding market-based solutions that address the priority areas of the African Union Commission’s (AUC) Agenda 2063.