Business Stages “Death Valley” Politecnico di Milano

Impact Investing in Southern Africa: A Case Study - Mozambique: Governments Role in Aiding Social

Startups/Enterprises Navigate the Early Business Stages “Death Valley”

Ahmed Adham Ahmed Eid Orban | POLITECINICO DI MILANO

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Politecnico di Milano

Industrial and Information Engineering Faculty

Master of Science in Management Engineering

Sustainable Operations and Social Innovation

Impact Investing in Southern Africa: A Case Study –

Mozambique:

Governments’ Role in Aiding Social Enterprises Navigate

the Early Business Stages “Death Valley”

STUDENT: AHMED ADHAM AHMED EID ORBAN

ID NUMBER: 863215

SUPERVISOR: IRENE BENGO CO-SUPERVISORS: FEDERICO

BARTOLOMUCCI & NICOLA BALLERINI

Academic Year 2018-2019



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Table of Contents

Abstract .......................................................................................................................... 11

Astratta .......................................................................................................................... 12

Executive Summary ........................................................................................................ 13

Introduction .......................................................................................................................... 13

Impact Investing in Southern Africa and Mozambique............................................................. 14

Methodology ......................................................................................................................... 15

Cooperation for Social Good Programme Model ..................................................................... 19

Case Study (Susamati) ............................................................................................................ 22

Conclusion ............................................................................................................................. 23

1. Introduction ............................................................................................................ 25

2. Methodology .......................................................................................................... 31

2.1. Research Aim ............................................................................................................. 31

2.2. Research approach and question formulation ............................................................. 32

2.2.1. Research Approach ........................................................................................................................32

2.2.2. Research Question Formulation ....................................................................................................33

2.3. Data Collection methods: ........................................................................................... 36

2.3.1. Desk research .................................................................................................................................36

2.3.2. Field research (Case Study) ............................................................................................................37

2.3.2.1. Participation in the life of the group: ...................................................................................38

2.3.2.2. Direct Observation................................................................................................................38

2.3.2.3. Informal semi-structured interviews ....................................................................................39

2.3.2.3.1. Sampling ..........................................................................................................................40

2.3.2.3.2. Interviews’ structure .......................................................................................................43

2.4. Data Analysis ............................................................................................................. 45

3. Literature Review .................................................................................................... 49



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3.1. Social Finance ............................................................................................................ 50

3.2. Impact Investing ........................................................................................................ 52

3.2.1. Definition ........................................................................................................................................52

3.2.2. Impact investing, traditional investments and philanthropy ........................................................55

3.3. Impact Investing System ............................................................................................ 57

3.3.1. Social Entrepreneurs, Social enterprises and Social Entrepreneurship .........................................57

3.3.1.1. Definitions, Differences, Drivers and Objectives ..................................................................57

3.3.2. Impact Investing in Southern Africa ...............................................................................................63

3.3.2.1. Potential and development context .....................................................................................63

3.3.3. Mozambican Context .....................................................................................................................66

3.3.3.1. Historical and present contexts ............................................................................................66

3.3.3.3. Economic development and foreign investment .................................................................67

3.3.3.4. Development landscape .......................................................................................................68

3.3.3.5. Impact Investing in Mozambique .........................................................................................72

3.3.3.6. The Ecosystem’s Elements and Challenges ...............................................................................74

3.3.3.6.1 Social Enterprises .............................................................................................................77

3.3.3.6.2. Impact Investors..............................................................................................................80

3.3.3.6.3. Intermediaries .................................................................................................................84

3.3.3.6.4. Government ....................................................................................................................85

4. Cooperation for Social Good Programme Model (CSGPM) ........................................ 88

4.1. The programme’s Objectives ...................................................................................... 89

4.2. Inspiration and Similar examples ................................................................................ 91

4.2.1. VIA Water .......................................................................................................................................91

4.2.1.1. How it works .........................................................................................................................92

4.2.2. IPEME (Instituto para a Promoção das Peguenas e Médias Empresas) ........................................93

4.3. Stakeholders’ Analysis ............................................................................................... 94

4.3.1. Government (Primary stakeholder) ...............................................................................................97

4.3.1.1. Interests and needs ..............................................................................................................97

4.3.1.2. Capacity and Motivation ......................................................................................................98

4.3.1.3. Possible Actions to Engage Stakeholder...............................................................................99

4.3.2. Team of Experts (Primary Stakeholder) .........................................................................................99

4.3.2.1. Interests and Needs ..............................................................................................................99

4.3.2.2. Capacity and Motivation ....................................................................................................100

4.3.2.3. Possible Actions to Engage Stakeholder.............................................................................100



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4.3.3. Social Startups/Enterprises (Primary Stakeholder)......................................................................101

4.3.3.1. Interests and Needs ............................................................................................................101



4.3.4. Investors and Fund Managers (Key Stakeholder) ........................................................................103




4.3.5. Research Institutions (Universities & Research Centers) (Key stakeholder) ...............................105




4.3.6. NGOs & Intermediaries (Key Stakeholder) ..................................................................................106




4.3.7. Sponsors (Secondary Stakeholder) ..............................................................................................108




4.3.8. The Public (Secondary Stakeholder) ............................................................................................109




4.4. Critical/Key Success Factors...................................................................................... 110

4.4.1. Internal Resources .......................................................................................................................114

4.4.2. Intra-organizational and Inter-Organizational .............................................................................116

4.5. Workflow ................................................................................................................ 116

4.5.1. Innovation Ecosystem and Representation: ...........................................................................122

4.5.2. Relationship between Literature-review, Interviews and Programme .......................................124

5. Case Study (SUSAMATI) ......................................................................................... 128

5.1. Susamati’s Project Summary .................................................................................... 131

5.2. Background ............................................................................................................. 131

5.3. Project Plan ............................................................................................................. 131



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5.4. Target group ............................................................................................................ 133

5.5. Challenges ............................................................................................................... 133

6. Conclusion............................................................................................................. 135

7. Limitations and Further Future Research................................................................ 138

8. Research’s Contribution ......................................................................................... 141

9. Acknowledgments ................................................................................................. 141

Annexes ....................................................................................................................... 143

Bibliography ................................................................................................................. 150



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List of Tables:

Table 1 - Challenges facing social entrepreneurs .................................................................... 34

Table 2 - List of interviewees .................................................................................................. 43

Table 3 - Thematic Analysis Results ....................................................................................... 47

Table 4 - On the ‘social’ and ‘private’ parts of social entrepreneur, social enterprise and

social entrepreneurship. ........................................................................................................... 58

Table 5 - Outline of Social enterprises growth stages and their financial needs ..................... 61

Table 6 – UN HDI scores and ranks by country. ..................................................................... 66

Table 7 - Selected Mozambique Development Indicators ....................................................... 71

Table 8 - Stakeholders' Analysis .............................................................................................. 96

Table 9 - Critical/ Key Success Factors (CSFs) in project management ............................. 111

Table 10 - Critical Success Factors (CSFs) in project management ...................................... 111



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List of Figures:

Figure 1 - Research question formulation process ................................................................... 35

Figure 2 - Investment Spectrum ............................................................................................... 52

Figure 3 - AUM concentration in different regions around the world. .................................... 63

Figure 4 - GDP (PPP) Growth in Southern Africa, 2005-2014 ............................................... 64

Figure 5 - Mozambique GDP Composition, 2012 (1st Quarter) ............................................. 69

Figure 6 - Poverty-reduction rates between 2003 & 2015 ....................................................... 70

Figure 7 - DFI Impact Investments Figure 8 - Non-DFI

Impact Investments .................................................................................................................. 72

Figure 9 - Currently active Intermediaries and service providers in Mozambique ................. 84

Figure 10 – Initiation phase ................................................................................................... 119

Figure 11 - Registration and Feedback phase ........................................................................ 120

Figure 12 – Execution phase .................................................................................................. 121

Figure 13 - Competition and Prize Results phase .................................................................. 122

Figure 14 - Innovation Ecosystem ......................................................................................... 123

Figure 15 - Ecosystem representation .................................................................................... 124

Figure 16 - Relationship between literature, interviews and programme .............................. 126

Figure 17 - Workflow's Visual Representation ...................................................................... 127



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Impact Investing in Southern Africa: A Case Study – Mozambique:

Governments’ role in aiding social enterprises navigate the early business stages “Death

Valley”



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“Social needs represent a growing market that is being further enlarged by the reduction of

welfare. Companies and organizations operating in the social sector have begun to identify

opportunities to create new business models and to generate profits by addressing these

social needs through social innovation” (Cajaiba- Santana, 2014; Franz et al., 2012; Grimm

et al., 2013).



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Abstract

Despite the continuous developments of the impact investment industry, its forecasted

potential has still a wide margin for its fulfillment. In the past few years, this sector has been

flourishing due to the efforts from development organizations in exploring new channels to

mobilize funding in more sustainable ways. However, its potential is still to be met, leading

to raising concerns over the underlying issues hurting the sector’s potential. Accordingly, the

landscape in Southern Africa is facing the same difficulties, aggravated by insufficient

investment opportunities and market infrastructure and in some cases unstable political

environments. Taking this in consideration, the author uses an explorative and deductive

qualitative research. Firstly, the author studies relevant literature to expose the issue.

Secondly, the author drafts a set of problems hindering the impact investing landscape in

social startup/enterprises’ early business stages mainly seed and startup stages and the

possible role of governments in aiding their development. As a basis for this analysis lies

field research and a series of interviews conducted within the impact investing ecosystem in

Europe and Southern Africa, with thirteen different actors ranging from entrepreneurs, impact

investors, fund managers to intermediaries, and academics. Thirdly, conclusions drawn from

a thematic data analysis, served as a foundation for a programme model developed by the

author and verified by the interviewees, outlining a possible aiding process to social

businesses and impact investors fostered by the government. Fourthly, a case study of a

Mozambican social startup was identified to verify the challenges found in literature and the

programme model introduced. Finally, a conclusion of what has been done is drawn,

highlighting the limitations and what could be achieved in future research.

Keywords: impact investing; impact investor; social finance; Sub-Saharan Africa; Southern

Africa; Mozambique; social entrepreneurship; social startup; social enterprise; government;

legal framework; Base of the Pyramid (BoP); Seed; Early stages.



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Astratta

Nonostante i continui sviluppi del settore degli impact investing, il suo potenziale previsto ha

ancora ampio margine di sviluppo. Negli ultimi anni, questo settore è stato fiorente a causa

degli sforzi delle organizzazioni di sviluppo nell'esplorare nuovi canali per mobilitare i

finanziamenti in modi più sostenibili. Tuttavia, il suo potenziale deve ancora essere

raggiunto, portando a sollevare preoccupazioni sulle questioni sottostanti che danneggiano il

potenziale del settore. Di conseguenza, il panorama nell'Africa meridionale sta affrontando le

stesse difficoltà, aggravato da insufficienti opportunità di investimento e infrastrutture di

mercato e, in alcuni casi, da ambienti politici instabili. Prendendo questo in considerazione,

l'autore utilizza una ricerca qualitativa esplorativa e deduttiva. In primo luogo, l'autore studia

la letteratura pertinente al fine di esporre il problema. In secondo luogo, l'autore stila una

lista di problemi che ostacolano l'impatto del panorama di investimento nelle fasi iniziali di

business delle startup / imprese sociali, principalmente nelle fasi seed e startup e il possibile

ruolo dei governi nel favorire il loro sviluppo. Come base per questa analisi viene utilizzata la

ricerca sul campo e una serie di interviste condotte all'interno dell'ecosistema di investimento

ad impatto in Europa e in Sud Africa, con tredici attori diversi che vanno dagli imprenditori,

agli investitori di impatto, ai gestori di fondi, agli intermediari e accademici. Terzo, le

conclusioni tratte da un'analisi tematica dei dati hanno costituito la base per un modello di

programma sviluppato dall'autore e verificato dagli intervistati, delineando un possibile

processo di aiuto alle imprese sociali e agli investitori promosso dal governo. Quarto, è stato

identificato un caso studio di una startup sociale del Mozambico per verificare le sfide trovate

in letteratura e il modello di programma introdotto. Infine, viene tracciata una conclusione di

ciò che è stato fatto, evidenziando i limiti e ciò che potrebbe essere raggiunto nella ricerca

futura.

Parole Chiave: impact investing; impatto investitore; finanza sociale; Africa sub-sahariana;

Africa meridionale; Mozambico; imprenditoria sociale; avvio sociale; impresa sociale;

governo; quadro giuridico; Base della Piramide (BoP); Seed; Fasi iniziali.



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Executive Summary

Introduction

The mounting evident global challenges from soaring income and social inequalities

worldwide to climate change and biodiversity deterioration caused by human activity within

the frame of the global neoliberal economic model has made it ever more crucial to reinvent

the global economic system. Moreover, “The combined efforts of governments and NGOs

have not proven equal to the task of ameliorating expanding socio-economic inequalities and

helping those who fall between the cracks of so-called free markets in which the playing

fields have been tilted in favor of the wealthy and powerful.” (Arogyaswamy, 2017).

However, during the last decade, private investors started growing an increasing awareness of

the incapability of such organizations to meet the increasing social and environmental

challenges of our time. This awareness has led some private investors to dedicate increasing

capital to the impact creation process. Corporate social responsibility and socially responsible

investments are solid examples. However not enough, recently a new alternative to traditional

finance has emerged in social finance including instruments like but not limited to social

impact bonds and “Impact Investing”. Impact investing defines all the investments made into

companies and organizations, with the intention to generate social and/or environmental

returns alongside a financial return. Through the past decade, impact investing has grown and

attracted the attention of several investors, ranging from householders to big financial

institution and Governmental agencies. The most recent market research estimated an impact

worldwide value of $228,1 Billions (Mudaliar, et al., 2018). Nonetheless, despite the

increasing interest, speaking of today, impact investment is still facing major setbacks

limiting its expansion and large-scale application. The major limitation is due to the lack of

clearness about the impact investing boundaries which have limited as well academic

research. Impact investing’s definitions are several and include a huge variety of potential

investors, asset classes and sectors. precise conceptual boundaries and terminology are still

under discussion (Glanzer & Scheuerle, 2015; Harji & Jackson, 2012) and vocabulary varies

(Hochstadter & Scheck, 2014; Wilson, 2014), most of the definitions for impact investing

describe it as investments that creates intentional and measurable social or environmental

benefits by the provision of financial capital to support organizations in pursuing social or



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ecological purposes (non-financial goal); while also generating economic returns (financial

goal) for the investor (Wilson, 2014; Rangan, Appleby, & Moon, 2011; Glanzer & Scheuerle,

2015; Hochstadter & Scheck, 2014; Brest & Born, 2013; Gatica, Carrasco, & Mobarec, 2015;

UK National Advisory Board to the Social Investment Taskforce, 2014; Anheier & Edith

Archambault, 2014; OECD, 2015; Balbo , et al., 2016; Inter-American Development Bank,

2012; World Economic Forum & Deloitte Touche Tohmatsu, 2013). So far, few authors have

provided profound conceptual work on social impact investing or a systematic analysis of

arising empirical problems (Glanzer & Scheuerle, 2015).

Accordingly, social entrepreneurship, as a movement that has gradually gained more and

more attention and momentum worldwide and a supplement to impact investing aims to

create new market-driven products, services and models, that in addition to yield revenues

that makes them economically sustainable, provoke intentional social impact (Porter and

Kramer, 2011; San Martin et al., 2014; Archambault and Anheier, 2014; Calderini et al.,

2016).

Impact Investing in Southern Africa and Mozambique

Furthermore, contrariwise to what happens in developed economies where there is a wave of

academic and practitioner research emerging (Nicholls, 2010), reporting and academic

research on Impact Investing in emerging economies is still missing (San Martin, et al.,

2014). As a result, conceptual clarity remains an issue and there is an evident absence of

evidence, definitions and unclear boundaries (Hochstadter & Scheck, 2014; Daggers &

Nicholls, 2016). In a similar context, despite billions of dollars of impact investments are

being channeled into enterprises and projects in low income countries (LICs) as a catalyst for

poverty alleviation, social and economic development through profitable enterprise

development ((WEF, 2013); (Scholtens, 2014); (Brest & Born, 2013); (Ashta, 2012); (Koh, et

al., 2012)). Impact investing in Southern Africa has faced similar, yet deeper impediments.

Generally little research has been carried out on impact investing at the country level. This

kind of irregular data is essential to impact investors now working in an environment or

considering investments there. Furthermore, the majority of impact capital in the region has

come from international Development Financial Institutions (DFIs) and a few non-DFI

impact investors. In total, non-DFI investors have closed more than 500 deals and disbursed



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USD 5.7 billion throughout the region. Moreover, it should be noted that the ten largest

transactions in this group account for just over USD 3 billion of capital disbursed (GIIN,

2016). International DFIs have closed more than 650 deals and disbursed USD 16.7 billion

(GIIN, 2016). In the Mozambican context, impact capital signifies an insignificant share of

the overall capital existing in Mozambique despite having had the third-highest number of

impact investing deals in Southern Africa, after South Africa and Zambia (GIIN, 2016).

“Additionally, Mozambique has seen the third-most noteworthy volume of DFI impact

capital. However, with just the seventh-highest quantity of non-DFI capital dispensed among

the 12 nations in Southern Africa, about all impact capital put into Mozambique (>96

percent) has originated from DFIs” (GIIN, 2016). Moreover, Several challenges such as the

difficulties that social entrepreneurs face to find funding (Sunley and Pinch, 2012); instability

of philanthropic giving (Miller and Wesley, 2010); risky environments with lack of structural

support; contexts marked by the lack of visibility (San Martin, Etchart, Kaminski & Truzzi,

2014) and intense competition against traditional enterprises; have been found decisive

impediments that hinder the development of the sector. In fact, concerning access to funding,

it is increasingly clearer for practitioners that conventional finance does not always offer the

type of capital needed by this growing sector (Moore, et al., 2012).

Methodology

• Research Aim

This research aims to study social businesses in the early business stages particularly during

the seed and startup phases within the impact investing system. It also explores the current

role of governments in the region by taking Mozambique as an example and the potential role

governments can play in aiding social businesses achieve operational, economic and social

sustainability.

This research is multi-purposed. Firstly, it aims to analyze the role of the government in the

impact investing and social entrepreneurship sectors, its downfalls and potential in aiding

social enterprises in their early business stages, which in turn requires an understanding of

what is impact investing. Secondly, to draw a general state-of-the-art on the impact investing



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industry in general and in Southern Africa specifically. Thirdly, to focus on how social

enterprises in the early business stages adapt to the challenges faced in the sector as well as

the opportunities available. Fourthly, to understand the factors affecting impact investors’

risk-taking and investment decisions. Fifthly, to take the Mozambican context as an example

of an emerging albeit struggling Southern African economy and to study a Mozambican

social startup in the early businesses stages, trying to scale up to an investable level and to

draw the main impediments it faces to do so.

Finally, to offer a model of framework in which governments in the region (or any other

region) can adopt to help social enterprises overcome their challenges in partnerships with

other actors like investors, intermediaries and universities. Additionally, given the scope of

this research and the shortage of data to perform a quantitative analysis, qualitative data was

used to test the hypotheses formulated. A qualitative approach is an appropriate and effective

strategy for early-stage research on a specific topic to gain understanding in situations where

there is limited knowledge (Glanzer & Scheuerle, 2015).

• Research Approach

The qualitative approach adopted for this research is an explorative and deductive

research approach. An exploratory research is a research conducted for a problem that has

not been studied more clearly, intended to establish priorities, develop operational definitions

and improve the final research design (Shields & Rangarjan, 2013). When a research aims to

gain familiarity with a phenomenon or to acquire new insight into it in order to formulate a

more precise problem or to develop a hypothesis, exploratory studies come in handy. If the

theory happens to be too general or too specific, a hypothesis cannot be formulated (Kumar &

Singh, 2011). While, the deductive approach consists in testing or falsifying hypotheses or

theories by contrasting it against data (Mason, 2002). It works from the more general to the

more specific. Sometimes this is informally called a "top-down" approach. We might begin

with thinking up a theory about our topic of interest. We then narrow that down into more

specific hypotheses that we can test (Trochim, 2006). We narrow down even further when we

collect observations to address the hypotheses (Trochim, 2006). This ultimately leads us to be

able to test the hypotheses with specific data, a confirmation (or not) of our original theories.

(Trochim, 2006).



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• Research Question

Similarly, during the research question formulation, a generic formulation was firstly

considered in the form of studying the impact investing landscape in the Southern African

region, exploring the key aspects of the field, its most common impediments and

opportunities. Searching for key gaps that needs to be addressed for the impact investing

sector to flourish in the Sub-Saharan region in the available scientific literature. That resulted

in a deeper understanding of impact investors’ and governments’ roles in Southern Africa

through Mozambique. The research question was formed through following the deductive

approach. Initially, the author wanted to understand the risk-return spectrum in the field in

general and how it affects impact investors’ appetite and how this appetite affects the whole

impact investing ecosystem and what could improve or worsen this appetite. Then, the author

dug deeper on the ‘how to improve the risk appetite’ aspect, understanding the factors that

affect impact investors’ decisions when it comes to taking investments decisions through

interviews.

However, during interviews, interviewees highlighted the growing and much needed

governmental role in the impact investing system and downplayed the probability of impact

investors’ risk appetite improvement in a too risky ecosystem. Thus, the author decided to

focus the research on the role governments can have in helping impact investing flourish by

mitigating the risk for impact investors and social enterprises. Finally, through further

interviews, the author found a common understanding by interviewees that the most crucial

stages of social entrepreneurship are the early stages where most entrepreneurs struggle to

adapt to the challenges of beginning a business, mostly managing limited financial resources

with limited experience available in their teams. Thus, the author decided to focus his

research on how governments can decrease the gap between young social enterprises

and impact investors by sharing the risk with both of them.



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• Data Collection

- Desk Research

Desk research is basically involved in collecting data from existing sources hence it is often

considered a low cost technique as compared to field research (Juneja, 2019). Desk research

is very effective and can be conducted in starting phase of market research as it is quite quick

and cheap and most of the basic information could be easily fetched which can be used as

benchmark in the research process (Juneja, 2019). Different approaches for digging

information were used. Firstly, using the various search engines like Google Scholar,

Scopus, ScienceDirect and Emerald Insight for modulated search of: Scientific literature. A

literature review was performed on the concepts of social finance and impact investing.

