In our rapidly evolving global market, the choice of fund domiciliation has become an increasingly salient issue for both investors and fund managers looking for efficiency, stability and transparency. The shifting geopolitics introduced by the Russia-Ukraine war, Brexit, Trumpism and the pandemic have reconfigured Africa’s place in the world and driven its rapid ascendency. These geopolitical issues have highlighted the fact that political risk is not idiosyncratic to Africa and the so called “emerging markets”, but rather that they are features of markets everywhere.
As African economies emerge from this crisis, it is clear that local and traditional sources of finance and investment will not be enough to fuel and grow economies. Governments will have to deploy and use different methods and sources of investment to return to the growth trajectory that will enable the continent to achieve the African Union Agenda 2063; The Africa We Want. Financial and other incentives will need to be ramped up to make African economies more competitive to attract the international capital that will inevitably be looking for a home to invest in.
With mutual ambition shared by African managers and international investors, it will be international finance centres (IFCs) like Jersey – that can demonstrate a quality service, sophisticated expertise, commitment to the highest standards of governance and regulation, and a global reach – that will have the potential to play an increasingly vital role in sourcing overseas capital securely and efficiently to ensure Africa can achieve its future aspirations.
Jersey’s relationship with Africa is broad, deep and based on shared interests and one area with strong growth is sustainable finance, specifically impact investing. The Global Impact Investing Network’s (GIIN) Annual Impact Investor Survey 2020 sized the market at a staggering US$715bn, and this deep pool of funds presents a golden opportunity for Africa.
In countries like Kenya, there is a wide range of companies solving societal issues through profitable and scalable models, therefore making these firms magnets for investors searching for sustainable investment opportunities. Brighter Life, a Kenyan company domiciled in Jersey, for example, managed to raise US$65 million in June 2020 enabling more than a million people living off-grid in Kenya to access d.light solar home systems and related solar energy products.
South African managers account for the seventh largest pool of capital globally, in respect of Jersey-based fund promoters. Using Jersey for South African fund assets is also on the rise; in 2021 statistics reported a 38% year-on-year increase. They are ahead of the curve with these opportunities and the past two decades have seen South African private equity expertise facilitate investment into retail, consumer, real estate and infrastructure investments across the wider African continent, typically partnering with Development Finance Institutions (DFIs) from the UK and northern Europe to drive economic development with often spectacular returns.
Jersey Finance’s report, ‘South African Fund Managers: Trends in Fund Domiciliation and Capital Raising’, pointed to the fact that many DFIs are now allocating extra budget towards ‘emerging markets’, and that investors who have been in Africa know the opportunity and its rewards, and therefore remain committed to supporting that growth. These days, it is considered much riskier to be outside the African opportunity than to be inside it, actively participating in its economic acceleration.