Digging deeper into the definitions, the differences and the connections between the concepts

of social entrepreneurship, social enterprise and social entrepreneurs. Afterwards, a literature

review was made about the impact investing in Southern Africa and Mozambique. As well as

the impact investing system in the region and its actors from social enterprises and impact

investors to governments and intermediaries.

Secondly, browsing the specific information from foundations, development organizations or

business sites like: GIIN, OECD, World Bank, UKaid, USaid or African Development Bank

to extract the information for: Gray literature. This was used to extract data that had to do

with numbers and statistics on the Southern African or Mozambican levels.

How does impact investors' risk appetite affect the impact investment ecosystem in Sub-Saharan Africa?

How can impact investors take more risks investing in SEs in Sub-Saharan Africa?

How can governments help mitigate risks for impact investors to invest in risky early business stages in Sub-Saharan Africa?

How can governments help mitigate risks for impact investors and SEs in Sub-Saharan Africa?

Governments role in helping SEs in the early stages navigate the death-valley?



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Thirdly, governments usually publish a great extent of data online that can be used in the

research process. This data is related to social, financial and economic aspects. The

government websites are mostly free to access and contains most prominent information.

Used mainly to get to specific data as laws and regulations.

- Field Research

Fieldwork allows exploration of areas with little pre-existing data or theory (Helper, 2000).

Field research is the collection of raw data outside a laboratory, library, or workplace setting.

Field research is the systematic study of ordinary activities in the settings in which they

occur. Its primary goal is to understand these activities and what they mean to those who

engage in them (Helper, 2000). To gain this understanding, field researchers collect data by

interacting with, listening to, and observing people during the course of their daily lives

(Bailey, 2007).

For this study, a mix of qualitative research instruments were used. The integration of

different methods usually provides highly productive outcomes offering different parts of a

the phenomenon studied, to have different approaches to respond the research questions, and

to corroborate and test what is observed by one source/method with another (Mason, 2002).

In the case of this research, informal semi-structured interviews were used as well as

participation in the life of the group and direct observation.

Cooperation for Social Good Programme Model

Innovation creation is boosted when public labs with scientific capabilities and firms with

technological capabilities (Lall, 1992) as well as intrapreneurial capabilities (Athreye et al.,

2009) interact with support from the state (Etzkowitz and Leydesdorff, 2000). In addition,

intangible assets such as organizational and network capital are crucial, contributing to the

innovativeness of firms in regional innovation systems (Kramer et al., 2011). Thus, a

mediator role is needed in this landscape. There is also an extensive literature on how

governments can facilitate new technology creation and business entrepreneurship in

mainstream sectors, though scholars note that government policy does not sufficiently

recognize the contribution of small organizations to employment or innovation creation (



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(Birch, 1987); (Kirchhoff, 1994); (Kirchhoff, et al., 2013)). Linking the evident challenges

faced in the region and Mozambique mentioned in The Ecosystem’s Elements and

Challenges Sub-chapter to the challenges faced by Susamati (the case study) discussed in the

chapter Case Study (SUSAMATI), along with acknowledgments collected during interviews

to the needed role in this landscape. The author proposes a programme model that aims to

solve these challenges. In this programme, this mediator is the government. A player that

has connections to all of the aforementioned institutions and with a significant authority to

make things happen if the will is present.

• Programme’s Objectives

Kickstarting innovative social businesses by SEED capital. Social entrepreneurs often find

it hard to kickstart their businesses. Mainly due to lack of funding as impact investors are not

willing to risk investing in risky businesses with no sufficient track record. Leaving social

entrepreneurs to often turn to family and friends to finance their ideas turning them into

businesses.

Build capacity for social entrepreneurs and their teams. Enterprises also typically find it

difficult to diagnose and overcome challenges by themselves and therefore require tailored

capacity-building support in order to move towards investment readiness. This kind of

support is to be distinguished from the light-touch, cohort-based support being provided to

enterprises by accelerator and incubator programmes across the region (Koh and Meier,

2015). Thus, a very important objective of this programme is to help social enterprises build a

strong capacity of business planning, managerial, financial skills and HR management that

might increase a social start-up's ability to develop the new hybrid capabilities required

(Arena et al., 2018).

Engage universities and research centers in the learning process. Impact investing being

a vague term in terms of definition and boundaries, requires more research and analyses by

academicians and researchers. In this sense, the programme offers a field research where

researchers can analyze, test and understand the interaction methods between different actors.

Encouraging impact investors to invest in early stage startups by risk-sharing. Impact

investors often place restrictions on what they will invest in by sector/theme/geography,

enterprise intent - these screens out many investments with potential impact, and limits the

scope for risk diversification (Ventures, 2014). This programme is there to ease the burden on



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investors as well as provide quality impact investing opportunities to solve the issue of the

shortage of high-quality investment opportunities as a major challenge to the growth of the

industry. (Koh & Meier, 2015). That being said, it gives impact investors an opportunity to

invest in early stage businesses while sharing the risk burden with governments.

Involving and creating synergies more actors for the mutual learning as a part of a new

paradigm. This programme offers a chance to different actors to find a common language

that helps achieve the results that results in a flourishing impact investing sector wherever it

might be implemented. The interactive and collaborative nature of the programme eases the

creation of synergies between different actors.

• Progamme’s Workflow

The programme is targeted to be a yearly programme in the beginning. However, depending

on its pilot version results, it could be a twice-a-year practice. The programme would be

based on three main pillars: Online platform, Training Camp and a Prize Competition.

The government would be the main financier and sponsor for this programme. The

programme would be managed by a team of experts, made up of one representative from

different actors. These actors are: the government, business experts, practitioners,

entrepreneurs and scholars.

The online platform would be the main element of communication with the participants of

the programme. In fact, social startups will be able to register their business ideas, proofs of

concept, business plans and so on. In the training camps, capacity building activities would

be conducted from sessions and workshops about business management, financial

management and social impact management and measurements. These camps’ contents

would be decided by the programme coordinators. Finally, a prize competition would be

organized, where social entrepreneurs could pitch their ideas investors and fund managers

and accordingly, three winners are chosen by the “Team of experts” to from each category

(SEED, Startup and Investment Ready) to be funded by either impact investors interested or

the government with varying amounts of capital depending on the category.



22


• Programme’s inspirations

This programme model was inspired by two programmes that the author came across on his

trip in Mozambique: VIA Water and IPEME. The former is a Dutch programme designed

to facilitate and support innovative solutions for water problems in African cities. These

seven African countries are: Benin, Ghana, Kenya, Mali, Mozambique, Rwanda and South

Sudan (Nagel, et al., 2015). The programme had been commissioned as one of the

'Knowledge Platforms' the Dutch government established, to build a scientific research base

for future policy making in Dutch international development aid. VIA Water supports

innovative projects financially through the VIA Water Fund (Nagel, et al., 2015). In addition,

it facilitates and enriches knowledge sharing among partners through the VIA Water

Learning Community. Susamati (the case study) used this programme as a funder for the

startup. The latter is the Institute for the Promotion of Small and Medium Enterprises

(IPEME), a Mozambican public institution whose mission is to encourage the

implementation, consolidation and development of small enterprises in Mozambique. The

IPEME was created in 2008, linked to the Ministry of Industry and Commerce, but is

endowed with administrative and financial autonomy (Devex, 2008) (Sebrae, 2008) (IPEME,

2008).

The author tried to fill the gaps in both programmes, having acquired the necessary elements

from both programmes, this programme model tried to bring the best of both worlds (VIA

Water and IPEME) together in a new programme that could also add something new and

involve more actors to aid the impact investing sector in Mozambique and the Southern

African region in general.

Case Study (Susamati)

A case study is a method for learning about a complex instance, based on a comprehensive

understanding of that instance obtained by extensive description and analysis of that instance

taken as a whole and in its context (Bailey, 2007). An empirical inquiry that is suitable for

studying complex social phenomena, especially for research on contemporary happenings

when boundaries between the phenomenon and its context are not clearly evident (Yin,

1994). In this research, the case study was used as a method of verification for both the

programme model (its feasibility, possible improvements and methods of implementation)



23


and for the challenges faced by social entrepreneurs trying to start businesses or social

businesses in the early business stages, exposed by the literature review through the

interviews.

Successively, after the author traveled to Sub-Saharan Africa for three months on a journey

that started in Southern African South Africa, through Mozambique and Malawi and ended in

the East African Tanzania, trying to understand the socio-economic and political realities in

the region. A case study of a Mozambican social enterprise in the business’s early stages was

identified having fulfilled the main pillars of the social enterprise explained in the Social

Entrepreneurs, Social enterprises and Social Entrepreneurship sub-chapter and explained

more in the Case Study (SUSAMATI) sub-chapter. This where the field research has taken

place and 3 interviews were conducted. However, the 10 remaining interviews took place in

Europe during the VIA Water training week to social entrepreneurs. VIA Water is a venture

philanthropy programme funded by the Dutch ministry of foreign affairs to fund water

innovations in Africa. One of the countries of its focus is Mozambique where Susamati is

operating. The main idea is an alternative sanitation system that is targeting to Base-of-the-

Pyramid communities in a cheap and innovative way. The system consists of a toilet made of

concrete instead of ceramic to reduce costs and a Biological Urban Sanitation system that

aims at gradually reducing the sanitation chain to practically nothing. The system is built on

the impressive appetite of the Black Soldier Fly larva that after about a month becomes a

pupa and a black fly that only lives for 8 days. This project aims to develop low-budget

marketable designs minimizing the need for pit emptying and reducing the amount of water

needed for flushing to just 0.5 liter. The starting point of this project is to convert existing

and/or new latrines from being traditional or pits for accumulation of faecal matter to small

on-site sludge treatment stations where the faecal sludge is converted to CO2 and to seepage

water which can be infiltrated (or used for control of pest flies).

Conclusion

The combined efforts of governments and NGOs have not proven equal to the task of

ameliorating expanding socio-economic inequalities and helping those who fall between the

cracks of so-called free markets in which the playing fields have been tilted in favor of the

wealthy and powerful.” (Arogyaswamy, 2017). Despite its potential, impact investing is



24


facing major challenges which are limiting its flow and growth. The major limitation of

impact investing diffusion is due to the lack of clearness about the impact investing

boundaries. this thesis work represents an explorative research of the impact investing

phenomenon, in particular in the frame of the Southern Africa region with a focus on

Mozambique using explorative and deductive approaches. The research aimed to analyze the

state of social startups/enterprises operating within the impact investing system in the

Southern African context and study the challenges faced by social businesses in the early

business stages (SEED/Startup) that prevent them from scaling-up their businesses and

operations and how governments with the help of the sector’s most influential players can aid

social businesses in achieving economic, social and operational sustainability. Literature

review has been performed with the intent to define the current interpretation of impact

investing, the roles and challenges facing its main actors. Moreover, using qualitative

research tools based on grounded theory and on field, allowed the author to explore the

challenges facing social entrepreneurs and whether these challenges matched the ones

mentioned in literature. Qualitative methodologies work well capturing multidimensional

phenomena and non-linear, sometimes fuzzy, patterns of the reality offering a clear and

holistic view of the context of study (Sinkovics et al., 2008). given the low level of

theoretical knowledge on the phenomena studied and its complexities, qualitative research

was a suitable instrument to examine it (Bonoma, 1985).

Furthermore, by conducting interviews to thirteen different actors within the social

entrepreneurship ecosystem in the region, in Mozambique and on a global level. Results have

been analyzed using a thematic analysis in order to gain a multi-perspective take on the

impact investing system in general and the possible role of governments to aid the system.

Furthermore, a case study of a Mozambican social startup operating the sanitation sector was

identified and used as studying field to verify the following issues most focused on, hindering

the development of social businesses detected:

1) The lack of seed funds to kickstart a social business leaving social entrepreneurs

to count on self-funding or crowdfunding by family and friends.

2) The lack of business, financial and management capacity, absence of an efficient

and effective governmental role within the impact investing sector.

3) The absence of a legal framework for social businesses that could ease the

development of the sector and the inflexibility of impact investors risk-return

paradigms, among others.



25


The case study was also used as a verification for the Cooperation for Social Good

Programme Model which the author developed after having analyzed the data collected

through interviews. The idea of the programme revolves around three main pillars:

1) An online platform: Social enterprises interested would register their business plans and

ideas on it. The use of an online platform is to foster technological advancements and gather

data about the social entrepreneurship field.

2) A training camp: To build business management capacity for the entrepreneurs. In the

same time, acting as a research field for researchers to carry out a deeper academic research

based on an empirical and practical analyses.

3) A prize competition: To provide funding to social businesses with different ticket ranges,

depending on their degree of development. As well as create a network between impact

investors and entrepreneurs.

The programme is mainly sponsored by the government and through a public-private

partnership and involves the main actors of the impact investing system including

intermediaries, fund managers and research institutions in a trail to improve the cooperation

between different actors and the learning process.

1. Introduction

The lack of sustainability underlying our current economic system has made it ever more

imperative to reinvent its global paradigm through different solutions. Indeed, this is evident

from soaring income and social inequalities worldwide, to raising global temperatures due to

serious CO2 emissions from human activities, triggering climate change. Moreover, “The

combined efforts of governments and NGOs have not proven equal to the task of

ameliorating expanding socio-economic inequalities and helping those who fall between the

cracks of so-called free markets in which the playing fields have been tilted in favor of the

wealthy and powerful.” (Arogyaswamy, 2017).

Accordingly, there has never been a stronger need for shifting our economic paradigm

towards more sustainable, inclusive and environmentally-conscious practices. Governments

and foundations, then again, have been exhibited powerless to handle these worldwide



26


difficulties. Despite the fact that Governments have seen their spending drastically decrease

after the global financial crisis and as a result their ability to resolve these issues. In 2010 a

survey of almost 1,000 business leaders representing 13 industries across the Americas,

Europe, Africa, the Middle East, and Asia revealed that more than 90% of respondents agreed

it will be necessary for firms to integrate sustainability initiatives into corporate strategy

within the next decade (Wilburn & Wilburn, 2014). Almost 10 years on, and the same is

being said with not enough businesses taking real action. Thus social entrepreneurs have

taken on the task of helping those left behind and satisfying the needs of unserved and under-

served populations that lack the ability to pay for the products and services they often

desperately need (Bornstein and Davis, 2010).

Moreover, outcomes that benefit ever-increasing swathes of society, scalability, and/or

replicability are often hallmarks of such entrepreneurial organizations that seek to fulfill

social missions, while staying within economic constraints and demonstrating strategic and

managerial capabilities (Woolley et al., 2013). Traditionally, Investments with the objective

of accomplishing social or environmental outcomes have been the job of governmental

institutions or philanthropic foundations which across decades struggled to allocate the

sufficient funds and resources to resolve the withstanding challenges. On a more positive

note, these complications have triggered a wake-up call for the general population to demand

more of governments, as well as trying to solve global challenges by a bottom-up approach.

There, social entrepreneurship was born as the bottom-up solution, motivated by a spirit of

activism and the capability to recognize and follow chances of generating societal value, but

also based on an acknowledgment of the necessity to build economically sustainable

organizations. Supported by social finance, with its various tools, including “impact

investing”, social entrepreneurship emerged as a discipline with a fundamental role in

realizing the shift to a new sustainable and socially driven economic paradigm. On the other

side of the spectrum, in the past, private investors were just evaluated according to the

financial results of their investments. However, nowadays, instead, investors are showing

willingness cope with the growing demand of responsible investments as well as sustainable

and impact-driven investments and taking responsibility for the impact caused by their

investments, whether positive or negative (Nicholls, 2009). Social and environmental returns

have shown to be of value for a certain set of investors who are even willing to give up some

financial return in order to achieve positive social results (Nicholls, 2009).



27


Despite stellar economic performance in recent years, Southern Africa still has a long way to

address pressing development needs, such as reducing poverty, inequality, improving

education and access to health-care systems. In this region, little is known about social

innovation and social entrepreneurship. Social enterprises are still living their first stages of

development as a sector and struggle to get a formal space in the economy in a context

marked by the lack of visibility and positioning in the public agenda (San Martin, et al.,

2014). These elements, added to the significant challenges that social entrepreneurs face to

find funding (Sunley & Pinch, 2012); the instability and unsustainability of philanthropy,

makes social entrepreneurship even more important. In fact, one of social entrepreneurship’s

biggest fallouts today is the shortage of financing sources needed to build a critical mass of

organizations that can achieve major and visible success (San Martin, et al., 2014). Whether

the funding comes from governments, investors, foundations, citizen-based support, self-

generated revenues, or combinations of these sources, it is urgent to build a wider array of

specialized financial services useful to unlock the trapped potential of social entrepreneurship

(Bornstein, 2007).

Accordingly, impact investing an alternative born in 2008, defined by GIIN as investments

made into companies, organizations and funds with the intention to generate social and

environmental impact alongside a financial return. It can be made in both emerging and

developed markets and target a range of returns from below market to market return

depending on investors’ strategic goals.

Moreover, since impact investing was defined in 2008, the sector has consistently grown and

diffused all-over the world, attracting the attention of several players ranging from high net-

worth individuals to big institutional investors and government. Recent researches conducted

by the GIIN (2018) estimated a global market size of over $228,1 billion.

Consequently, the growth of social entrepreneurship and its needs have spurred the

development of impact investing, a new source of funding that has gained increased media

attention in recent years (Miller & Wesley, 2010) as a market-driven support to social

entrepreneurs, impact investors provide funding alternatives to organizations that promise an

intentional and measurable social impact alongside some level of financial return ( (Rangan,

et al., 2011); (Brest & Born, 2013); (Hochstadter & Scheck, 2014); (Wilson, 2014); (Glanzer



28


& Scheuerle, 2015)). Therefore, in its different forms, impact investing has opened the way to

new forms of capital for innovative social enterprises that use of market mechanisms to solve

societal problems. As Titia Wouters, Program manager at VIA Water, a venture philanthropy

programme for water-focused innovations, funded by the Dutch ministry of foreign affairs,

put it in an interview with the author “There are many impact investors out there looking for

great opportunities that would provide both impact and the return on investment they’re

looking for. At the same time, there are many people working locally on these sort of

opportunities, they know about the problems their communities are facing, they know which

solutions would work and they know exactly which sort of revenue models would work.”

(Wouters, 2018)

However, impact investing faces some major challenges that limit its growth and diffusion.

To begin with, scholarly literature to date is still limited (Moore, Westley, & Nicholls, 2012;

Daggers & Nicholls, 2016; Nicholls, 2010; Glanzer & Scheuerle, 2015). So far, few authors

have provided profound conceptual work on social impact investing or a systematic analysis

of arising empirical problems (Glanzer & Scheuerle, 2015). This confusion resulted in a big

variety of players and sectors using the term impact investing leading to the risk of watering

down the real meaning of impact investing. Additionally, contrary to what happens in

developed countries where there is a wave of academic and practitioner research emerging

(Nicholls, 2010), reporting and academic research on the status of Impact Investing is still

missing in emerging economies (San Martin, et al., 2014) and further evidence is needed to

boost the taking-off of the market from the outset (Miller & Wesley, 2010). As a result,

conceptual clarity remains an issue and there is an evident absence of evidence, definitions

and unclear boundaries (Hochstadter & Scheck, 2014; Daggers & Nicholls, 2016).

In Sub-Saharan and Southern Africa, billions of dollars of impact investments are being

channeled into enterprises and projects in low income countries (LICs) as a catalyst for

poverty alleviation, social and economic development through profitable enterprise

development ((WEF, 2013); (Koh, et al., 2012); (Dahlberg, 2011; 2012)). However, some

countries have had a faster development pace, contrasting others which are still lagging

behind in this sphere Sub-Saharan Africa (SSA) which includes Southern Africa, a region

belonging to the latter group. Additionally, there is solid interest for impact capital around

Southern Africa, as an attractive emerging market investment strategy, it involves



29


development finance institutions and philanthropic foundations partnering with mainstream

private venture capital to create impact funds with the goal of catalyzing inclusive market-

based enterprise development in low income countries. (Ngoasong, et al., 2015)

In this context, this paper discusses the definition and roles of social entrepreneurship and

impact investing in facing social/environmental challenges with a focus on the emerging

markets in Southern Africa and the current and possible roles that governments can play to

support the sector, with the intent to offer an analysis to the challenges that most interviewees

agreed upon. Given the scope of this research and the shortage of data to perform a

quantitative analysis, qualitative data was used to test the hypotheses formulated. A

qualitative approach is an appropriate and effective strategy for early-stage research on a

specific topic to gain understanding in situations where there is limited knowledge (Glanzer

& Scheuerle, 2015). Thirteen interviews were conducted with practitioners, entrepreneurs,

intermediaries and investors through semi-structured interviews conducted in three different

countries: Mozambique, Netherlands and France, as well as online. Mozambique and

Netherlands are the countries of the case study’s origin and the donor (investor) respectively,

while France was where the author has attended a conference about Impact Investing to

deepen his understanding of the topic and interview investors and intermediaries. Within a

time frame between March and December 2018.

It also illustrates the significant challenges facing the sector according to the interviewees and

how impact investing with its potential can help realize this potential. Moreover, through

studying the literature review, it was concluded that there’s a huge gap when it comes to

governments roles in social entrepreneurship and impact investment in Southern Africa in

specific. As a result, the author focuses on reinventing the role of government in helping

social startups navigate the early stages of business, or what is called commonly known as the

‘death valley’.

Additionally, the author outlines the different challenges of the impact investing landscape in

Southern Africa by further studying the Mozambican context and analyzing a case study from

Mozambique. “Susamati” a social startup operating in the Water, Sanitation and Hygiene

sector (WASH) sector, trying to make it through the early business stages to become a

sustainable social enterprise, by introducing a revolutionary biological sanitation system to be

sold at the Base of The Pyramid (BOP) communities in the suburbs of the Mozambican



30


capital Maputo to begin with and as they expand their business they would continue selling it

in rural communities around the country.

In turn, the research digs deeper into the perspective of social entrepreneurs who are trying to

make it in a sector filled with challenges to the growth stage where they would be able to

generate sustainable income that will attract impact investors. In fact, one of the main

challenges is that most social enterprises are in the early business stages which is considered

too risky by impact investors to invest in or need small amounts of money that is too small

for most impact investors to consider. A governmental role is missing as well and a big

potential for a shift in these initial stages of the impact investment scheme through

governmental institutions’ roles could yet still be explored.

The research offers a new role for governments in Sub-Saharan Africa generally and

Southern Africa specifically through a model of work called the ‘Cooperation for Social

Good Programme’. The model is the author’s blueprint for a government backed and co-

funded digital and physical platform that is based on three main pillars: an Online Platform, a

Training camp and a prize competition

That being said, the thesis structure is as follows:

Chapter two is dedicated to the Methodology of data collection for the research, the case

study and the model, the research question and aim.

Chapter three is dedicated to an extensive literature review of impact investing and social

entrepreneurship. In particular, trying to define the concept of impact investing by defining

the essential factors capable to differentiate impact investments from traditional investments

and philanthropy. Additionally, a comparison was made between the concepts of social

entrepreneur, social enterprise and social entrepreneurship as processes. As well as an

analysis of the general impact investing system with its actors. Followed by analyzing the

impact investing landscape in Southern Africa and Mozambique and its ecosystem.

Chapter four is dedicated to the illustration of the ‘Cooperation for Social Good Model’ its

idea, goals, actors, structure and validation by experts, academics and practitioners.

Chapter five highlights the ‘Susamati’ case study and discusses briefly the sanitation

problem in Mozambique that the social startup is aiming to participate to its solution.



31


Additionally, it discusses the business model of the social startup, their current state and the

nature of the investor (grant-giver) and the role of the intermediary in this case

Chapter six concludes the research. All data are reported and connected each other with the

intent to offer a clear understating the possible future scenarios.

Chapter seven discusses the limitations of the research and how future research could

capitalize on this current research and improve it.

Chapter eight discusses the research contribution to the academic and practitioner world.

2. Methodology

2.1. Research Aim

The shortage of academic research on impact investing has led to a lack of a theoretical

framework to study the field, and consequently to a lack of understanding on actors and roles,

the best practices to promote its growth, and the trends the sector is undergoing (Glanzer &

Scheuerle, 2015). This shortage of information has been particularly acute in Sub-Saharan

economies where besides the efforts of some few actors especially in Kenya and South Africa

reporting and academic research is almost null. Additionally, very little empirical research

has been conducted to understand the nature and operations of impact funds in African

economies (Ngoasong, et al., 2015).

Furthermore, there’s even less academic research on businesses in the early stages within the

impact investing system. That being said, this research aim is multi-purposed:

Firstly, to analyze the role of the government in the impact investing and social

entrepreneurship sectors, its downfalls and potential in aiding social enterprises in their early

business stages. Which in turn requires an understanding of what is impact investing and

define it according to the most agreed upon defining factors.

Secondly, to draw a general state of the art on the impact investing industry in general and in

Southern Africa in specific.

Thirdly, to focus on how social enterprises in the early business stages adapt to the

challenges faced in the sector as well as the opportunities available.



32


Fourthly, to understand the factors affecting impact investors’ risk-taking and investment

decisions.

Fifthly, to take the Mozambican context as an example of an emerging albeit struggling

Southern African economy and to study a case of a Mozambican social enterprise in the early

businesses stages, trying to scale up to an investable level and draws the main impediments it

faces to do so.

Finally, to offer a model of framework in which governments in the region can adopt to help

social enterprises overcome their challenges in partnerships with other actors like investors,

intermediaries and universities.

2.2. Research approach and question formulation

2.2.1. Research Approach

Given the scope of this research and the shortage of data to perform a quantitative analysis,

qualitative data was used to test the hypotheses formulated. A qualitative approach is an

appropriate and effective strategy for early-stage research on a specific topic to gain

understanding in situations where there is limited knowledge (Glanzer & Scheuerle, 2015).

In addition, qualitative methodologies work well capturing multidimensional phenomena and

non-linear, sometimes fuzzy, patterns of the reality offering a clear and holistic view of the

context of study (Sinkovics et al., 2008).

The literature offers a wide range of methods for qualitative research as case studies,

ethnography and participant observation, grounded theory, biographical and participative

inquiries, and these methods appear particularly suitable for research where multiple actors

and environments are involved (Sinkovics et al., 2008).

The qualitative approach adopted for this research is an explorative and deductive

research approach.



33


An exploratory research is a research conducted for a problem that has not been studied

more clearly, intended to establish priorities, develop operational definitions and improve the

final research design (Shields & Rangarjan, 2013). When a research aims to gain familiarity

with a phenomenon or to acquire new insight into it in order to formulate a more precise

problem or to develop a hypothesis, exploratory studies come in handy. If the theory happens

to be too general or too specific, a hypothesis cannot be formulated (Kumar & Singh, 2011).

Therefore, a need for an exploratory research may be realized and instituted to gain

experience that may help in formulating a relevant hypothesis for more definite investigation

(Kumar & Singh, 2011). Consequently, given the complexity of impact investing, the

exploratory approach represents a good fit to this research.

While, the deductive approach consists in testing or falsifying hypotheses or theories by

contrasting it against data (Mason, 2002). It works from the more general to the more

specific. Sometimes this is informally called a "top-down" approach. We might begin with

thinking up a theory about our topic of interest. We then narrow that down into more specific

hypotheses that we can test. We narrow down even further when we collect observations to

address the hypotheses. This ultimately leads us to be able to test the hypotheses with specific

data -- a confirmation (or not) of our original theories. (Trochim, 2006).

2.2.2. Research Question Formulation

Similarly, during the research question formulation, a generic formulation was firstly

considered in the form of studying the impact investing landscape in the Sub-Saharan region,

exploring the key aspects of the field, its most common impediments and opportunities.

Searching for key gaps that needs to be addressed for the impact investing sector to flourish

in the Sub-Saharan region in the available scientific literature.

Successively, a more profound understanding of the impact investors’ minimal risk-taking

approach was formed, followed by the understanding of a disappointing governmental role in

the region generally through interviewing different personnel including the CEO of the social

enterprise, the technical engineer and the funding partner. The final research question came to

realization after the author came back to Europe and carried further interviews, having seen



34


some of the challenges that is holding the sector back which interviewees agreed upon. Table

1 shows them as follows:

Table 1 - Challenges facing social entrepreneurs

There are investment opportunities in Sub-Saharan Africa and Southern Africa unlike what

some studies might suggest. However, there are few investment ready opportunities.

Most of these investment opportunities are in the early business stages.

Social enterprises in the early stages are too risky for investors to invest in.

Social enterprises find difficulties raising financial resources.

Social enterprises lack the needed capacity and management expertise to manage and scale

their businesses, which in turn cause these capital.

Capacity and management challenges are even more critical than financial challenges.

Investors don’t trust other actors to help in the screening nor due diligence processes.

Social entrepreneurs are usually of technical abilities and speak a different language than

investors who speak a business language.

There’s a need of a pipeline creation for social entrepreneurs to learn and build capacity.

Governments roles are almost negligible and need to step up their game to close the gap

between the two parties.

Source – Own Elaboration

Using the deductive approach, the research question was funneled from a more generic

question to a more specific one as the author gained more understanding of the topic and the

Sub-Saharan reality. Initially, the author wanted to understand the risk-return spectrum in the

field in general and how it affects impact investors’ appetite and how this appetite affects the

whole impact investing ecosystem and what could improve or worsen this appetite. Then, the

author dug deeper on the ‘how to improve the risk appetite’ aspect, understanding the factors

that affect impact investors’ decisions when it comes to taking investments decisions through

interviews. However, during interviews, interviewees highlighted the growing and much

needed governmental role in the impact investing system and downplayed the probability of

impact investors’ risk appetite improvement in a too risky ecosystem. Thus, the author



35


decided to focus the research on the role governments can have in helping impact investing

flourish by mitigating the risk for impact investors and social enterprises.

Finally, through further interviews, the author found a common understanding by

interviewees that the most crucial stages of social entrepreneurship are the early stages

where most entrepreneurs struggle to adapt to the challenges of beginning a business, mostly

managing limited financial resources with limited experience available in their teams. Thus,

the author decided to focus his research on how governments can decrease the gap

between young social enterprises and impact investors by sharing the risk with both of

them. Figure 1 shows the evolution process through which the research question have been

through:

Figure 1 - Research question formulation process

Source – Own elaboration

“Death Valley” is the slang phrase used in venture capital to refer to the period of time

spanning from when a startup firm receives an initial capital contribution to when it begins

generating revenues. During the death valley curve, additional financing is usually scarce,

leaving the firm vulnerable to cash flow requirements (Kenton, 2017). Interestingly, minimal

How does impact investors' risk appetite affect the impact investment ecosystem in Southern Africa?

How can impact investors take more risks investing in SEs in Southern African

How can governments help mitigate risks for impact investors to invest in risky early business stages in Southern Africa

How can governments help mitigate risks for impact investors and SEs in Southern Africa?

Governments role in helping SEs in the early stages navigate the death-valley in Southern Africa?



36


literature were found covering this part of the topic. As a result, a significant amount of gray

literature was reviewed.

2.3. Data Collection methods:

As initial instrument, desk research and literature revision on primary and secondary sources

both produced by academic and practitioners was performed. The information collected was

systemized and structured in order to posteriorly analyze it.

One of the advantages of using secondary sources of information is that it helps both at early

stages of research – for framing the project and formulating hypotheses – and also during

more advanced stages for contrasting what is said in the literature with the primary data

collected (Cabrera & Batthyány, 2011).

Documents are constructed in particular contexts, by particular people, with particular

purposes and with consequences, therefore they are constructions that have formulated own

interpretations and should not be regarded as mere sources of facts (Mason, 2002).

2.3.1. Desk research

Desk research is basically involved in collecting data from existing resources hence it is often

considered a low cost technique as compared to field research. Desk research is very effective

and can be conducted in starting phase of market research as it is quite quick and cheap and

most of the basic

information could be easily fetched which can be used as benchmark in the research process

(Juneja, 2019).

- Online Desk Research:

There could be two approaches for digging out the relevant information from internet:

Firstly, using the various search engines like Google Scholar, Scopus, ScienceDirect and

Emerald Insight for modulated search of: Scientific literature.



37


Secondly, browsing the specific information from foundations, development organizations or

business sites like: GIIN, OECD, World Bank, UKaid, USaid or African Development Bank

and other foundations’ to extract the information for: Gray literature.

All the identified literature of both types were gathered in two excel sheets: One for read

Abstracts and the other for papers and reports.

Thirdly, governments usually publish a great extent of data online that can be used in the

research process. This data is related to social, financial and economic aspects. The

government websites are mostly free to access and contains most prominent information.

2.3.2. Field research (Case Study)

Fieldwork allows exploration of areas with little pre-existing data or theory (Helper, 2000).

Field research is the collection of raw data outside a laboratory, library, or workplace setting.

The approaches and methods used in field research vary across disciplines. Field research is

the systematic study of ordinary activities in the settings in which they occur. Its primary goal

is to understand these activities and what they mean to those who engage in them.

To gain this understanding, field researchers collect data by interacting with, listening to, and

observing people during the course of their daily lives (Bailey, 2007). Field research involves

a range of well-defined, although variable, methods: informal interviews, direct observation,

participation in the life of the group, collective discussions, analyses of personal documents

produced within the group, self-analysis, results from activities undertaken off- or on-line,

and life-histories. (Burgess, 1984)

For this study, a mix of qualitative research instruments were used. The integration of

different methods usually provides highly productive outcomes offering different parts of a

the phenomenon studied, to have different approaches to respond the research questions, and

to corroborate and test what is observed by one source/method with another (Mason, 2002).

In the case of this research, informal semi-structured interviews were used as well as

participation in the life of the group and direct observation:



38


2.3.2.1. Participation in the life of the group:

Participation in the life of the group (Participant observation) is one type of data collection

method typically used in qualitative research and ethnography. It is a widely used

methodology in many disciplines. Or "the systematic description of events, behaviors, and

artifacts in the social setting chosen for study" (Marshall and Rossman, 1989). Observations

enable the researcher to describe existing situations using the five senses, providing a

"written photograph" of the situation under study (Erlandson et al., 1993). (Demunck and

Sobo, 1998) describe participant observation as the primary method used by anthropologists

doing fieldwork. Participant observation is the process enabling researchers to learn about the

activities of the people under study in the natural setting through observing and participating

in those activities. It provides the context for development of sampling guidelines and

interview guides (DeWalt and DeWalt, 2002).

Moreover (Schensul, et al., 1999) described participant observation as "the process of

learning through exposure to or involvement in the day-to-day or routine activities of

participants in the researcher setting".

In April 2018, the author had the chance to spend 2 weeks of his time in Mozambique, living

the life of his case study’s CEO. This led to a series of realizations regarding the intensity and

drivers of the fast-paced life of a social entrepreneur. This also has allowed the author to

witness and understand the Social enterprise’s team-dynamics and workplace. The author

also had the chance to personally visit the neighborhood in which the project was to be

implemented to see the implementation of the project in real life which gave the author a

deeper understanding of the issue, the solution offered by the social enterprise and the reality

of the community within. Some photos taken by the author could be found in the annexes.

2.3.2.2. Direct Observation

Direct observation, also as known as observational study, is a method of collecting evaluative

information in which the evaluator watches the subject in his or her usual environment

without altering that environment. Direct observation is used when other data collection

procedures, such as surveys, questionnaires, etc., are not effective; when the goal is to



39


evaluate an ongoing behavior process, event, or situation; or when there are physical

outcomes that can be readily seen (Holmes, 2013). Direct observation can be overt, when the

subject and individuals in the environment know the purpose of the observation, or covert,

when the subject and individuals in the environment are unaware of the purpose of the

observation (Holmes, 2013). Structured direct observations are most appropriate when

standardized information needs to be gathered, and result in quantitative data. Unstructured

direct observation looks at natural occurrence and provides qualitative data (Holmes, 2013).

This was applied when the author attended a training camp that lasted a week in Rotterdam,

Netherlands in November 2018. The camp was organized by VIA Water (The fund manager

programme by the Dutch ministry of exterior affairs) for twelve social entrepreneurs focused

on

water innovations for Base-of-the-Pyramid (BoP) communities across the Sub-Saharan

African region, who traveled to Rotterdam to attend this camp. Entrepreneurs were trained by

business, management, researching and technical experts on capacity building capabilities as

well as business management and Pitching capabilities. VIA water also dedicated a day for

the twelve social entrepreneurs to pitch their businesses to an audience of fund managers and

investors for their post-programme funding and scaling up efforts. This experience has

inspired parts of the Cooperation for Social Good Programme that will be illustrated in later

chapters.

2.3.2.3. Informal semi-structured interviews

Semi-structured interviews were the core method for this research as it the method most

suited with the exploration of the perceptions and opinions of respondents regarding complex

issues and allow for interviewing a heterogeneous sample for which standardized interviews

may neglect the differences and particularities of the respondents (Barriball and While,

1994).

The interviews were not only used as a guideline for validating the research question but also

to validate and guide the author’s ideas for the programme proposed. Thus, interviewees were

divided into two categories:



40


- Practitioners

These interviews were mainly carried out while the author was traveling in Africa. Their

main purpose was to understand entrepreneurs’ challenges, needs, ideas for a better social

entrepreneurship sector as well as the validity of the proposed programme for their businesses

and further feedback on its downfalls and what could it further offer.

- Panel of Experts

These interviews were mainly carried out in Europe: Netherlands, France and Italy. Their

main purpose was to understand how researchers, intermediaries, policy makers, fund

managers and investors saw the sector in general but more specifically what was lacking and

needed for social startups to be able to find the much needed support to scale their processes.

Furthermore, these experts were able to give more feedback on the programme’s model and

provide a validation from those who work on daily-basis in the sector and have an

understanding of what could or could not work.

2.3.2.3.1. Sampling

The strategy behind the sampling methodology adopted in this research is aimed to entail all

the relevant range of actors and roles within a wider impact investing sector in Southern

Africa. The aim of sampling is to build a relevant range of contexts or phenomena, which

enable the researcher to make strategic and possibly cross-contextual comparisons, and hence

build well-founded arguments (Mason, 2002). Furthermore, purposive sampling was used in

order to maximize the diversity of the sample and obtain more insights from the data

collected and therefore, individuals from different kinds of organizations working on impact

investment and social entrepreneurship were selected to be interviewed. Purposive sampling

is a non-probability sampling method and it occurs when “elements selected for the sample

are chosen by the judgment of the researcher. Researchers often believe that they can obtain a

representative sample by using a sound judgment, which will result in saving time and money

(Black, 2009). Consequently, the final sample was composed by 11 different organizations

comprising:



41


Two grant-making (investors) project responsibles who in this case act both as fund managers

or the investor’ representative as well as intermediaries, two investors, two entrepreneurs,

two academics and researchers and two intermediaries. Table 2 further illustrates the sample:




42



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Table 2 - List of interviewees

2.3.2.3.2. Interviews’ structure

In what regards to the structure of the interviews, one of the main goodness of semi-structured

interviews is that their flexibility allows the interviewee to freely express its point of view on a topic.

Yet, in order to avoid discussing out of the topic of the interview and focus on fundamental issues, it

is the role of the interviewer to guide the conversation in order to get the information needed.

The author had different sets of interview protocols depending on the interviewee’s role nature,

mainly divided into these categories: Entrepreneurs, researchers and investors/intermediaries.

However, it’s worth mentioning that given the nature of the research, the questions were not

limited to the following templates as sometimes the interview flow led the author to ask follow-

up questions to the interviewees depending on their initial answers. Interviewees were not

required to stay on the exact boundaries of the templates, but were free to explore alternative

directions. The semi-structured protocol was adopted according to the interviewee’s main roles and

field of expertise and thus integrated new insights.

In general, the purpose of each interview was to understand the approach to the impact investing, get

the maximum amount of information that could be useful to the author in support of the research

purpose. Trying to understand the different perspective of the different actors being interviewed on

the ecosystem and challenges involving social enterprises, governments and investors. That being

said, the general templates are as follows:



44


A- Investors and panel of experts template:

1- Brief presentation of the author and the research.

2- What do you think is a determining factor for how impact investment is being approached in

developing countries?

3- What criteria and redlines do you consider before investing In a social startup?

4- Would you invest in high risk social startups?

5- What are the criteria for you to take high risk investment opportunities?

6- What measures do you take in order to mitigate such risk?

7- Do you think social enterprises in Africa are mature enough to strike financial agreements

with private investors?

8- Through literature review, I found out that there’s a challenge in creating a match between

investors and good investment opportunities? What are these challenges in your opinion and

how to overcome them?

9- Do you think there are enough intermediaries that could facilitate this process?

10- How can these different actors participate in mitigating risk for the investors and the

investees?

11- What are the usual governance or governmental drawbacks?

12- How do you think governments in Africa could help attract impact investors?

13- How do you think governments can play a de-risking role?

14- How can the different actors involved in the impact investing process affect social finance

governance?

15- What are the major pitfalls between the public and private sectors when it comes to social

entrepreneurship?



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B- Entrepreneurs and Practitioners’ template:

1- Brief presentation of the author and the research

2- Can you Introduce your project, its drivers and current state?

3- What is the role of VIA Water in your project?

4- How do you see Impact Investing and Social entrepreneurship in Sub-Saharan Africa and

Southern Africa?

5- What does the impact investing landscape miss for impact investors to be willing to take

higher risks?

6- Given how impact investors care about measuring social impact, How do you measure

such an impact?

7- What are the challenges that you faced to find investors?

8- How do you think investees can do to attract first stage investors as it's the most crucial

stage?

9- How do you think governments can do to attract first stage investors as it's the most

crucial stage?

10- What types of actions do you like to see take by governments as a social entrepreneur?

11- What is the current state of the role of universities and research centers in the sector? And

How do you like to see it change to?

12- From your perspective, what kind of problems do social startups usually face when it

comes to achieving sustainability?

13- Through your day-to-day interaction with governments, how do you think

governments are holding back social entrepreneurship and impact investing?

Interviews lasted between 20 to 80 minutes, with an average of 50 minutes per interview. Interviews

were mostly informal, conducted in person apart from one interview online.

The in-person informal interviews were conducted at different places like universities, seminar halls,

etc. depending on the availability and the time-schedule of the interviewees.

2.4. Data Analysis

The collected data was analyzed to extract relevant information from interviews to the research

question. For this reason, a thematic analysis was adopted to analyze the data collected from the



46


interviews (Marshall and Rossman, 1999). Thematic Analyses are used for qualitative researches to

structure and interpret collected data through the identification of recurrent themes (Calderini et al.,

2016).

Two main variables are identified when making a thematic analysis. First, thematic analysis could be

data-driven or deductive-approached. In the data driven method, the themes are consequences of the

data. While in the deductive method, the theme is driven by the research question (Braun and Clarke,

2006). The second variable to carry out thematic analysis is the deepness of the text analyzed. In fact,

themes can be classified by semantic or explicit levels. At the semantic level the analysis digs deeper

into what was said or what was written, and searches for relevant information analyzing how it was

said (Braun and Clarke, 2006). Meanwhile, at the explicit level the analysis ends at what has been

said.

This research has adopted an explicit and deductive approach. The theme is a pattern within the

data capturing important insights related to the research question (Braun and Clarke, 2006). The

relevance of the themes does not depend on the numbers of times the theme is mentioned, rather on

the theme capability to catch something relevant regarding the research question (Braun and Clarke,

2006).

As indicated by the thematic analysis approach, each research question needs some characterized

classifications or categories. In this manner, these categories/classifications need to aggregate

comparative concepts that ought to be unique in relation to other categories' concepts. Coherently,

with the deductive approach, categories have been identified on the basis of the literature review.

Starting by each category the transcribed interviews were analyzed to identify the codes. The coding

process consisted in a double reading. The first reading was done to have a clear picture about the

overall content, the second was the coding reading: data were reduced to obtain the final codes. Each

code identifies a feature of the data that appears interesting to the analyst (Braun and Clarke, 2006).

A number of codes were selected for each category.

Finally, for each category, on the basis of the relevance of the codes, the themes were deduced. All

the process is shown in table 3 below:



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Table 3 - Thematic Analysis Results

Categories Codes Themes

Entrepreneurs - Rise of

social/environmental

problem-solving

businesses.

- Social/Environmental

problem identification.

- Social business model.

- Business plan.

- Legal documentation.

- Proof of concept.

- Financial resources.

- Team and talent

management.

- Product/Service marketing

expertise.

- Technical expertise.

- Lack of local capital.

- Ability to raise funds.

- Local network knowledge

- Social mission

sustainability.

- Financial sustainability.

- Capacity management.

- Business development

expertise.

- Network of local

connections



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Impact Investors - Easing screening and due-

diligence criteria.

- Geopolitical analysis.

- Risk/Return spectrum.

- Grant capital

- More patient capital to

invest

- Social enterprises’ team

chemistry.

- Investing in SEED.

- Investing in startups.

- Non-Financial support.

- Pipeline (long-term)

development.

- Flexible investment criteria.

- Screening and due-

diligence

- Risk appetite boosting.

- Long-term impact

investing market

development.

- Seed and startups focus.

- Broader range of financial

instruments.

Government - Social Entrepreneurship.

legal framework.

- Tax reduction.

- Flexible labor laws.

- Financial support for social

- startups/enterprises.

- Non-financial support.

- Engaging universities and

research centers

- Legal support and ease for

the social entrepreneurship

sector.

- Impact Investing to aid

public expenditure.

- Research and development

aid.

- Political and economic

stability



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3. Literature Review

The literature review was conducted with a focus on academic works; however due to the novelty of

the area, also grey literature has been taken in consideration to offer a broader, more accurate and

detailed analysis of the industry. Nicholls (2010), notes that despite growing international policy

interest in social investment, with the development of a considerable and fast growing grey literature

(Bank of England 2003; HM Government 2011; Carrington 2005; J.P.Morgan 2010; Monitor

Institute 2011), it has failed to attract much academic analysis or research. Academic works have

been scouted through the use of three search-engines: Scopus, Google Scholar and ScienceDirect as

well as other search engines which were used sporadically like Sagepub and Springerlink.

An extensive research was conducted to identify the key literature discussing impact investing,

impact investing in African economies, social entrepreneurship and governments’ roles in the sector.

Specific keywords were used to funnel the search as closest to the intended topic as possible.

Keywords as: “impact investing, social impact investing, impact investor, social finance, Sub-

Saharan Africa, Southern Africa, Mozambique, social entrepreneurship, social startup, social

enterprise, government, legal framework, Base of the Pyramid (BoP), venture, seed, early stages and

sanitation” are few examples, without any year constraint. For each paper steaming from the research

the abstract has been screened to select the ones relevant for the research topic.

Impact investing is still a blurry term and the concept is studied and defined by various disciplines:

Economics, finance, business and management, public and social policies. For that reason, the papers

read have been enlarged through a snowball approach. The literature provides a complete overview

of the impact investing context with a focus on Sub-Saharan Africa, in particular Southern Africa

and Mozambique. The definition was carefully analyzed and its relevant characteristics :

intentionality, additionality, measurability and return were defined.



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3.1. Social Finance

How can we define ‘Social Finance’ and how does it differ from ‘Finance’?

Social Finance is the utilization of financial resources targeting financial, social and environmental

returns as illustrated by (Moore, et al., 2012); (Glänzel & Scheuerle, 2015); (Daggers & Nicholls,

2016). Even though financial investing to realize social or environmental goals is not innovative per

se, “the idea of leveraging venture capital mechanisms for social purposes is indeed relatively new”

(Glänzel & Scheuerle, 2015); is becoming progressively a field of practice (Geobey, et al., 2012)

mentioned.

As a result, following the increasing attention drawn to this topic, as argued by (Wilson, et al., 2015),

diverse socially-oriented financial instruments have emerged, under the umbrella of Social Finance

(Moore, et al., 2012) Including, namely, social banking, impact investment, charitable banking,

crowdfunding platforms, community bonds, funds of funds, social impact bonds, beside other

financial instrument targeting social or environmental change. While traditional corporate finance is

when organizations get financing through an assortment of methods, going from value ventures to

credit courses of action. A firm may apply for a line of credit from a bank or organize a credit

extension. Securing and overseeing obligation legitimately can enable an organization to grow and

turn out to be progressively productive. In conclusion, “On the spectrum of investment types, set its

dual approach to financial resources management, social finance sits between philanthropy,

composed grants and donations for charities and non-profit, and socially responsible investing”

(Taskforce, 2014).

This paper will focus on Impact Investment. As a first approach towards understanding this topic, it

is essential to have a complete grasp over the different forms of investment. The following figure

maps the investing typologies and classifies them according to different blends of financial and

social risk and return. At one end of the spectrum, it is shown “traditional investments”,

characterized by maximizing financial returns for shareholders, regardless the consequences of these

investments on society or environment. Examples on ‘traditional investments’ could vary from

harmful yet legal investments (negative investments) like ones made in tobacco, alcohol, gambling

and weapons to neutral traditional investments made in agriculture or real estate. Moving towards a

more responsible approach, stands ‘Social/Sustainable Responsible Investments (SRI)’, which are

investments intended to avoid harming both the society and the environment and use negative-



51


screening to avoid investing in the aforementioned industries. Nevertheless, it does not necessarily

take a positive approach towards making a positive change or solve a problem. Examples on these

types of investments are ones that seek out companies engaged in: Social justice, environmental

sustainability, or alternative energy/clean alternative energy/clean technology efforts.

Next, there are the so-called ‘program-related investments’ that look for the financial sustainability

of the programs (enterprises) financed (Vecchi, Cusumano, & Brusoni, 2015), or other models

related to social finance. While Impact-driven investment, under the umbrella of social finance

(Geobey, et al., 2012) in an impact continuum, stands in the middle between philanthropic-giving

and investors pursuing generating a social impact alongside some level of social and financial turn

(Taskforce, 2014). Clear examples about impact-driven investments (impact investments) as

investing in businesses that serve a certain social problem in its own community, like providing

potable water, sanitation solutions or use of clean energy to bring electricity to rural areas in

developing countries.

Finally, on the other end, ‘appears donations or mission-driven investments that refer to the provision

of capital motivated by the social mission pursued, without taking into consideration financial

performance” (Taskforce, 2014). Figure 2 shows the investment spectrum according to the UK social

Taskforce:



52


Figure 2 - Investment Spectrum

Source - (Taskforce, 2014).

3.2. Impact Investing

3.2.1. Definition

Defining impact investing is a tough ask according to research, although there’s a general agreement

on the inclusion on its social and financial gains. “There has been an increasing realization that,

along with philanthropy and government aid, private enterprise can contribute to solving social and

environmental problems.” (Brest & Born, 2013) A statement that only shows how philanthropy and

government institutions have failed to address societal and environmental issues on their own as put

by (Moore & Nicholls, 2012) “Governments are no longer able to provide all the services, with the

required quality, for the all population.”



53


Therefore, this highlights the need for greater action/initiatives/work from the private sector to head

towards more responsible and sustainable approaches by gradually addressing social and

environmental issues, while abandoning traditional business approaches. However, these efforts have

been gaining prominence for the last decade as ““a growing number of investors are expressing a

desire to “do good while doing well”. These are impact investors, who seek opportunities for

financial investments that produce social or environmental benefits.” (Brest & Born, 2013). But who

are ‘impact investors’ and what does ‘impact investing’ mean?

The definition of “Impact Investment” remains clearly still a conundrum among industry experts and

scholars. In November 2018, the author, along investors, intermediaries and scholars, attended a

conference about Impact Investing and its role in the attainment of UN 2030 Sustainable

Development Goals. Interestingly, the different conceptual notions used for this term was especially

visible during one of the workshops, whereby the presenter mistakenly addressed and explained

impact investing as being the same as ‘Social Responsible Investment’. Hence, it is apparent the

elasticity underlying this term, despite having been already first introduced two decades ago upon the

event at Bellagio Center in Italy, organized by the Rockefeller foundation. This event was marked by

a fundamental discussion among leading finance, philanthropy and development experts, who

recognized the emergency for a solution aiming at building a global industry striving for investments

with a positive social and environmental impact (Höchstädter & Scheck, 2014) and defined the term

“impact investing” as investments made with the intention of generating both financial return and

social and/or environmental impact. (Rockerfeller, 2007). Since then, as illustrated by other scholars

including (Daggers & Nicholls, 2016) the field has gained an increased attention by practitioners and

scholars. Impact investing is also defined as an ‘intentional’ process (WEF, 2013: 3) of “actively

placing capital in businesses and funds that generate social and/or environmental good and a range of

returns, from principal to above market, to the investor” (BV-PG-GIIN, 2010). “It is this intentional

focus on both financial return and social impact that distinguishes impact investing from traditional

financial market tools” (WEF, 2013; (Scholtens, 2014); (Brest & Born, 2013); (Ashta, 2012); (Koh,

et al., 2012)).

However, as most of the publications are covered by practitioners, there is still a lack of homogeneity

and academic accuracy as argued by (Daggers & Nicholls, 2016). (Nicholls, 2010) suggested that the

Epistemology absence is a de-facto outcome when two conflicting sources of capital in ‘Philanthropy

and traditional investment’ are combined form a new hybrid organizational model. (S. & Kickul Jill



54


R. , 2013) added that this new perspective has provided an innovation in the financial sector. Even

though it has resulted in a much bigger degree of complication as (Nicholls, 2010) concluded. In

fact, one of the biggest aspects of complication to define a clear epistemology is the closeness of

impact investing to comparable areas, such as the Social Responsible Investments and Ethical

Investment as emphasized by Daggers & Nicholls (2016) and as previously illustrated through my

own personal experience. Moreover, this lack of an agreed upon definition yields a barrier when it

comes to academic researches. To date research struggles to outline accurate limits and the current

existing literature addresses the issue from different research fields like: Public Policy, Finance,

Economics, Business and Management. as stated by Daggers & Nicholls (2016). However, “there is

a general acceptance of the main contents of the definition at a general level” (Höchstädter &

Scheck, 2014) which is “The presence of financial and social returns, an explicit intentionality of

reaching social objectives and the measurement of the social returns” (O’Donohoe, et al., 2010)

(Nicholls, et al., 2015).

“Impact investing comprises all forms of financing linked to social objectives, from seed and early

stage risk capital all the way through to debt and growth capital” (Taskforce, 2014). As illustrated by

(Nicholls, 2010) impact investing compresses three different investment foundations: Firstly, it

focuses on creating social and environment returns as much as through government spending.

Secondly, it targets generation of financial returns on capital investments. Lastly, the creation of

blended value that merges both a consideration for financial returns and a concentration on

social/environmental outputs and outcomes. Furthermore, “The heterogeneity of investment logics

within impact investing is validated by the presence of diverse risk and return models and their

associated financial instruments, that range from grants to high yield private equity” (Nicholls,

2010).

Looking at the bigger picture, impact investors are categorized into two sets of thought approaching

impact investing strategy as argued by (Ormiston, et al., 2015) “The first category defines impact

investments as a new asset class, suitable for portfolio, that requires investors fully specialize to this

the field. According to this theory investor have to acquire a set of skills and the capability to

approach new set of capital structures (O’Donohoe, et al., 2010).

The second category is instead more optimistic and see impact investing as an investment approach

applicable to the existing asset classes (WEF, 2013). The investor embraces the idea that almost all



55


the investments may have an impact that could be measured and must specify intentionality. In this

case impact investments embodies a valid method for all asset modules and topographies (WEF,

2013). In conclusion, impact investing is a very complex term that is characterized by its

interdisciplinary nature with a lot of other fields and terms, a trait that makes it hard to define.

3.2.2. Impact investing, traditional investments and philanthropy

So what differentiates impact investing from business as usual investments (traditional investments)

or Philanthropy/grant-giving?

According to the aforementioned definitions of impact investing, the main difference to traditional

investments is that it is triggered by the investor’s intentionality. Intentionality is one of those

elements necessary to define impact investing (Addis, 2015) (Höchstädter & Scheck, 2015). It

means, the positive social or environmental results, steaming form the investment cannot be an

incidental side-effect of the deal (Brown & Swersky, 2012). If impact investing is what we do,

blended value is what we produce. ( (Bugg-Levine & Emerson, 2011). All the organizations both, for

profit and not for profit, create value with some economic, social and environmental components.

However, impact investing required some additional efforts to investors and enterprises that should

intentionally and actively pursuit social and environmental goals (Bugg-Levine & Emerson, 2011).

On the other hand, traditional investments are solely targeting profit maximization to shareholders

regardless of the consequences whether its consequences. In turn, the latter are considered

externalities, as opposed to impact investing, which goes beyond them taking action and driving

social and environmental change in a sustainable way. As a result, this positive change persists even

after the investment, regardless whether it was in the form of capital or expertise.

The intentionality to create positive impact beyond financial return is one of the main differences

that separates it from socially responsible investing (SRI) (Martin, 2014) which, as mentioned

previously, focuses on avoiding negative screens. While SRI focuses on reducing negative screens,

not proactively aiming to have a positive social or environmental impact. Another key element in

impact investing concerns the regular measurement of generated social impact as a cornerstone

practice of the social enterprise as previously discussed by (Höchstädter & Scheck, 2014) (Glänzel &

Scheuerle, 2015) and many more.



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On the contrary, impact investing is different to philanthropy and grant-making in the sense that

there has to be a financial return expected whether as return on investment or, at least, as a capital

preservation as highlighted by Nicholls, et. al. (2015). Though philanthropy, has helped millions of

people around the globe serious situations, it presents an underlying drawback, namely its inherent

social unsustainability stemming from the dependency of the helped on the helper.

The persistent lack of sustainability underlying philanthropy practices is especially visible in past

projects in Africa which were not leveraged in the long-term, following the investment.

Given the focus on Sub-Saharan Southern Africa on this paper, it is critical to recognize Philanthropy

as the most active form of investment in African countries, from East to West and from North to

South. However, thousands of projects had been fostered in African countries, without realizing the

change they were destined to make due to the lack of continuity, whether in the form of capital,

expertise, maintenance or human capital. As a result of this lack of sustainability, billions of dollars

become a lost investment, representing an opportunity cost for more sustainable practices which

could have been invested in Africans’ more independent decision-making concerning sustainable

social, health and environmental change to their communities. Thus, need for a reformed, more

sustainable model to drive change in developing countries, in general, and Africa, in specific.

As result impact Investing can be conceptually positioned in the middle of two extremes:

Philanthropy and traditional finance (Jessica & Katherine, 2009). Moreover, impact investors could

be divided into two categories according to (Freireich & Fulton, 2009), namely Impact First and

Finance First; The two classifications allow identifying different degrees of impact investing

concentration. Impact first

investors have the primary objective to reach social and environmental goals with the constraint of a

financial return base. Therefore, this group is willing to accept investments with an unbalanced

risk/return ratio in order to finance those high impact projects that are considered too risky for

traditional investors as (Lyons & Kickul, 2016) would argue. An example on this is ‘Via Water’

which will be discussed in details in later chapters. Contrastingly, ‘Impact First’ investors are less

willing to accept unbalanced risk/return investments, as they pursue to optimize financial returns in

parallel with social and environmental impact. In this sense, finance first investors are more similar

to SRI, complemented by an intention of a social or environment positive change. Conversely,



57


impact first investors are closer to grant-making, while having the capital preservation as a minimum

requirement.

In conclusion, in my opinion, impact investing is the evolution of both traditional investments that

have to be more inclusive, responsible and sustainable and philanthropic-giving which also needs to

be more economically and socially sustainable, creating bigger impact while using money efficiently.

3.3. Impact Investing System

The development of innovation and social entrepreneurship doesn’t depend just on one actor or

institution but it is a process in which a net of actors interact through different roles to enable the

success (or failure) of entrepreneurship and innovation (Gatica, 2011). Similarly, impact investing

goes beyond the operation of one sole actor and relies on the interactions within a whole

entrepreneurial system (Martinez, 2016). It’s possible to discriminate a system in relation to the rest

of the world (Edquist, 2001). The systems’ internal parts are composed by elements and relations –

components and relations for–, which are also able to produce more elements and relations. One of

the main problems when defining and specifying social innovation systems is to set the boundaries of

the systems studied (Edquist, 1997). Specifying the extent of the system –systems of innovation in

his case and impact investing systems for this research – is a procedure that require to identify all the

elements that may influence the development, diffusion and use of the phenomenon studied, which is

not easy in practice (Edquist, 1997).

3.3.1. Social Entrepreneurs, Social enterprises and Social Entrepreneurship

3.3.1.1. Definitions, Differences, Drivers and Objectives

There have been several speculations about the definitions of the aforementioned three terms in

literature. On one hand, they are connected and driven by common social, economic and

environmental challenges, arising from unethical human activities in the last few decades. However,

on the other hand, they still differ in conceptual meaning, objectives and triggers.



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In fact, paradoxically, several scholars have identified these three terms in many different ways. As

per (Shyama V. Ramani a, et al., 2016) who followed on a comprehensive survey carried out by

(Bacq & Janssen, 2011) on social entrepreneurship literature. They divided the three terms according

to the comprehension of the term ‘social entrepreneur’, indicating a specific person; the term ‘social

enterprise’, referring to a specific organizational type and the term ‘social entrepreneurship’

pertaining to a certain set of processes. While (Shyama V. Ramani a, et al., 2016) differentiated

between these terms using table 4 as follows:

Table 4 - On the ‘social’ and ‘private’ parts of social entrepreneur, social enterprise and social entrepreneurship.

Social entrepreneur

The individual

Social enterprise

The organization

Social entrepreneurship

The process

Objective:

To create, sustain, distribute or

disseminate social or

environmental value in order

to maximize social welfare

while being financially

sustainable.

Objective:

To create, sustain, distribute or

disseminate social or environmental

value to maximize social welfare in

order to attain the objectives of the

enterprise which could range from

financial sustainability and/or

maximization of returns to its staff

and/or growth of the organization

(Lévesque & Mendell, 2005)

Objective:

To create, sustain, distribute

or disseminate social or

environmental value rather

than maximize shareholder

value or personal wealth or

commercial profits (Zadek &

Thake, 1997)

Trigger:

Identification of a social or

environmental problem

Trigger:

Identification of a ‘social or an

environmental problem’ and the

‘resources to solve the problem’

(Lévesque, 2004)

Trigger:

Identification of a ‘social or

environmental problem’ with

or without the resources



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Drivers of activity:

Capabilities to resolve

social/environmental problems

using market-based

approaches and practicing

financial bootstrapping and/or

bricolage (Zahra, et al., 2009)


Capabilities to use

social/environmental problems as

business opportunities that can be

tackled with a market based

approaches (Seelos & Mair, 2009).


Possibilities for resolving

social/environmental

problems using market based

approaches whether or not

there is a business opportunity

and/or adequate resources.

Traits of the individual:

- Makes a high impact with

frugal use of resources

- Applies business

management principles

- Creative, radical, committed,

compassionate and effective

(Miller, et al., 2012)

- Strong social networks

(Shaw, 2004)

- Adept in communicating and

presenting the hard realities of

the society creatively so that

they come across as solutions

to the organizational

objectives or business needs of

the funders (Mallin & Finkle,

2007)

- Adept at relationship

marketing (Morgan & Hunt,

1994)

Traits of the organization:

- Makes a high impact with frugal

resources.

- Applies business management

principles.

- Strong social networks and dense

personal contacts of the founders

(Shaw, 2004)

- Adept in communicating and

presenting the hard realities of the

society creatively so that they come

across as solutions to the

organizational objectives or

business needs of the funders

(Mallin & Finkle, 2007).

Traits of the process:

- Makes a high impact with

frugal resources.

- Applies business

management principles to

create social value (Austin, et

al., 2006)

- Generates a flow of

information and persuasive

arguments to create awareness

and interest in order to

develop a flow of funds to

create social value or resolve

a social problem (Sodhi &

Tang, 2011)

Source: (Shyama V. Ramani, et al., 2016)

From the previous table, we conclude that both ‘social entrepreneurs’ and ‘social enterprises’ target

generating ‘social or environmental impact’. A ‘social entrepreneur’ could -but not necessarily- own

or work within a ‘social enterprise’. While social enterprises follow an organizational set of targets



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and aims approached with a business mindset. On the other hand, ‘social entrepreneurship’ is the

process generated by the activities of either social entrepreneurs, social enterprises or both, no matter

the size or the sector of either. Hence, according to this source, social enterprises are similar to all

corporate ventures, pursuing social value or tackling social problems only if they have the adequate

resources; whilst social entrepreneurs could do with whatever they’ve got on their hands. However,

as stated by (Shyama V. Ramani a, et al., 2016) what differentiates a social enterprise is, firstly, a

market or non-market proposing to address a social necessity. And secondly, the enterprise have to

be economically feasible, either through direct offerings or through third party financiers such as

foundations or public agencies that help back their undertakings and proposals to the targeted

community. And finally, business management principles have to be followed within an enterprise’s

internal governance, advertising and services supply.

That being said, another point when discussing about social enterprises is the differentiation between

being not-for-profit vs. for-profit. (Ratten & Welpe, 2011) argued that social enterprises can be

community based, theme based or both. And they may or may not require external intervention for

success (Handy, et al., 2011). In fact, one of social enterprises’ target Bottom-of-the-Pyramid (BoP)

consumer markets with the potential to improve access to essential goods and services for the poor in

Low Income Countries (LICs) ( (Bugg-Levine & Emerson , 2011) (Koh, et al., 2012). The long-term

impact is mutually controlled by social enterprise's genuine aims, its abilities and the idea of logical

difficulties. To encourage long-term positive social impact for people and environmental

sustainability, key and fundamental difficulties must be put through censoring components, reviews

and training of the SE's team. Aiming at better decision-making and provided the lack of updated

information about their aimed beneficiaries’ or environmental needs from managers of funds, social

enterprises are often sought by public agencies for research and development associated with social

problems (Leadbeater, 1997). Thus, social enterprises have been considered as innovative platforms.

(Psychogios & Leslie T. Szamosi, 2007). Enterprises traditionally pass through a well-known

lifecycle, and so do social enterprises; however with the added social/environmental related aspects

that add more challenges to the process. These stages are as Existence--concerned with garnering

customers and delivering the product or service contracted for. (Lewis and Churchill, 1987).

Survival--firms have demonstrated that they are workable business entities, but the key question

becomes whether there is enough money for the firm to break even and stay in business (Lewis and

Churchill, 1987). Success--here the decision facing owners is whether to exploit the company's



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accomplishments and expand or keep the company stable and profitable, providing a base for

alternative owner activities. (Lewis and Churchill, 1987).

Take-off--concerned with how to make the firm grow rapidly and how to finance this growth.

(Lewis and Churchill, 1987). Below, is table 5 that represents the growth stages as well as the

financial needs and the type of capital available to these organizations at the different stages of

growth as well as the barriers they face during these growth stages according to Arena et al. (2018)

Table 5 - Outline of Social enterprises growth stages and their financial needs

Source - (Arena et al., 2018)



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In this paper, the author focuses on the Startup/Survival stage. How social entrepreneurs cope with

the demands of this stage which is considered the most critical and most difficult as nine out of ten

startups fail according to (Patel, 2015) of Forbes.

Surprisingly, the potential of social entrepreneurship to bring about positive transformative changes

in the context of poverty remains understudied (Rashid, 2010). In fact, (Mair & Marti, 2006) discuss

the interaction between the social entrepreneur and the context is supposed to be the foundational

unit of analysis for studying the process of social entrepreneurship, but there is scarce understanding

of the instruments and practices of social impact in the poverty setting.

As for the social entrepreneurship process, according to (Davidsson, 2012), any entrepreneurial

process consists of four elements: ‘Opportunity recognition’, ‘Solution’s concept development’

‘Solution actualization’ and ‘Harvesting’. ‘Opportunity recognition’ implies the realization of a

social problem, and have generating profit as an important and essential objective for a social

enterprise to sustain its operations and scale up, without, however, having profit maximization as a

priority , as in traditional enterprises.

‘Solution’s concept development’ and ‘Solution actualization’ are concerned with innovating and

coming up with quality ideas and solutions for the identified social/environmental problems that

would meet a certain need, while being economically viable for the targeted community as discussed

by (Christensen, et al., 2006). Therefore, these solutions are ultimately implemented (by working on

them and turning them into realities and work in progress rather than just mere ideas). ‘Harvesting’ is

a metaphor of realizing the results of the preceding stages of the social entrepreneurial process

whether social/environmental or financial or both. These results should have a positive impact on the

community if this was the initial target, social impact speaking or a positive impact on the

enterprises’ resources or financial situation.

In conclusion, both social entrepreneurs and social enterprises operate in a social entrepreneurship

scheme with little variances. All complementing each other and operating in close proximity with

similar goals in sight. However, the sector is severely lacking academic research.



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3.3.2. Impact Investing in Southern Africa

3.3.2.1. Potential and development context

The impact investing phenomenon is generating interest all around the world (Mudaliar, et al.,

2017). Moreover, billions of dollars of impact investments are being channeled into enterprises and

projects in low income countries (LICs) as a catalyst for poverty alleviation, social and economic

development through profitable enterprise development ((WEF, 2013); (Koh, et al., 2012);

(Dahlberg, 2011; 2012)). However, some countries have had a faster development pace, contrasting

others which are still lagging behind in this sphere Sub-Saharan Africa (SSA) which includes

Southern Africa is a region belonging to the latter group. Nevertheless, according to GIIN report

2018, shown in figure 3 below, SSA has the 3rd highest of Asset Under Management (AUM)

allocation in the world.

Figure 3 - AUM concentration in different regions around the world.

Source – (GIIN, 2018)



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The majority of impact capital in the region has come from international DFIs and a range of non-

DFI impact investors. In total, non-DFI investors have closed more than 500 deals and disbursed

USD 5.7 billion throughout the region.

Moreover, It should be noted that the ten largest transactions in this group account for just over USD

3 billion of capital disbursed. International DFIs have closed more than 650 deals and disbursed USD

16.7

billion. Larger than either of these categories of actors alone, domestic South African DFIs have

closed more than 7,500 deals and disbursed USD 17.1 billion throughout the region (GIIN, 2016).

Figure 4 below shows the GDP growth in Southern Africa between 2005 and 2014:

Figure 4 - GDP (PPP) Growth in Southern Africa, 2005-2014

Source – (GIIN, 2016)

Additionally, there is solid interest for impact capital around Southern Africa “as an attractive

emerging market investment strategy, it involves development finance institutions and philanthropic

foundations partnering with mainstream private venture capital to create impact funds with the goal



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of catalyzing inclusive market-based enterprise development in low income countries (Ngoasong, et

al., 2015).

In spite of advancement on key development indicators, there remain noteworthy gaps in the

arrangement of key products and services. This open doors for entrepreneurs to create ventures that

address the issues of underprivileged populations while acknowledging economical returns. In spite

of solid interest and developing industry, generally little research has inspected impact investing

markets at the nation-by-nation level. This kind of rough data is fundamental to impact investors as

of now working

in a locale or considering investments there later on Southern Africa has seen moderate development

as of late, averaging a consolidated five percent annual growth in Gross Domestic Product (GDP) at

Purchasing Power Parity (PPP) somewhere in the range of 2005 and 2014. Across the region, total

GDP (PPP) as of now remains at roughly USD 1.2 trillion, with South Africa representing 60 percent

and Angola a further 15 percent. Over the previous decade, Zambia and Mozambique were the two

quickest developing economies, at nine and eight percent Compound Annual Growth Rates (CAGR),

separately as found by (GIIN, 2016).

In Southern Africa, nations shift generously in their developmental levels as shown by their scores

on the United Nation's Human Development Index (HDI). Mauritius surpasses the global average

HDI score, while Botswana and South Africa are close to the global average of 0.69. In the

meantime, Malawi and Mozambique have HDI scores that are scarcely above half the global

average, driven by poor execution on different indicators identified with poverty, health, and

education. The following table 6 shows HDI scores of the Southern African states:



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Table 6 – UN HDI scores and ranks by country.

Source: (GIIN, 2016)

The International Monetary Fund (IMF) extends that the area will keep on encountering around five

percent annual growth through 2020, with the region's total GDP (PPP) developing to over USD 1.5

trillion. South Africa is anticipated to keep forming almost 60 percent of the region's GDP (PPP) and

Angola to grow to about 18 percent. In spite of the fact that not the biggest economy, Mozambique is

relied upon to encounter the biggest development, with year-on-year rates of more than nine percent.

3.3.3. Mozambican Context

3.3.3.1. Historical and present contexts

Mozambique's way to stability has been long and troublesome. After independence from Portugal in

1975, the Mozambique Liberation Front (FRELIMO) ruled the country, prohibited all other

ideological groups and parties, and supported the battle for freedom in Zimbabwe. Hoping to

destabilize the FRELIMO government, in 1976 the Zimbabwean Central Intelligence established a

resistance rebel group, the Mozambican National Resistance (RENAMO). The political unrest



67


between the two sides turned into a civil war that caused more than one million deaths before ending

in 1992.

The aftermath of the civil war left Mozambique as one of the poorest nations on the planet, yet the

most recent two decades have seen a fast recuperation. Development in (GDP) has soared around

nine percent every year in the course of the most recent decade, and the administration has loosened

up its once strict socialist policies. Alongside the discovery of huge oil and natural gas reserves, this

economic progress has caused a flood in foreign investment. Impact investing in Mozambique has

kept up with rising business investment. Driven by vast DFI deals in infrastructure and energy,

Mozambique has gotten the third-most astounding measure of impact capital of any nation in the

region. Acknowledging opportunities across sectors, nonetheless, will need overcoming significant

remaining obstacles. Non-DFI impact investors have found it hard to place capital, referring to

Mozambique's poor infrastructure, poor education, political restlessness, and high linguistic and

social boundaries for non-Portuguese speakers. (GIIN, 2016).

3.3.3.3. Economic development and foreign investment

Mozambique today has one of the highest growth rates of Africa’s non-oil economies, averaging

7.5% since the turn of the millennium. The country has engaged in considerable economic reform

since its emergence from civil war in 1992, with substantial support from development partners

(OECD, 2013). Mozambique's GDP has developed consistently at around nine percent year-on-year

in purchasing power parity (PPP) terms somewhere between of 2005 and 2014, making it the

quickest developing economy in the region and the quickest developing non-oil economy in

Southern Africa as the (IMF, 2015) impact investing in Southern Africa report argues. A lot of this

development has originated from FDI in Mozambique's extractives segment, especially coal and

aluminum, alongside investigation and early infrastructure for its huge and undeveloped natural gas

reserves. Public spending in development, services, transportation, and energy—financed generally

by foreign debt—has likewise been a noteworthy driver of GDP development (EIU, 2014). In spite

of records of development, be that as it may, GDP per capita stays at just USD 1,174 in PPP terms,

the second-lowest in Southern Africa as illustrated by (IMF, 2015). In spite of the fact that its

population is generally like that of Angola's (at roughly 26 million), Mozambique's economy is

around a fifth the extent of that of its fellow previously Portuguese colony.



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3.3.3.4. Development landscape

Mozambique has witnessed modern growth in terms of development measures. Nonetheless, after a

drop in inflation following the 2016 debt crisis which caused an economic nose-dive, the

Mozambique Economic Update (MEU) by the world bank pinpointed that the country is steadier

now after starting to recover from the 2016 debt crisis, but growth predictions are slim. Gross

domestic product (GDP) growth was an average 3.8% in 2016 and 2017 and is expected to reach a

slightly lower rate of 3.3% in 2018 (World Bank, 2018). Moreover, services such as tourism,

transport and finance—which were all hit hard by the crisis—have shown a shy rise in growth,

however these improvements were counterweighed by reduced growth in the extractives sector.

Mozambique’s growth opportunities also hinge on the recovery of consumer spending, especially in

services, which had been the largest driver of growth before 2016 (World Bank, 2018).

On the other hand, Mozambique’s GDP remains driven by agriculture, according to OECD ( 2013),

agriculture makes up 25% of the total GDP (mostly tobacco, sugar, cotton and cashews) while

services make up to 30% (including construction and tourism) while the finance and real estate

sectors only make up 5% of the total GDP, as shown in the below figure shows the Mozambican

GDP composition in the first quarter of 2012. Accordingly, agriculture makes up to 80% of total

employment in Mozambique, while services make only up to 13%-15% (if informal workforce is

taken into consideration).

However, agriculture share of the GDP has been declining since 1996 (OECD, 2013). While,

services and industry have been reaching double-figure growth ever since 2003 (mainly due to the

development of the extraction sectors) which means Mozambique is well on its way to the direction

of global economy that has a big emphasis on the services and manufacturing industries (OECD,

2013).



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Figure 5 - Mozambique GDP Composition, 2012 (1st Quarter)

Source: (Bank of Mozambique, 2012)

Furthermore, while poverty has been reduced, the MEU reports that inequality has surged as

economic progress is gradually becoming less inclusive. The report mentioned numerous optimistic

advances,

including an increase in the poverty-reduction rate between 2003 and 2015, bringing poverty down

from more than 60% in 2003 to a little more than 48% in 2015 as seen in figure 6 below:



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Figure 6 - Poverty-reduction rates between 2003 & 2015

Source: (World Bank, 2018).

However, these improvements came at a high cost of a widening gap between the rich and the poor,

as the report concludes, hindering Mozambique’s development in achieving shared wealth and

turning it into one the most unequal nations in Southern Africa. Mozambique has witnessed modern

growth in terms of development measures, but the country’s score on the United Nations’ Human

Development Index (HDI) of just 0.39 ranks 178th of 187 nations, the lowest in Southern Africa

according to the (Malik & et , 2014).

This ranking is replicated in poor implementation across a number of indicators covering poverty,

health, and education as illustrated in table 7:



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Table 7 - Selected Mozambique Development Indicators


In that context, Mozambique has one of the poorest educational systems in the world. According to

various studies 96% of the population didn’t attend secondary education, the lowest in Southern

Africa by a mile and the second-lowest globally. Likewise, 60% of Mozambique’s population, live

on less than $1.25/day more than double the global average and above the region’s average. The

country is also performing poorly on the health indicators’ front. Mozambique’s under-five mortality

rates are close to double the global average and are the third-highest in the region behind Angola and

Lesotho (GIIN, 2016). Levels of under-five stunting, an effective proxy for childhood and later

general health, are close to the regional average, still considerably above the global average (GIIN,

2016). Like quite the rest of not only Southern Africa but the whole of Sub-Saharan Africa,

Mozambique is a youthful nation; 45 percent of the population is younger than 15, and 65 percent is

younger than 25 (CIA, 2015). Which led to high levels of youth-unemployment as discussed by

(Cowie, 2014), a problem hard to solve with a poor educational system, a tool that is very much

needed to translate youth potential into economic growth.



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3.3.3.5. Impact Investing in Mozambique

Impact capital signifies an insignificant share of the overall capital existing in Mozambique.

Contemplating both DFI and non-DFI activities, Mozambique has had the third-highest number of

impact investing deals in Southern Africa, after South Africa and Zambia (GIIN, 2016).

Additionally, Mozambique has seen the third-most noteworthy volume of DFI impact capital.

However, with just the seventh-highest quantity of non-DFI capital dispensed among the 12 nations

in Southern Africa, about all impact capital put into Mozambique (>96 percent) has originated from

DFIs (GIIN, 2016).

Less than 1% of non-DFI impact capital disbursed in the regions has been placed in Mozambique,

amounting to only $52 million across 42 deals” (GIIN, 2016). See the following figures 7 and 8:

Figure 7 - DFI Impact Investments Figure 8 - Non-DFI Impact Investments


FDI streams have been a noteworthy driver of financial development in Mozambique. Especially

lately, global interests in extractives have drastically stretched FDI quantities. In 2013, net incoming

FDI streams summed nearly $6 billion, $5 billion more than three years prior as demonstrated by

(UNCTD, 2015). Portugal, China and South Africa are the country’s main trading partners and FDI

springs.

For example: In 2013, companies from the three aforementioned companies made the highest new

investments in Mozambique. according to figures from Mozambique’s Investment Promotion Centre

(CPI).



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On the other hand, there are less than fifteen active non-DFI impact investors who have set just USD

52 million in Mozambique to date, with the greater part in agriculture. Thus, regardless of high

generally speaking streams are, social enterprises across sectors in Mozambique battle to source

impact capital due to a variety of reasons that will be discussed later on. In a country where financial

institutions control the financial sector, controlling around 95% of total assets in the financial sector,

of which 87 % are concentrated in the country’s five largest banks’ hands. Access to capital remains

a test for enterprises. Despite loan fees on commercial debt having dropped since 2005 from around

20 percent, nevertheless they still are fixed close to 15 percent, making them unreasonable for some

businesses as Manuel Gangulo, CEO of ‘SUSAMATI’ a social enterprise functioning in the

sanitation sector confirmed during an interview with the author. When Asked about the nature

impact investing landscape in Southern Africa, specifically in Mozambique, Gangulo said and I

quote “ I think it is an emerging sector because normally from my experience, SE is a solution to

solve emerging problems. A lot of initiative (startups) are emerging now a days. I know of 12

initiatives after research and study with high potential. So definitely the sector is growing and

emerging with these initiatives being sustainable, it is only going to grow more.”

Gangulo noted during the interview that few financial institutions are willing to engage with

entrepreneurs. Generally, financial institutions are reluctant to work with entrepreneurs and social

entrepreneurs specifically or even respond to the needs of growing social entrepreneurship.

Especially those in the first stages. Notwithstanding the trouble of acquiring credits from traditional

financial institutions, Manuel also hinted that Mozambique for the most part, needs to develop a

bigger and more resilient entrepreneurial culture. Thus, many businesses crash because they lack

finances and mentorship. Furthermore, Of the segments focused by non-DFI affect financial

specialists, Agriculture records for about 80% of agreements and in excess of 60% of total capital

dispensed. As per (GIIN, 2016), Non-DFI impact investors in Mozambique have utilized a genuinely

even part of the traditional debt and equity has represented about 60% of known deals. Equity deals

were additionally utilized in a significant portion of transactions, representing 33% of known deals.

In any case, more finances have been conveyed in general utilizing equity than debt, given the bigger

deal sizes known with this tool.

Moreover, very few impact investors have offices in Mozambique, and lesser than fifteen non-DFI

impact investors have located money in Mozambique. With that in mind, Gangulo noted that there



74


are evident gains to functioning with local existence, as investing in Mozambique often needs

profound local familiarity, language proficiency, and human-networks to steer a bureaucratic scene.

Developing a local existence offers substantial benefits in terms of aiding investors to source

exclusive deals. Nevertheless, Gangulo reported that more and more entrepreneurs in Mozambique

are looking for impact capital. However, the country’s SME scene remains immature. Nevertheless,

as (UNIDO, n.d.) put it, a new generation of Mozambican entrepreneurs is evolving, actively

supported by the government (a notion Gangulo has disagreed with as he doesn’t see enough support

whether financial or professional by the governmental authorities) there remain substantial gaps in

the establishment of basic commodities and services, mostly outside of the capital Maputo, which

creates opportunities for entrepreneurs to start startups that would fulfill needs while also gathering

financial returns.

3.3.3.6. The Ecosystem’s Elements and Challenges

In this sub-section, the discussion will focus on the primary actors and the challenges often faced in

Southern Africa by taking Mozambique as an example. The ecosystem consists in primary actors in

entrepreneurs, social enterprises, investors, intermediaries and government. While it also includes

secondary actors which are often “Enablers” like universities, research centers and NGOs. As with

impact investment as an activity, the more extensive environment/ecosystem supporting impact

investment in Mozambique is still in its initial growing stages too. Mozambique's development might

be relied upon to exhibit appealing chances for intermediaries, investors and service providers later

on, yet the nation's emerging culture of entrepreneurship and difficulties in the administrative and

regulatory frame imply that its ecosystem growth might take time.

There are many challenges that different scholars and practitioners have covered, but there are some

more that are usually overlooked despite being of huge importance, miscommunication and mis-use

of language are examples. Titia Wouters, program manager of ViaWater managed by AquaForAll, (a

Dutch intermediary non-for-profit organization that manages more than 60 governmentally funded

water innovation projects across Africa with whom the author is working on a case study from

Mozambique which would be covered in details later in this paper) said during a capacity building

and investor induction seminar opening speech in Rotterdam, Netherlands:



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“What do we mean by impact? There’s no right or wrong definition here, we know there’s a gap in

the language spoken by NGOs, donors, local entrepreneurs, policy makers and investors.” (Wouters,

2018) “It has become clear to me how much using familiar terms positively affect your audience’s

attention to your pitch, how much smoothly things might go when people understand which part of

the market you’re operating in. It struck me because I realized there’s a world to win here, just by

crossing this language barrier alone, there are many impact investors out there looking for great

opportunities that would provide both impact and the return on investment they’re looking for.”

(Wouters, 2018). “At the same time, there are many people working locally on these sort of

opportunities, they know about the problems their communities are facing, they know which

solutions would work and they know exactly which sort of revenue models would work.” (Wouters,

2018).

According to (GIIN, 2016) a lack of public data about deals stops depiction of solid assumptions

about the record of non-DFI impact investing in Mozambique, Manuel Gangulo has confirmed that

impact investing generally and non-DFI impact investing specifically remain immature. However,

through different literature review, a lot of challenges have been mentioned and repeated by different

scholars, practitioners and organizations, these challenges could be summed in the following

according to (UNDP, 2015):

• Difficulty finding sustainable investments that meet equally financial and

social/environmental Intentions as a consequence of inadequate capacity of sustainable social

enterprises:

- Limited number of sustainable social enterprises able to establish an adequate track-record

and capacity development in harmony with the risk-appetite of impact investors.

- Limited ability to measure and report adequately on impact performance where such

capacities do exist.

• Inadequate new fund tools and deal structures:

Finding deals and funds that matches investors’ risk-return requirements is an issue that can be

mitigated by deal and fund structures incorporating instruments such as ‘first loss reserves’, ‘risk-

sharing’ and ‘patient capital’.



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• Difficulty Exiting Investments:

The majority of exits were through sales to strategic buyers, with most African exits being realized

by investors seeking below market (closer to market) returns. Despite the Sub-Saharan Impact

Investing market being the second biggest market in the world, exit opportunities still persist to be a

challenge which prevents impact investors from being drawn towards the market in general and

specifically towards small/starting businesses with high probability of failure.

• Limited Capital Supply Across the Risk/Return Spectrum:

As with sustainable social enterprises globally, those in Southern Africa have even more limited

access to funding particularly at their early stages of implementation, suggesting a low appetite for

risk and reinforcing the funding gap at this critical stage of development.

• Unclear Regulatory Environment:

Create an enabling and stable regulatory and policy environment for both investors and sustainable

social enterprises. Social enterprises find it hard to start social businesses due to inflexible

regulations that give no advantages or facilities to socially or environmentally oriented businesses.

• Poor Linkages Between Sustainable Social Enterprises, Entrepreneurs, Investors and

Innovation Networks:

- Sustainable social enterprises themselves may function outside of the recognized enterprise

development networks usually active in low-income countries as a result of the inflexible and

bureaucratic legal framework implemented by African governments.

- Social enterprises may have limited or no access to academic and research institutions

focusing on research and development that can be aid in the learning process and help the sector

prosper.

• Poor and Inconsistent Impact Measurement Practice:



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- The sector still needs a regular methodology to measure performance against clear impact

criteria, targets and deliverables.

Moreover, according to (GIIN 2018), the top 5 most persistent challenges as cited by GIIN’s network

of respondents of investors of the aforementioned are the following (ranked from highest to lowest):

1- The lack of appropriate capital across the risk/return spectrum was the most commonly cited

challenge facing the growth of the impact investing industry:

2- The lack of common understanding of definitions and segments of the market.

3- Suitable exit opportunities.

4- Sophistication of impact measurement practices.

5- High-quality investment opportunities with track record.

3.3.3.6.1 Social Enterprises

The number of social entrepreneurs and social enterprises is rising globally, as is their influence and

impact ( (Bornstein, 2004); Drayton, 2002); Harding (2004); (Nicholls & Young, 2008)).

However, contrary to that, Mozambique like most Southern African countries, has few early-stage

businesses generally, never mind social businesses and its entrepreneurship culture remains

immature even if the country has been witnessing economic growth over the past decade or so.

Social entrepreneurs, investors and intermediaries interviewed for this paper identified Sub-Saharan

African in general and specifically Mozambique’s governmental corruption, lack of expertise and

bureaucracy as challenges to growing a culture of social entrepreneurship. Moreover, Gangulo added

that there are many challenges that hold the sector back. Challenges related to lack of governmental

support, legal framework and mentoring. Other countries have a legal framework for social

enterprises, however here in Mozambique there’s none. Either you are defined as an NGO or a

company, and even if you have a company to prove to investors that you are a company but with a

social goal, it is another story. (Gangulo, 2018).



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Gangulo has stated that even though theoretically there are a few policies which are meant to help

startups, corruption and bureaucracy act as impediments to the actual implementation of these

policies. “Theoretically, there are some policies to help startups, but because of bureaucracy and

corruption it always works in other ways. You never know how to reach funds by the government

and it is a very long process that is time and resource consuming that only some people can trigger.”

(Gangulo, 2018) “In 2011, the government started a startup fund of 7 million Metacais (Around 100k

Euros) in each region of the country, entrepreneurs could just go with the business model and get the

fund. Most entrepreneurs never paid the government back. There was no tracking of how the money

was spent or results’ tracking. All you needed is just a plan of how and when you are going to pay

and if you don’t pay, no penalties were applied.” (Gangulo, 2018). Gangulo highlighted the highly

inefficient Mozambican system that results in financial losses and resource-wasting, undermining, in

the process, tens of entrepreneurial ideas that would solve social problems if sufficiently supported

otherwise.

Besides, early-stage entrepreneurs who do exist in Mozambique and most of the region face

considerable impediments to growing their businesses to be investment-ready and struggle to unearth

funding beyond friends and family. Especially that banks’ financings are expensive with interest

rates on SMEs’ loans seldom less than 15% as (GIIN, 2016) illustrated. Enterprises sometimes

struggle to prove their business models.

In such cases, it is understandable for impact investors not to have confidence in a business’s

processes or to rely on the entrepreneur enough to invest money in the startup. Gangulo as well as

investors’ and intermediaries interviewees have confirmed this notion during different interviews

between March and December, 2018 in Mozambique, Netherlands and France. “ We are facing a

challenge to find new investors to set the business running. We now have the prototype, we have the

community that needs the product but we do not know yet the capacity of the customer to pay for the

pit so we are struggling to set a business model to work with” Gangulo said. Gangulo confirmed that

this process leads to difficulty in finding impact investors as they always require a proven sustainable

social business model to invest in. “That is our current dilemma” He added. “We found a donor ‘VIA

Water’ through personal connections of one of our founders”. Because they’re a grant-maker, they

take high risks, which isn’t common in the field. However, as he later clarified, VIA Water have a

strict potential project evaluation process that if not passed, startups don’t get the fund.



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Beyond access to capital, early-stage businesses also face significant challenges due to

Mozambique’s geographic size and poor infrastructure (GIIN, 2016). The author spent a month

between March and April 2018 traveling through Mozambique, trying to understand how the

country’s geographical nature and infrastructure affect the social entrepreneurship landscape. The

country extends for two thousand kilometers along the African Southern-Eastern coastline. Highway

roads and infrastructure are still evidently affected by the civil war, many of the roads are bombed

and are un-navigable. It took the author 4 days of public transport and hitchhiking to travel a distance

of one thousand five hundred kilometers from Vilankulos, a little town on the coast-line, to Nampula,

the third biggest city in Mozambique. A distance that would usually take less than a day to cover.

Additionally, the country has low population concentration and is highly un-urbanized as mostly the

population live in rural areas, which needs rising businesses to quickly enlarge their geographical

range to develop their incomes.

As in many of the region’s countries, the group of well-informed workforce is insignificant and

therefore costly, specifically at the levels of middle and senior management. Moreover, Government

restrictions on the number of expatriates businesses are allowed to hire exacerbate this problem.

Depending on their total number of employees, Mozambican businesses are only permitted to

employ foreign labor as five to ten percent of their total staff depending on the total staff size.

(Research Law Business, 2014). Additionally, as a result of Mozambique’s poor educational system

as mentioned before, there’s a shortage of educated well-informed labor and thus educated

Mozambicans and Africans command high wages that are most social startups cannot afford. In

addition, the quotas of foreign labor in Mozambican enterprises depends on enterprises’ sizes.

According to the (Law Business Research, 2014) only 10% of foreign workforce is permitted in

small enterprises with up to 10 employees. 8% for medium enterprises with 11 to 100 employees and

5% for large enterprises with more than 100 employees. A law that limits the number of foreign

expertise that could be useful in boosting Mozambican’s workforce experience and knowledge in

different sectors.

Further, according to the World Bank’s “Doing Business” report of 2019, “Mozambique made

starting a business more expensive by increasing the cost to publish the company’s deed. At the same

time, it made the process less costly by replacing the business license with a notification of activity

for some sectors.” Given that social entrepreneurship is not a priority for the country, this means that

starting a business for social startups is even more expensive and harder now than before, supporting

http://www.doingbusiness.org/en/reforms/overview/economy/mozambique



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Gangulo’s claims “Legalities usually cost us unnecessary money and time to get established as a

company with no eases whatsoever on being a social enterprise. Money and time that could

otherwise be invested in the business” Gangulo noted.

3.3.3.6.2. Impact Investors

The impact investing sector faces a cyclical challenge wherein private investors will not likely invest

at scale until there is a proven track record, but a proven track record can only happen when a critical

mass of capital is available to invest. Foundations might be willing to venture into this uncharted

territory, but complicated tax regulations inhibit them from making program- related investments in

social impact businesses (Simon & Barmeier, 2010). Nevertheless, assumed the absence of

competition, demanding necessity for investment, and encouraging general economic stance,

Mozambique could provide chances for impact investors to create social and financial returns. The

existing investing landscape presents a clear gap that impact money could fill.

Below is an analysis of the facts and realities that could result in challenges and opportunities that

Impact Investors could face or take advantage of in the region and specifically in Mozambique, that

were found in gray-literature reviewed (as a result of lack of scientific literature on the topic), and

later validated by interviews with investors and more actors later on but generally speaking, a

broader range of financial instruments is needed across the full risk/return spectrum including a

better understanding of which financial instrument and funding model would be most effective for

social enterprises at various stages of development (Evenett and Richter, 2011). However, these are

some of the challenges and opportunities that impact investors are likely to face while operating in

Mozambique:

• Environmental aspects:

- Poor infrastructure:

Despite the civil war ending almost three decades ago, the country’s infrastructure remains

underdeveloped as already mentioned before in the previous section, it took the author 4 days to

navigate a distance of one thousand five hundred kilometers due to poor road conditions.



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Additionally, the absence of a strong transportation network makes navigation even harder. Less than

15% of Mozambican citizens are connected to the national grid, as the majority of electricity is

exported to South Africa as elaborated both by (Electricidade de Moçambique, n.d.) and (US

embassy in Mozambique, n.d.). Generally, these infrastructure restraints, in addition to the country’s

gigantic geography, can increase capital-placing costs and examining companies’ portfolios.

- Bureaucratic and hard to navigate government:

As in most of the Sub-Saharan region, a geographical area that has been torn by civil wars from the

Indian ocean to the Atlantic ocean after decades of colonization by European powers, Mozambique

has inherited a deeply bureaucratic and corrupt series of governments. This resulted in an unstable

macroeconomic scene for decades. However, this has been gradually changing over the past decade

or so, the country was recently hit by a debt crisis in 2016 that yet hindered economic development.

All

these instabilities and drawbacks will certainly cause impact investors some challenges in navigating

the legal and governmental landscape in Mozambique as well as increase the due-diligence and

portfolio monitoring costs.

• Socioeconomic aspects:

- Workforce:

One of the primary setbacks to a prosperous impact investing scene in Mozambique is the poor

education level of the population and the difficulty in sourcing qualified labor for scaling, according

to the Danish Trade Unions (CIDC, 2014). Moreover, Qualified labor is usually fully engaged in the

extractive industry, which in turn generates extra demand for qualified international educator

workforce. Despite being an issue that was partly counterbalanced by the flood by Portuguese

moving to Mozambique in search of work. The lack of local qualified workforce is still critical

because of the previously mentioned labor laws regarding the number of employed foreign labor.

- Language:

Being one of the very few countries that speak Portuguese, investors have to adapt in Mozambique to

the language differences. While the author was traveling through the country, a major challenge was



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communicating with the population as very few people speak English or any other language apart

from Portuguese and the local tribal languages. A challenge that would make it hard for investors to

carry out their due-diligence processes as well as understand the legal system and finishing

paperwork in the country that is based on civil law rather than the English common-law system that

is used in anglophone countries as indicated by (GIIN, 2016).

- Lack of investment-ready deals:

Due to the immaturity of the private sector in most Southern Africa countries, as well as in

Mozambique, interviewees hinted that there are a few number of investment-ready businesses which

are at a growth stage and are ready for external capital in forms of different financial instruments.

For instance, many startups work informally due to legal restrictions and therefore lack the historical

records and long-term strategies that are needed to attract impact investors.

However, there are still a lot to be optimistic about in the impact investing scene and what it

could offer impact investors in Southern Africa and especially Mozambique with the following

opportunities:

• Establishing a local presence:

Assumed the lack of competition, impact investors with a local presence note having a substantial

advantage in their capacity to find investment prospects. Since only very few non-DFI impact

investors have offices in Mozambique, impact investors keen to invest resources in the country have

the chance to find key investments and create a base early on before a competitive market emerges as

anticipated.

• Create and improve Technical Assistance (TA) for pre-investment pipelines:

Because most businesses in Southern Africa are not investment-ready yet, pre-investment assistance

is usually required to aid these startups in reaching an investment-ready status where they’d be able

to raise sufficient investment capital and efficiently use it across different business operations. Here,

there is a huge opportunity for impact investors to provide grant-funds or a Technical Assistance



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(TA) presence to help build capacity and professional expertise which is often more needed than

money.

• Establishing a local partners network to navigate governmental bureaucracy and legal

challenges:

Having a local partner eases the whole process for investors as argued by Gangulo.

It helps impact investors navigate the system’s bureaucracy, the language barrier as well as

understand the local context from a local perspective with an eye on the social problems that need to

be addressed and the best ways

to address these problems. Without the local perspective, investments would usually cost more both

money and time.

• A growing scene of Social Entrepreneurship:

Gangulo noted that the Social entrepreneurship landscape in Mozambique, Southern Africa as well

as in Sub-Saharan Africa, in general, is growing every day. As more and more young people realize

the need to solve their own problems, more entrepreneurs are born every day, trying to capitalize on

the massive potential of improvement in services, utilities and products for the Base of the Pyramid

(BoP) population.

• Focusing on Development Corridors:

Due to the country’s huge size, little population and underdeveloped infrastructure, impact investors

concentrate their work in Maputo. However, there are entrepreneurs who function in other regions

and are usually neglected. Impact investors should try focusing on development corridors across

Mozambique. For instance, there is a huge potential in Biera, the most important transportation route

in the country and one of the most important in the region connecting countries like Zambia, Malawi

and Zimbabwe to the Indian ocean according to (USCC, 2013) .



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3.3.3.6.3. Intermediaries

The lack of an ecosystem infrastructure also impedes the dialogue between finance and impact first

investors, which makes it difficult to break down historical barriers between history between

philanthropy and investment (Freireich & Fulton, 2009). Platforms are needed to provide accessible

distribution systems and offer comparable product performance (Jackson & Associates, 2012). This

will also allow better matching of investor and investee risk/return profiles.

The intermediaries’ scene of incubators, accelerators, consultants, investors’ networks and

researchers looks on the rise even if not all of them have a local presence according to (GIIN, 2016).

Additionally, there are a number of individual consultants who work with entrepreneurs and

investors on projects’ basis. However, the limited number of investors (due to the challenges

mentioned in the previous sub-section) have limited the growth of the intermediary scene in

Mozambique, since the chance of finding opportunities is limited accordingly. On the other hand,

Promisingly, many small ecosystem actors active in Mozambique have initiated lately, suggesting

that the sector entirely may be developing. Below is figure 9 of the well-known active

intermediaries and service providers in the country.

Figure 9 - Currently active Intermediaries and service providers in Mozambique

Source – Open Capital Research organization



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As illustrated above, there is a good presence of Incubators/Accelerators and consultants in

Mozambique. On the contrary, only one recognized investor network which amplifies the challenge

of attracting investor networks to the country. And despite Mozambique’s ecosystem being

dominated by incubators and accelerators who are predominantly focused on startups or seed and

venture-stage businesses in specific sectors like Information and Communication Technology (ICT)

as per (GIIN, 2016) illustration, startups in other sectors continue to face major challenges in finding

professional mentoring, funds and deals opportunities.

3.3.3.6.4. Government

Governments act as regulators of the market if they approve legal acts and laws to govern social

impact investing ((Addis, 2015), 2015; ((Oleksiak et al., 2015); ((Wells, 2012), and they can act as

investors if they provide capital directly to social businesses (Buzzacchi et al., 2013) or indirectly

invest in intermediaries (Castro Spila, et al. (2016); Moore et al.,(2012)). They can also play the

wider role of stewards, in which governments can create a facilitative infrastructure according to

Schwartz et al., ((2015) that – particularly in the beginning phases – is necessary to ensure social

investees' and investors' readiness by establishing, for example, new specialized institutions,

networks, and capacity building programs ( (Glänzel & Scheuerle, 2015); (Wells, 2012)). The past

decade have witnessed reforms that positively re-oriented the trajectory of economic growth and

development in Mozambique; nonetheless policy implementation is often weak, as several arms of

the government lack the requisite technical capacity OECD (2013). Thus, there’s a massive gap

between regulation of policy and its implementation.

As previously mentioned, the difficulties in the administrative and regulatory frames imply

immaturity of the impact investment scene in Southern Africa and Mozambique in particular.

Despite what the OECD (2013) mentioned when they stated “Mozambique has undertaken many

efforts to make it easier for enterprises to do business, and to increase the country’s attractiveness for

foreign and domestic investment.” A series of issues still persist; for instance land ownership is

exclusive to the Mozambican state. As a result, land-use laws can be overwhelming and will always

involve government which also involves bureaucracy and long procedures that consume time and

resources. “There is no private ownership of land in Mozambique. Land and its associated resources



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are the property of the State. The Land Law, however, grants private persons the right to use and

benefit from the land known as “Direito do Uso e Aproveitamento da Terra” (DUAT). Although the

land itself cannot be sold, mortgaged or alienated in any way, buildings, infrastructure and

improvements built on land may be mortgaged and sold.” (Kathrada, 2014). The government releases

DUATs to citizens grounded on profession or traditional norms, and to foreigners and companies

after the Investment and Promotion Center of Mozambique’s (CPI) approval (Kathrada, 2014).

Moreover, State Owned Enterprises (SOEs) control many sectors from transportation to

telecommunication and utilities in most Southern African countries and Mozambique is no different.

Despite privatizing some of the publicly owned companies and introducing free-market reforms,

SOEs still have advantages over private companies in the form of state subsidies and eased tax

payments as discussed by (USDS, 2015).

However, as much as laws are concerned, according to (Lex Mundi, 2012) the Mozambican

government has been incentivizing domestic and international investors alike by introducing Value

Added Taxes (VAT) exemption on specific capital goods during the initial 5 years of a project’s

start. The government also provides credits on taxable income for projects carried out in rural regions

as (HCRML, 2008) explained. Another very important incentive to social entrepreneurship and

impact investing, is the introduction of tax deductions based on modernizing industrial equipment

and training Mozambican workforce, a very needed practice to qualify Mozambican workforce as

illustrated by (Lex Mundi, 2012). Nonetheless, the investment was approved by the Investment and

Promotion Center (CPI) as indicated by (Lex Mundi, 2012) in his Guide to Doing Business in

Mozambique. And “for the approved investment to be registered with the central bank of

Mozambique (BoM) within 90 days of approval.” (Lex Mundi, 2012). as all foreign unregistered

investments are considered illegal and are subject to fines and permanent forfeiture of capital to the

state. Likewise, there are limitations on foreigners owning shares in specific economic sectors. For

instance, in media it’s limited to a maximum of 20% as (Abreu Advogados, 2011) put it. And 50% in

aviation according to (Samuel Levy, 2012), while mineral trading must be fully controlled by

Mozambican citizens or enterprises. The Ferreira Rocha & Associados (FraLaw, 2011) law firm

released a corporate law Red-paper with policy recommendations to the Mozambican government, in

order to boost entrepreneurship in Mozambique as well as foreign investment. Below are the

suggestions related to entrepreneurship and private foreign investment:



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• Contribution to training, multiplication and development of entrepreneurship and

Mozambican entrepreneurial partnerships;

• Creation of jobs for national workers and the increase of professional qualification of the

Mozambican workforce;

• Promotion of the technological development, increase of productivity and entrepreneurial

efficiency;

These recommendations are in line with the interviewees’ recommendations of how the policy

landscape in Southern Africa in general and Mozambique specifically can positively impact the

social entrepreneurship and the impact investing landscapes in the region. Despite the country having

a responsible body in the Centro de Promoção de Investimentos (CPI), that provides services that

assist both domestic and foreign investors as cited as:

• Identifying investment opportunities;

• Promoting and registering investment projects;

• Promoting assistance programmes for businesses development, particularly national

businesses.

Yet, Social entrepreneurship is still out of focus and left behind in this investment supporting scheme

as there’s no legal framework for social businesses in the first place as mentioned before. In

conclusion, the OECD (2013) describes regulatory framework as “an investment policy framework

that is insufficiently legible for investors, particularly foreign, thereby reducing investor confidence

in the country.” which is a main factor in attracting investors in general, never mind, impact

investors specifically.

On the other hand, it is also important to find effective ways to improve the management capacity of

social entrepreneurs and to help them grow their ventures (Jackson and Associates, 2012).

Governments can involve researchers, practitioners and universities to help social enterprises

building effective capacity management at the board level of social enterprises, which in turn,

increases the social enterprises’ chances of being investment ready and thus finding investors easier.



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4. Cooperation for Social Good Programme Model (CSGPM)

For new technology led growth, financial-institution capabilities to bear the costs of risky investment

(Gerschenkron, 1962) and an educated workforce with social capabilities (Abramovitz, 1986) are

believed to be essential.

Innovation creation is boosted when public labs with scientific capabilities and firms with

technological capabilities (Lall, 1992) as well as intrapreneurial capabilities (Athreye et al., 2009)

interact with support from the state (Etzkowitz and Leydesdorff, 2000) . In addition, intangible assets

such as organizational and network capital are crucial, contributing to the innovativeness of firms in

regional innovation systems (Kramer et al., 2011). Thus, a mediator role is needed in this landscape.

There is also an extensive literature on how governments can facilitate new technology creation and

business entrepreneurship in mainstream sectors, though scholars note that government policy does

not sufficiently recognize the contribution of small organizations to employment or innovation

creation ( (Birch, 1987); (Kirchhoff, 1994); (Kirchhoff, et al., 2013)). They point out that more than

size, the quality and magnitude of market impact should guide policy to support (techno)-

entrepreneurship (Shyama, et al., 2017). In this programme, this mediator is the government. A

player that has connections to all of the aforementioned institutions and with a significant authority

to make things happen if the will is present.

Consequently, linking the evident challenges faced in the region and Mozambique mentioned in The

Ecosystem’s Elements and Challenges Sub-chapter to the challenges faced by Susamati (the case

study) discussed in the next chapter below, along with acknowledgments collected during interviews

to the needed role in this landscape. The author proposes a programme model that aims to solve these

challenges. It’s worth mentioning that this programme’s model was reviewed and verified by the

CEO of Susamati (Manuel Gangulo) as well as most of the interviewees interviewed.

This programme has certain objectives that are further highlighted and explained below. Later, a

blueprint of how the author sees the workflow which was as mentioned verified by both the

practitioners



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and the panel of experts. It’s worth highlighting that not every interviewee agreed with the details of

the programme, some had comments and ways of optimizing it, but generally the idea was accepted

and encouraged.

4.1. The programme’s Objectives

- Kickstarting innovative social businesses by SEED capital:

Entrepreneurs with bright ideas that could change realities in their communities, often find it hard to

kickstart their businesses. Mainly due to lack of funding as impact investors are not willing to risk

investing in risky businesses with no sufficient track record.

Leaving social entrepreneurs to often turn to family and friends to finance their ideas turning them

into businesses. However, a lot of ideas never come to fruition due to lack of sustainable capital that

is able to push the business forward with all its expenditures. Thus, one of this programme’s

objectives is for governments to aid these SEED stages businesses if proven conceptually and

potentially profitable and sustainable.

- Build capacity building for social entrepreneurs and their teams:

Enterprises also typically find it difficult to diagnose and overcome challenges by themselves and

therefore require tailored capacity-building support in order to move towards investment readiness.

This kind of support is to be distinguished from the light-touch, cohort-based support being provided

to enterprises by accelerator and incubator programmes across the region (Koh and Meier, 2015).

Thus, a very important objective of this programme is to help social enterprises build a strong

capacity of business planning, managerial, financial skills and HR management that might increase a

social start-up's ability to develop the new hybrid capabilities required (Arena et al., 2018) to manage

a business successfully.

- Encouraging impact investors to invest in early stage startups by risk-sharing:

Impact investors often place restrictions on what they will invest in by sector/theme/geography,

enterprise intent - these screens out many investments with potential impact, and limits the scope for



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risk diversification (Ventures, 2014). A major challenge linking investors to inclusive businesses and

delivering financial and social impacts is that the tools and methodologies favored by impact

investors pose major challenges to Africa-based entrepreneurs and managers of inclusive businesses.

This includes lengthy investment processes with many stages, technical assistance facilities that do

not always reflect local realities and market profiling requirements that make it difficult to define

target market segments (Ngoasong, et al., 2015). In this sense, this programme is there to ease the

burden on investors as well as provide quality impact investing opportunities to solve the issue of the

shortage of high-quality investment opportunities as a major challenge to the growth of the industry.

(Koh & Meier, 2015). That being said, it gives impact investors an opportunity to invest in early

stage businesses while sharing the risk burden with governments.

- Engage universities and research centers in the learning process:

Impact investing being a vague term in terms of definition and boundaries, requires more research

and analyses by academicians and researchers. In this sense, the programme offers a field research

where researchers can analyze, test and understand the interaction methods between different actors

while also involving young students and researchers to learn and understand more about the impact

investing phenomenon.

- Involving and creating synergies between the sectors’ actors for a mutual learning process:

“There’s no right or wrong, we know there’s a gap in the language spoken between NGOs,

donors, local entrepreneurs and investors. “There’s no right or wrong, we know there’s a gap in

the language spoken between NGOs, donors, local entrepreneurs and investors” (Wouters, 2018).

“It struck me because I realized there’s a world to win here, just by crossing this language barrier

alone, there are many impact investors out there looking for great opportunities that would

provide both impact and the return on investment they’re looking for” (Wouters, 2018). “At the

same time, there are many people working locally on these sort of opportunities, they know about

the problems their communities are facing, they know which solutions would work and they

know exactly which sort of revenue models would work” (Wouters, 2018). This programme

offers a chance to different actors to find a common language that helps achieve the results that

results in a flourishing impact investing sector wherever it may be implemented.



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4.2. Inspiration and Similar examples

This programme model was inspired by two programmes that the author came across on his trip in

Mozambique: VIA Water and IPEME. The former is a programme by the Dutch ministry of

Foreign affairs created for international development in the water sector. Managed by Aqua for All, a

fund manager and intermediary that also operates in the water sector and was used by Susamati (the

case study) to tunnel funds for the startup. The latter is an entrepreneurship incubation programme

initiated by the Mozambican government to help businesses kickstart their businesses in different

methods.

Primarily, the government is in the center of the programme in terms of funding and accountability

while at the same time not involving governmental personnel too much to avoid bureaucracy as per

recommendations by the panel of experts interviewed. That is why the programme offers the “Team

of Experts” which represents different actors with different expertise in all fields that the programme

is aimed to address.

The author tried to fill the gaps in both programmes, having acquired the necessary elements from

both programmes, this programme model tried to bring the best of both worlds (VIA Water and

IPEME) together in a new programme that could also add something new and involve more actors to

aid the impact investing sector in Mozambique and the Southern African region in general. Both

programmes are discussed further below:

4.2.1. VIA Water

VIA Water is a Dutch programme designed to facilitate and support innovative solutions for water

problems in African cities. These seven African countries are: Benin, Ghana, Kenya, Mali,

Mozambique, Rwanda and South Sudan (Nagel, et al., 2015). VIA water is a programme fully started

working in the summer of 2014.



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The programme had been commissioned as one of the 'Knowledge Platforms' the Dutch government

established, to build a scientific research base for future policy making in Dutch international

development aid. VIA Water supports innovative projects financially through the VIA Water Fund

(Nagel, et al., 2015). In addition, it facilitates and enriches knowledge sharing among partners

through the VIA Water Learning Community. In this way it contributes to the UN Sustainable

Development Goal 6: to ‘Ensure access to water and sanitation for all’ (Nagel, et al., 2015).

4.2.1.1. How it works

VIA Water is a funding instrument which actively works with applicants to allow them to overcome

the programme's entrance barriers.

We provide capacity development to local entrepreneurs, water professionals, NGOs and scientists to

help prepare their ideas for VIA Water funding (Nagel, et al., 2015). Through the programme, these

solutions can be brought to life: with financial support, but also with the help of the (online) learning

community. Connecting businesses to possible partners and finding experts that might be able to

help. VIA Water’s funding programmes lasts for between two to three years. In the case of Susamati

the Project covered a period of 32 months from May 2016 till December 2018:

1. The first year focused on research and prototype development.

2. The second year focused on piloting, assessment of socio-economic acceptance and training

of entrepreneurs.

3. The third year focused on scaling-up and marketing.

Every six months, the programme holds a training camp for the social entrepreneurs to build

capacity, keep the learning process updated and try to solve challenges facing the entrepreneurs on

the ground. They also organize pitching days for investors and fund managers to listen to the

entrepreneurs’ business ideas to provide investment opportunities. Moreover, with respect to the

changes in the resource landscape, important drivers of some new social impact reporting practices.

As increasingly, foundations, governments, and high net worth individuals have demanded more

reliable monitoring of the outcomes of their grant inputs increasingly seen as social ‘investment’ or

contractual obligation within a quasi-market context, (John, (2006)(2007)).



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Furthermore, traditional models of transactional philanthropy, that reported performance success by

the number and variety of grants allocated, have been replaced by a new investment philanthropy

that

measures success as a function of maximizing the impact of the donor’s capital ‘investment’ by the

total (social) value created ( (Anheier & Leat, 2006); (Bernholz, 2004);(Bishop and Green, 2008)). In

this sense VIA Water acts as a venture/investment philanthropy programme. This latter approach is

also being extended in a venture philanthropy model that not only pays great attention to the impact

‘return’ on philanthropic investment, but also has a highly engaged, even interventionist, approach to

the strategic management of the recipient (John, 2006).

The philanthropic perspective on performance has, therefore, moved from a focus on reporting

philanthropic inputs to an emphasis on disclosing grantee organizational outputs and outcomes.

(John, 2006).

4.2.2. IPEME (Instituto para a Promoção das Peguenas e Médias Empresas)

The Institute for the Promotion of Small and Medium Enterprises (IPEME) is the Mozambican

public institution whose mission is to encourage the implementation, consolidation and development

of small enterprises in Mozambique. The IPEME was created in 2008, linked to the Ministry of

Industry and Commerce, but is endowed with administrative and financial autonomy. (Devex, 2008)

(Sebrae, 2008) (IPEME, 2008)

As a public institution, IPEME´s vision is "to be the institutional platform for promotion of micro,

small and medium enterprises in Mozambique". Its mission is "to encourage the deployment,

consolidation

and development of micro, small and medium enterprises" guided by values of "excellence, Ethics,

Service, Efficiency, Competitiveness, Entrepreneurship, Partnership" (Devex, 2008) (Sebrae, 2008)

(IPEME, 2008). (Devex, 2008) (Sebrae, 2008) (IPEME, 2008) stated that in order to fulfill its

mission, IPEME works in the following areas:

Business information: Providing information on small businesses geared to meeting the needs of

entrepreneurs, businesses and citizens.



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Business consulting: Direct and personalized follow-up to entrepreneurs and small business

managers, supporting the formation and development of business growth strategies;

Business training: courses offered to small entrepreneurs in the areas of entrepreneurship, business,

marketing, access to investment, among others;

Facilitation of business financing: dissemination of information on financial solutions, adapted to

the realities and needs of small businesses;

Creation of new companies: support during the stages of conception of the idea, elaboration of

business plan, financing and first steps of the company;

Promotion of entrepreneurship: development of diversified skills geared towards creating new

businesses.

Among the main projects of IPEME are: Mozambique Kitchen, the Demonstration Center, the Each

District a Product Program (CaDUP) and the Center for Orientation to the Entrepreneur (COrE)

(Devex, 2008) (Sebrae, 2008) (IPEME, 2008). However, IPEME isn’t focused on social

entrepreneurship, neither does it promote impact investing. according to Gangulo, the IPEME

initiative is highly inefficient and bureaucratic and lack technological advantages. The author tried to

get more info and get into contact with them. However, their website has been down for some time

and all their online presence is limited to a Facebook page operated in Portuguese and the language

barrier was a communication downfall.

4.3. Stakeholders’ Analysis

Stakeholders’ analysis is the process of assessing a system and potential changes to it as they relate

to relevant and interested parties (stakeholders). This information is used to assess how the interests

of those stakeholders should be addressed in a project plan, policy, program, or other action.

(Ketema, et al., 2017). A stakeholder analysis does not preclude the interests of the stakeholders

overriding the interests of the other stakeholders affected, but it ensures that all affected will be

considered (DeGeorge, 2010). Stakeholder analysis is often used throughout the planning phase of a

project to evaluate the behaviors of the stakeholders involved regarding the potential changes.

Stakeholder analysis should be possible once or all the time to follow changes in stakeholders’

behaviors over time. De Mascia (2016) classified stakeholders into the following categories:



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- Primary stakeholders: those ultimately most affected, either positively or negatively by an

organization's actions.

- Secondary stakeholders: the "intermediaries," that is, persons or organizations who are

indirectly affected by an organization's actions.

- Tertiary stakeholders: those who will be impacted the least.

- Key stakeholders: those with significant influence upon or importance within an

organization; can also belong to the other groups.

In this case, the author used three of the four classifications which are Primary, Secondary and

Key. The elements analyzed were developed with the Manuel Gangulo Susamati’s CEO, a

practitioner and a social entrepreneur who’s aware of the local Mozambican reality as an example of

the Southern African reality. Moreover, all the stakeholders were identified and their types identified

depending on each stakeholders’ level of involvement in the program, their interests and needs,

capacity and motivation and the possible actions needed to satisfy and engage those stakeholders, as

shown in table 8 below:



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Table 8 - Stakeholders' Analysis



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Source: Own elaboration

4.3.1. Government (Primary stakeholder)

4.3.1.1. Interests and needs

- Interest in Social Impact and Solving community issues:

By default, governments are interested in improving their people’s lives and improving facilities and

services. Social entrepreneurship and impact investing offer a bottom-up approach for social issues

problem-solving by nature and with this programme, their ability to succeed is higher and more

probable.

- Interest in finding help approaching social and environmental problems:

Governments naturally are supposed to approach societal, economic and other problems. Social

entrepreneurship eases this burden and offers out of the box solutions that governments are not

capable of developing because of their heavy weight and bureaucracy.

- Needs a Resilient Population, Capable of Driving Change:

In order for social entrepreneurship to flourish and government to help and support it. It needs a

resilient population with an entrepreneurial spirit that is able to understand its own community’s

needs and develop solutions to the challenges ahead.



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- Interest in Economic Growth:

Governments are interested in an economic growth that in turn improves the lives of its citizens.

Social entrepreneurship and impact investing could play a role in this economic growth if fostered

and flourished with the help of governments.

4.3.1.2. Capacity and Motivation

- Funding:

Governments have the capacity to provide funding for social businesses through this programme.

Capital is important for any business in general, never mind social businesses. Initial capital is a

critical success factors for social entrepreneurs to be able to run a sustainable business in the future.

- Legislation and Policy making:

Governments have the capacity to offer a legislative framework for social businesses and impact

investors in many fields, a process which could change the fortunes of social businesses to the better

and change the whole impact investing landscape generally.

- Network of Connections:

Because of their nature, governments deal with different actors, which leaves them with a huge

network of connections of organizations that could aid in the programme like: Investors, Fund

Managers, NGOs, Research Institutions, Development funds, etc.

- Risk-sharing paradigm for investors:

Governments could offer impact investors risk-sharing programmes to encourage them to invest in

SEED and early stage businesses through this programme.

- Provide Assets as buildings and Venues:



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Governments have the capability to provide already existing physical assets for the programme rent-

free as a method of facilitation for the programme and thus decreasing the costs of the programme

and reusing buildings and facilities that might be closed-down.

4.3.1.3. Possible Actions to Engage Stakeholder

- Government to sponsor the programme:

Governments usually are a credible source, sponsoring the programme officially in media and in

public would give it higher value, exposure and credibility.

- Government to be Involved in the Bigger Picture:

As seen in the sub-chapter describing the role of IPEME above, involving governmental institutions

in technical aspects, results in a lot of inefficiency and failure in a lot of the cases. Thus, it’s better to

involve governments in the bigger picture or in other words in easing the process of the

programming happening while avoiding involving them in the day-to-day running of the programme.

4.3.2. Team of Experts (Primary Stakeholder)

4.3.2.1. Interests and Needs

- Interest in Social Impact:

The experts members of the team would be keen on being a part of a programme that uses their

expertise and skills to foster social and economic value, which in turn would be a motivation for their

to accept the role.

- Financial Gain:

These experts are professionals in the end willing to give their time and expertise and would be

expecting a financial return to their services too.



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- Impact Investing Landscape Development:

An interest in helping developing a sector with a high growth potential through a programme that

encourages and improves the learning process.


- Expertise, Skills and Knowledge:

The members of the team of experts are full-professionals in their fields, with years of experience

and practicing in their respective fields. Which is considered the basic asset of these experts and the

main reason of them being part of this coordinating team. Their skills and knowledge are key to the

programme’s success and to the social enterprises’ as well.

- Data Collection:

Through the online platform, the team is left with a huge amount of data which could be useful for

future research and analyses for programme optimization.

- Programme Management:

The Team of Experts is the main manager and coordinator of the programme. Responsible for day-

to-day decisions as well as Key decisions too. With its members’ diverse backgrounds, the

programme management is critical for the progamme’s success.


- Full Autonomy:

Autonomy is the biggest tool that could be put into the team of experts’ hands. Autonomy in taking

decisions, implementing them and making things happen without having to wait for permissions.

This would allow the team to move fast from decisions to results. Being represented by more

different actors, the autonomy is lying in all actors’ hands in the end of the day.



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4.3.3. Social Startups/Enterprises (Primary Stakeholder)


- Financial Return/Sustainability:

Social startups/enterprises seek financial return through the programme whether from funding by the

governments and investors through the competition, or by forming a network of interested impact

investors in their work. Which in turn plays a major role in their sustainability and ability to scaleup

their operations and thus their impact.

- Sustainability of Operations:

Beside financial sustainability, social startups/enterprises seek an experience, skills and knowledge

that would help them in their pursuit of sustainability of operations. The programme provides a

recipe of capacity building that according to practitioners is the most critical aspect if a startup wants

to survive the death valley.

- Social Impact Sustainability:

Social startups/enterprises also seek the ability to deliver and manage a sustainable social impact for

their communities and costumers. This social impact needs to be tracked and managed along with

their business operations.

- Capacity Building:

In order to achieve all the aforementioned objectives, most critically, social startups/enterprises need

to build a capacity to run and manage a social business. An activity with an added difficulty to the

regular entrepreneurial approach, due to the added aspect of the social value return which is the main

driver of a social enterprise.



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- Providing Solutions for societal problems:

As a main driver of their businesses, social startups/enterprises are able to provide active solutions

for their community’s social/environmental problems from a local perspective.

- Research Data Base:

Social startups/enterprises could be a research data mining field for research institutions intending on

studying the impact investing and social entrepreneurship phenomena in depth. With their teams,

ideas and motivations, they could be a great source of reliable field information.


- Efficient and effective capacity building training camps and operations:

The programme’s activities needs to be well-planned, organized and with a strong content in order to

prepare these businesses for the market they’re operating in as well as for the competition. Capacity

building is the biggest downfall social enterprises face to scale-up their operations, more than

finances according to the author’s interviewees.

- Legal facilities:

They need to be provided with legal facilities to ease their existence in a much challenging

and changing business landscape. Legal facilities include but not limited to: Tax reductions,

Hiring facilities, a full legal framework for social businesses, etc.

- Financial Support:

Most social businesses finance their own businesses through family and friends which are usually

limited funds that are not able to sustain a business for an extended period of time. Through the



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programme, social startups/enterprises should be supported with the needed financial support

according to their needs and stage of development.

- Impact Measurement Tools:

Last but not least, impact measurement tools are crucial for impact tracking and measuring, a process

that still has no standard operation to be followed. The programme should be able to work on a

measurement tool with the involved actors to help social startiups/enterprises track their

social/environmental impacts.

4.3.4. Investors and Fund Managers (Key Stakeholder)


- Explore Attractive Investment Opportunities:

Impact investors are interested to find new investment opportunities in general. The programme

offers them this facility using a pull marketing approach through the online platform online and

offline marketing to pull social enterprises towards the programme. Increasing the probability of

investors finding good investment opportunities unlike what is mentioned in literature.

- Financial Return (Depending on Investor’s type):

Impact investors look for a triple bottom line, and thus they look to make profits out of their

investments in social enterprises. Some aim for below market returns while others look for market

returns and sometimes above, depending on the type of investor and what they are looking for.

The programme offers this opportunity through an extended time spent by experts with the

entrepreneurs to fully analyze their potential and chances of surviving.

- Social/Environmental Return:



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Impact investors look for social/environmental impact returns from their investment. The

programme is totally and solely focused on social entrepreneurship, with a target of creating a

standard social impact measurement tool that would track the businesses’

social/environmental impact along the process.

- Reasonable Risk-Return Spectrum:

Investors also need a reasonable risk-return paradigm that matches their objectives when investing.

Unfortunately, Investors have shown inflexibility in these terms and expect to invest in low risk

businesses with higher returns. The programmes offers a risk-sharing paradigm that might change

this approach.


- Business Expertise:

Investors have the business expertise and experience that would be useful for the programme if used

in the right way to help build capacity for social startups/enterprises.

- Funding:

Impact investors’ biggest capability is their financial ability which the whole impact investing is built

upon. Social enterprises count on impact investors’ financial powers as governments aren’t capable

of providing a reliable financial pipeline for enterprises to sustain their operations or scale-up.

- Driving Social Change:

Impact investors have a chance to drive social change and impact through supporting social

startups/enterprises participating in the programme. Social businesses have the ability and local

connections, presence and awareness to understand their own communities challenges and needs and

driving change through a bottom-up approach.



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- Risk-Sharing Paradigms:

Impact investors are usually reluctant to invest in risky businesses, leaving this mission to donors,

Development Financial Institutions (DFIs) and governments. However, many sectors are left behind

and businesses fail accordingly. Through this programme, impact investors are offered a chance to

share the risk with the government, leaving them with little risk losing their invested capital in case

of a business’s failure.

- Facilitation of taxes and other legalities:

The programme offers impact investors who participate and invest in the businesses participating in

the programme a chance to legal facilities (tax reduction, etc.) in case of further investments.

4.3.5. Research Institutions (Universities & Research Centers) (Key stakeholder)


- Empirical data to aid academic research generate social impact:

The programme offers research institutions like universities and research centers the chance

to collect empirical data from real cases over a period of time which could aid the academic

research on the impact investing and social entrepreneurship as it remains understudied

leading to a positive social and economic impact.

- Involving students and young researchers in the learning process:

Research institutions would be interested in involving their students and young researchers in

the programme to gain experience and carry out field researches while enhancing the learning

process.



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- Academic Expertise:

They could offer their theoretical expertise, academic experience and guidance in different

specializations in the capacity building process during the training camps made for the social

entrepreneurs.

- Research and Analytical thinking:

They could offer the programme research and data analyses which would only improve the

programme and increase its success chances. As well as offering a different mindset and thread of

thought which is more analytical and scientifically structured and oriented.


- Provide Facilitation for a Research Environment:

Provide all the necessary tools and facilities for research institutions to be able to carry out an

effective and fruitful research that would benefit the programme and the whole industry in the future.

- Provide a Reliable Data Base:

The programme would provide research institutions with the collected data base about the actors

involved to be used in the research process.

- Provide Funds for Research if Needed:

Government could provide fund for research institutions if needed related to the programme, the

social entrepreneurship and the impact investing fields generally.

4.3.6. NGOs & Intermediaries (Key Stakeholder)




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- Widening their Network:

NGOs and Intermediaries are interested in increasing their network of connections, whether with

donors, investors or governmental institutions. The network is an asset.


NGOs have a financial interest, through the programme, they could approach donors or are

able to fund their projects and non-for-profit initiative. While Intermediaries could be paid by

different actors whether by entrepreneurs or investors who are searching for impact investing

opportunities.


- Past Experiences in Driving Social Change:

They could play a role of the social change driver through the programme, teaching entrepreneurs

how to influence communities and drive the change in the direction they are targeting, through their

past experiences working in the social sector.

- Human Capital:

Usually having a wide network of volunteers and helpers in their local projects, a much-needed

resource in many cases. Could be useful in the early stages of the programme when setting up the

venue and logistics.

- Networking Power:

Usually have a wide range of connections of donors (NGOs) and investors (Intermediaries) that the

programme could approach for the competition.

- Trust and Visibility by Local Communities:

Having a network of local representatives and manpower, they could play a role in intermediating

with local communities and small businesses.



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- Exploring Synergies Among Different Actors:

Offering them the opportunity to create a network of different actors and creating synergies through

the program.


Offering different forms of financial support, for instance: Donations and philanthropic

capital for NGOs and impact investing deals for Intermediaries if proved vital in impact

investing deals between investors and entrepreneurs.

4.3.7. Sponsors (Secondary Stakeholder)


- Advertising and Exposure:

Sponsors usually sponsor events or programmes in return of exposure, advertising and future

collaborations. The Cooperation for Social Good Programme is a good opportunity to approach

private companies to sponsor the programme in return of facilities.

- Corporate Social Responsibility:

Sponsoring the programme would be part of the private sectors’ corporate social responsibility. An

opportunity to give back to society.


- Financial and Logistical Support:



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Sponsors could be a financial support source for the programme as well as a logistical support,

providing material for the training camps and the competitions.

- Providing Prizes:

Sponsors could provide prizes to entrepreneurs like internships and further product development

at their headquarters depending on the sector in which these entrepreneurs operate.


- Public-Private Partnerships (PPP):

The programme offers a good opportunity for PPPs, to support the impact investing sector as well as

other sectors of the economy.

- Legal Facilities:

Private sponsors could use sponsoring the programme as a way to get legal facilities due to their role

in supporting the social sector.

4.3.8. The Public (Secondary Stakeholder)


- Societal Problem-Solving and Better services:

The public are interested in the improvement of the services provided and finding solutions to their

persistent social problems. The programme is a long-term plan to help those who are capable of

finding solutions for their communities.

- Employment:



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The public needs to be provided with employment. The programme offers another long-term plan for

capacity building for social enterprises to guarantee their survival and sustainability to be able to

employ locals from their own communities.


- Manpower:

The public could provide the programme with manpower in the likes of volunteers and workforce if

needed.

- Crowdfunding:

They could provide crowdfunding for the social businesses that interest them the most, as a

secondary financial support tool for those businesses that could not win the competition.


- Communication of the Programme’s Mission:

The public needs to be engaged through media outlets. To have the programme and its mission

explained to them through reliable and trustable platforms online and offline.

4.4. Critical/Key Success Factors

Critical success factors are those few things that must go well to ensure success for a manager or an

organization and, therefore, they represent those managerial or enterprise areas that must be given

special and continual attention to bring about high performance. CSFs include issues vital to an

organization's current operating activities and to its future success. (Boynton & Zmud, 1984).

Critical success factors support the attainment of organizational goals (Rockart, 1979). Since the



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goals of a CFH are both to have a social impact and to be economically sustainable, the CSFs are

critical factors that impact and sustain either one of the two aims or both.

(Mesly, 2017) stated that project management, multiple cross-cultural studies spread over decades

have shown that the basic Critical/Key Success Factors can be summarized as follows in table 9:

Source - (Mesly, 2017)

Table 11 - Critical Success Factors (CSFs) in project management

Table 10 - Critical/ Key Success Factors (CSFs) in project management

Table 9 - Critical/ Key Success Factors (CSFs) in project management



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These critical/key success factors apply to the programme as they are general enough to fit different

setups. However, the author chose to analyze more personalized and specific factors for the

programme as well. the following key aspects in table 10 were identified and divided into three main

dimensions: Individual (internal resources), intra and inter-organizational (relationships) and

environmental (external aspects).

Table 10 - CSGP Critical Success Factors

Dimension CSF Key factors

Internal resources

1- Knowledge of the

social

entrepreneurship

local scene.

2- Programme

management.

3- Attractiveness and

marketing

strategies.

4- Physical assets.

1- Knowledge of the

social

entrepreneurship local

scene:

- Knowledge of local actors.

- Knowledge of the social

and economic needs of the

society in which the

progamme is applied.

- Collected database of local

SEs.

- Initial state of art

knowledge.

2- Programme

management:

- Autonomy.

- Management expertise.

- Motivation and

commitment.

- Skills (Knowledge,

expertise, field,

performances) of the team.

- Volunteers’ management.

- Partners’ management.



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- Customers’ management.

3- Marketing:

- Online platform efficiency

and effectiveness.

- Brand image (program’s

image).

- Social Media.

- Advertising campaign

(logo, slogan, mission).

4- Physical Assets:

- Physical space (events,

training camps,

conferences)

- Logistics.

Intra-organizational and

inter-organizational

1. Metrics and

Monitoring.

2. Partnerships

management.

1- Metrics and

monitoring:

- Periodic social impact

monitoring in comparison to

initial state of art.

- flexibility in adding or

removing activities

depending on feedbacks and

initial results.

2- Partnerships’

management:

- Transparency of

expectations, rights and

duties with all partners.

- Flexibility in adjusting to

changes and problems.



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- Effective collaboration with

other involved

governmental institutions.

Source: Own elaboration

4.4.1. Internal Resources

1. Knowledge of the local entrepreneurship local scene:

Since one of the main objectives of the programme is to ultimately offer solutions to

social/environmental challenges, it is essential to have a significant knowledge of the of the social

entrepreneurship local scene. This includes a deep knowledge of the local actors involved in the

social entrepreneurship sector including the governmental institutions concerned with

entrepreneurship and social entrepreneurship (if available), the state of the intermediating medium,

the available impact investors offices in the country and the role of research institutions in the

landscape. Knowledge of the local enterprises or small businesses operating within a

social/environmental framework as a lot of them usually operate unofficially. This database could be

useful in knowing the degree of interaction and the percentage of participation when the programme

is released. Also Knowledge of the initial state-of-the-art could be a good impact measuring base

for after the piloting of the programme to understand if an impact was created on the social

entrepreneurship scene or not.

2. Programme Management:

The programme management process is one of the most critical processes, the success of the

programme hinges upon the quality, efficiency and effectiveness of the programme management and

thus of the team of experts’ quality. Autonomy is crucial to give the team of experts the necessary



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power to make things happen. This will save time when taking important decisions as well as put the

decision-making process under the control of a qualified team. Accordingly, making good decisions

that would contribute to the programme’s success, management expertise is required. Therefore,

there are members on the team of experts board who are experienced managers with different

backgrounds. However, without motivation and commitment these expertise will not make the

biggest of differences. Thus, the team of experts and supporting teams have to be motivated by their

belief in the cause behind the programme. Armed by the needed set of skills and knowledge to act

properly and be able to solve problems as they arise. On the other hand, more in depth management

is needed, for instance: Volunteers’ management, Partners’ management and Customers’

management. As Stakeholders, all these actors need to be engaged in the way that are suitable for

them while participating in the programme.

3. Attractiveness and Marketing Strategies:

As a new initiative, the CSGP will need to be attractive to social entrepreneurs, impact investors,

sponsors and intermediaries. Starting from the quality, ease and efficiency of the online platform

to creating a programme image (brand image) for the programme’s as a focus for the government

to spread the entrepreneurial spirit between the public. having a positive programme image is

important as the set of emotional and sensory inputs a consumer associates with a particular product

or service. Another way of communication with the public (which include a lot of possible and

existing entrepreneurs) is the Social Media which has grown in importance in the last decade to

unprecedented levels. It’s the most commonly used communication tool nowadays. Social media

could be a deciding factor of how the young population perceives and engages with the programme,

for instance: live streaming the prize competition could attract a wide base of young audience

interested in social, environmental issues and entrepreneurship in general as well as act as a

motivation for young entrepreneurs to step up and turn their ideas into businesses.

4. Assets:

Physical assets are of real importance to the success of the programme. The training camps and the

prize competitions would need a reliable venue to host the numbers that will be attending either or

both. Especially the competition prize. Logistics for both events, whether the training camps or the

prize competitions would be needed widely to enable the organization of a trustworthy programme.



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4.4.2. Intra-organizational and Inter-Organizational

1. Metrics and Monitoring:

How can the impact of the programme be measured? Periodic social impact monitoring in

comparison to the initial state has to be carried out to measure and monitor the impact whether

positive, negative or neutral of the programme on the impact investing and social entrepreneurship

landscapes. This will add a much needed flexibility to the programme in adding or removing

activities according to the givens and the updated realities. Moreover, cost analysis would give an

idea about the expenses of the programme relative to the available funds whether by the government

or the sponsors which might result in adding activities to the programme that would provide ways to

achieve economic sustainability if needed.

2. Partnerships’ management:

The importance of managing partnerships lies in the expectations of parties involved,

understanding rights and duties which would ensure transparency and fluidity of operations,

leaving behind any unclarity. This definitive knowledge of roles would also allow more flexibility in

adjusting to changes and problems. Which in turn would affect positively any involved governmental

institution in terms of effectiveness and efficiency in operations and decision-making.

4.5. Workflow

In this sub-chapter, the author explains the workflow bold lines of the programme and the role of

every player in the cycle of the programme. The programme is targeted to be a yearly programme in

the beginning. However, depending on its pilot version results, it could be a twice-a-year practice.

The idea of the programme is briefly explained below: Keywords will be in bold.

The programme would be based on three main pillars: Online platform, Training Camp and a

Prize Competition. The government would be the main financier and sponsor for this programme.



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The Online platform would be the main element of communication with the participants of the

programme. In fact, social startups will be able to register their business ideas, proofs of concept,

business plans and so on. The coordinating team is consisting in five different actors, one from each

of the following backgrounds: Policy (governmental), Academia, Investment, Management and

Entrepreneurship and would be called “Team of Experts”.

This team’s function would be to:

i. Carry out due-diligence on these startups/enterprises.

ii. Screen startups/enterprises according to the due-diligence results.

iii. The selected startups will then be analyzed and divided into categories according to their

‘readiness for investment’ into 3 categories:

o Seed

o Early Stages/Startup

o Commercial investment ready

iv. Approach the selected startups’ management for capacity building training camps

according to their category.

v. Rather than dismissing the unaccepted startups and “rejecting their business proposal that

fail the screening test, the ‘Team of Experts will invite the entrepreneurs and prepare a

schedule for providing formative feedback to help develop and fund the business

proposal. (Ngoasong, Michael; Paton, Rob and Korda, Alex, 2015)

Training camps, where capacity building activities would be conducted from sessions and

workshops about business management, financial management and social impact management and

measurements. These camps’ contents would be decided by the programme coordinators.

Universities and Research centers would also be invited to collect data from the entrepreneurs

during the workshops to aid in research with students aiding in these projects (the role of universities

in training and educating future generations on these issues is key for the maturation and

development of the actors of the ecosystem.) As well as their role in the Impact measurement system

- systems of performance reporting, audit, and risk management have been recognized as key

legitimating features of all successfully functioning organizations (Austin (1996); Power, (1994a),



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(1994b), (2007); Rousseau(2006)) And thus, with universities tools and expertise, they could be a

major participant in the impact measurement process.

Moreover, partnerships would play a major role in the credibility and growing the connections

network of the programme Well-established intermediaries/NGOs (with strong networks of donors,

business angels and investors. Finally, a competition and a prize where social entrepreneurs could

pitch their ideas investors and fund managers and accordingly, three winners are chosen by the

“Team of experts” to from each category (SEED, Startup and Investment Ready) to be funded by

either impact investors interested or the government with varying amounts of capital depending on

the category. Diving deeper into the details, the programme is divided into four phases according to

its stage of development: Initiation phase, Registration & Feedback phase, Execution phase and

Competition & Prize Results phase. The first stage is the “Initiation phase” which is divided into

three stages:

Firstly, the government as the main sponsor of the programme will announce a call for a social

entrepreneurship funding and training programme, with the details of the programme in media

outlets for a certain period of time. Secondly, Making a short-list of the candidates for the ‘Panel of

Experts’ team, followed by approaching these names to check their availability and willingness in

joining the team. Thirdly, a call for web-designers for the online platform would be announced and

the online platform to be created. This concludes the end of the Initiation Phase. Figure 10 below is

a simple representation of this phase:



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Figure 10 – Initiation phase


The second phase is the “Registration & Feedback phase” which is also divided into three stages.

Firstly, social startups and enterprises would be able to register their ideas, proof of concepts (if

available at this stage) and business plans (with full confidentiality guaranteed). Secondly, the ‘Team

of Experts’ would carry out due diligence and screening processes to study the feasibility and

potential of the proposals and feedback would be sent to the registrars whether accepted or rejected

(including reasons of rejection and ways to improve for future editions of the programme). Accepted

social startups would be contacted with the schedule of the programme and the necessary details.

Thirdly, the ‘Team of Experts’ would categorize the accepted SEs into three categories: SEED,

Early Stage/Startup and Investment ready according to the analysis made in the previous stage. Each

• Government to announce the start of an acceleration program.

• A competition for financing.

Program and competition

Publishing

• A team of 5 experts from the following disciplines:

• Concerned government personnel.

• Management

• Researcher/Academic

• Investment

• Incubator

Team of Experts formulation

• A Call for web-developers Online Platform Creation



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category would have its own prize ticket range, training camp and competition. Figure 11 below is a

simple representation of this phase:

Figure 11 - Registration and Feedback phase


Thereafter, the third phase starts, which is the “Execution”. This phase is divided into three stages:

“Training Camps, Research institutions involvement and Intermediaries & NGO involvement”. The

“Training Camps” is the first stage. However the next two stages take place during this stage.

“Training Camps” are when the physical preparations of seminars, sessions and workshops take

place. The “Team of Experts” would be responsible for choosing the camp’s conductors according to

their expertise. As mentioned before, SEs would be assigned camps according to their development

category which was previously determined by the “Team of Experts”. Each category has its own

sessions and workshops. The second stage which takes place during the training camp is the

“involvement of Research Institutions” where universities and research centers are invited to the

training camp to collect information and carry out field research with practitioners and experts of the

• Businesses model.

• Proof of concept.

• Business plan.

Social Enterprises Online registration (confidentiality is

granted)

• Due Diligence.

• Screening.

• Feedback to SEs.

• Schedule and details communication to accepted SEs.

Analysis & Feedback

• Seed.

• Early Stages/Startup.

• Investment Ready.

Categorizing accepted SEs



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field in a trial to learn more and provide more academic work on the field to help its development in

the region. The third stage is the “Intermediaries & NGOs Involvement.” In this stage, these actors

are invited to take part in the camps to provide their expertise to the camps’ participants as well as

use their extended network of connections to prepare for the final phase of the programme which is

“Investors and Fund Managers Involvement” for the competition and the prize. Figure 12 below is

a simple representation of it:

Figure 12 – Execution phase


Finally, the fourth and last phase of the programme “Competition & Prize Results phase”. This

phase is consisting of two stages: Stage one is The Competition and Stage two is the Prize Results.

In this phase, Investors and Fund managers are invited to participate in collaboration with the

progamme coordinators (Team of Experts). The competition is divided into three different

competitions, one for each category of the available categories with ascending ticket sizes depending

on an agreed upon average of ticket size for different categories. Social entrepreneurs pitch their

ideas and business plans to investors and fund managers and accordingly as well as an audience

formed of all the actors involved. The winner, is decided by a vote of the ‘Panel of Experts’.

However, investors would be free to contact and support whoever they see fitting their agenda.

Below is a simple representation of this phase:

• Capacity building and business skills.Training Camps

• Field research.

• Students involvement in real life business cases.

Research Institutions Involvement

• Social impact training by experted practitioners.

• A strong network of donors and Impact investors.

NGOs & Intermediaries involvement



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Figure 13 - Competition and Prize Results phase


4.5.1. Innovation Ecosystem and Representation:

Innovation ecosystems are relevant for regions to which they belong, because they affect

their competitiveness and economic growth (Tejero and León, 2016). Innovation ecosystems are

dynamic systems made up by actors and connected by knowledge flows based on the relationships of

these actors (Tejero and León, 2016). According to (Moore, 1993), an organization cannot be

considered in isolation, because it usually is immersed in a network of interdependencies where a

change occurring in a part of the system can affect others. In literature on socio-economic

ecosystems there are many authors who refer, in one way or another, to the actors usually found in

these systems, such as enterprises, universities, venture capital, etc (Pilinkienė and Mačiulis, 2014).

In these ecosystems, either industrial (Korhonen, 2001; Frosch and Gallopoulos, 1989), business

(Iansiti and Levien, 2004; Moore, 1993), entrepreneurship(Isenberg, 2010), digital (Nachira, 2002)

• Pitching competitions by Entrepreneurs to the audience (Panel of experts, investors, fund managers..etc)

Competition (Investors and Fund managers involvement)

• Results are decided by the panel of experts.

• Investors have a vote as well

• Investors get an access to non-winner social startups/enterprises according to their preferences

Ticket prize Results



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or innovation (Yawson, 2009;Wessner, 2007; Adner, 2006), knowledge appears as an element that

underlay aspects such as learning, people, technology and culture (Tejero and León, 2016). In fact, in

a society like today’s, based on knowledge, not that surprising knowledge is an essential part of the

different systems and ecosystems, as reflected through concepts such as the known “triangle of

knowledge”, which shows the relationship between the areas of education, research and innovation,

and how knowledge is transformed along those axes (Maassen and Stensaker, 2011). Moreover, the

idea here is for the programme’s ecosystem to include all the players of the impact investing

ecosystem, in a try to define a common language rather than the different languages used by each

and every actor which is an obstacle in the development of the sector. Figure 14 and 15 illustrate the

innovation ecosystem process in both literature and the CSGP model :

Figure 14 - Innovation Ecosystem

Source - (Tejero and León, 2016)



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Figure 15 - Ecosystem representation


4.5.2. Relationship between Literature-review, Interviews and Programme

In the literature review chapter above, a lot of challenges have been mentioned. Some of these

challenges were confirmed by both sets of interviewees (Panel of experts and practitioners). In this

sense, a connection could be made between the literature, interviews and how the programme is

aiming to solve these issues. The most critical issues could be summed in the following:



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• Difficulty finding sustainable investments that meet equally financial and

social/environmental Intentions as a consequence of inadequate capacity of sustainable

social enterprises:

Confirmed by both sets of interviewees and an objective of the CSGP model

• Inadequate new fund tools and deal structures:

Confirmed by both sets of interviewees and is an objective of the CSGP model.

• Difficulty Exiting Investments:

Confirmed by panel of experts.

• Limited Capital Supply Across the Risk/Return Spectrum:


• Unclear Regulatory Environment:


• Poor Linkages Between Sustainable Social Enterprises, Entrepreneurs, Investors and

Innovation Networks:


• Poor and Inconsistent Impact Measurement Practice:


In relation to these challenges, the author was able to validate some of them as most significant

through interviews. Through these interviews the challenges validated were the following with no

specific order (including a few that were recognized during the field research process):

Investors perceive high risk among funds with little or no track record, among investments in

certain geographies or sectors, and among investments into untested business models. Investors

often seek to invest larger amounts of impact capital than investees need, leading them to pass

over smaller deals. Which results in SEED/VENTURE stages startups unfunded and with no

capacity to scale up their operations to reach the investment-ready stage. On the other side of the

spectrum, unclear Regulatory Environment gives social entrepreneurs a hard time just getting their

businesses started as there are many legal barriers to starting social businesses when it comes to for

example hiring employees or volunteers. There’s no legal framework for social enterprises in

general, Entrepreneurs have expressed their disappointment with legal framework only covering

traditional enterprises and NGOs which leaves them paying high taxes which they cannot afford.

Bureaucracy also hinders SEs workflow. Governments role is almost negligible in the impact



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investing/social entrepreneurship spectrum in general. Legally, financially, and professionally,

governments almost have limited roles. Insufficient cooperation among different players across

the impact investing industry acts as barrier to placing capital and building capacity which leaves

the industry with limited number of investment-ready businesses. Which led the author to develop a

programme that could aid in the solving of the aforementioned issues hindering the industry.

In conclusion, the programme’s model was validated by interviewing experts, Social entrepreneurs

and intermediaries who worked with governments before. Originally, investors had a bigger role in

the programme. However, mixed reactions from interviewed investors gave the author another

thread-of-thought decreasing their role in the process and limiting it to involvement through later

stages as interviewees from investment bodies didn’t show the well to be part of the capacity

building process or flexibility in the risk-return spectrum. Figure 16 shows this direct relation below:

Figure 16 - Relationship between literature, interviews and programme


Literature Interviews Programme



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Figure 17 - Workflow's Visual Representation




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5. Case Study (SUSAMATI)

A case study is a method for learning about a complex instance, based on a comprehensive

understanding of that instance obtained by extensive description and analysis of that instance taken

as a whole and in its context (Bailey, 2007). An empirical inquiry that is suitable for studying

complex social phenomena, especially for research on contemporary happenings when boundaries

between the phenomenon and its context are not clearly evident. This exactly fits the conditions of

my enquiry (Yin, 1994).

The author has opted for the case study approach to validate and refine the theoretical constructs

formulated from the survey of the literature. The case study method is useful whenever the purpose

of the scientific query is to understand the ‘how’ rather than the ‘why’ of a process (Eisenhardt

(1989); Yin (2002)).

Moreover, the case study method is preferable to a large-scale statistical analysis, when there are no

secondary sources of data on the parameters of the theoretical model and/or observations through

proxies are not sufficiently high or adequate (Urias, 2015). However, this is not the case in this

research, as there’s was no large-scale statistical analysis due to lack of data. In this research, the

case study was used as a method of verification for the programme model explained in the previous

chapter that also included the interviews and for the challenges exposed by the literature review.

Subsequently, after the author traveled to Southern Africa for three months on a journey that started

in South Africa, through Mozambique and Malawi and ended in Tanzania (Which is part of Eastern

Sub-Saharan Africa region), trying to understand the socio-economic and political realities in the

region. A case study of a Mozambican social enterprise in the business’s early stages was identified

having fulfilled the main pillars of the social enterprise previously explained in the Social

Entrepreneurs, Social enterprises and Social Entrepreneurship sub-chapter.

In general according (Shyama, et al., 2017) three conditions must be fulfilled: (i) the market or non-

market offering must address a social need; (ii) the organization must be financially viable, either

through their direct offerings (either through market or non- market routes) or via third party



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financiers like foundations and public agencies that support their activities and offerings to the

community; and (iii) the organization must apply business management principles in its internal

governance, marketing and delivery of goods/services. An enterprise is identified as being social or

not given the objective of its activities combined with the pursuit of business sustainability through

application of rational management principles (Shyama, et al., 2017). How an enterprise redistributes

its profit does not determine its categorization as a social enterprise. Social enterprises can be

community based, theme based or both (Ratten and Welpe, 2011) and they may or may not require

external intervention for success, even in the context of poverty (Handy et al., 2011). Moreover, a

deeper illustration is of social enterprises’ objectives, triggers, drivers of activities and the traits of

the organization is made below:

• Objective and Trigger:

To create, sustain, distribute or disseminate social or environmental value to maximize social welfare

in order to attain the objectives of the enterprise which could range from financial sustainability

and/or maximization of returns to its staff and/or growth of the organization (Levesque and Mendell,

2005) triggered by an identification of a ‘social or an environmental problem’ and the ‘resources to

solve the problem’. In the same vein, designing an innovation, product or service that is a good fit for

a context (Shyama, et al., 2017).

The innovation must serve an unmet or underserved need and the price/performance ratio must be

attractive and accessible ( (Christensen, et al., 2006); (Hart, 2005)) and function efficiently in the

targeted context (Prahalad, 2005). Furthermore, it must be compatible with the cultural and socio-

economic constraints of the context (Katz, 1961); (Rogers, 1962)). The entire marketing strategy

should take into account socio-cultural norms, power groups and thought leaders (Kotler et al.,

2006;Letelier et al., 2003).

• Drivers of activity:

Activities are usually targeting and derived by the urge to provide opportunities at the Base-of-the-

Pyramid (BoP) population with the possibility to use social/environmental problems as business

opportunities that can be tackled with a market based approaches (Seelos & Mair, 2009). However,

the BoP context presents a number of challenges from the demand side not usually associated with



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mainstream consumers (Shyama, et al., 2017). The consumers may not ‘want’ the innovation even if

it can augment their income generation capabilities (Kaplinsky et al., 2009). Nonetheless, social

enterprises are used to create new markets or expand existing BoP ones (Chesbrough et al., 2006;

Dahan et al., 2010; Webb et al., 2010) by developing an emotional connection with the targeted

consumers via life-quality enhancing activities and projects (Sridharan and Viswanathan, 2008;

Ulhøi, 2005).

• Traits of the organization:

Social enterprises are hybrid organizations that contain both traits of noth non-for-profit

organizations and business entrepreneurship, combining both sets of values, traits and skills to

achieve maximum

results on both the social and economic levels. Some of the most important traits social enterprises

should possess are: Being able to make a high impact with frugal resource, as often is the case

with social enterprises, financial and non-financial resources are limited and they are supposed to be

able to achieve maximum results with the available resources. Apply business management

principles, as mentioned social enterprises need business skills in order to survive in the market, as

the social objectives are not enough to sustain business operations.

Strong social networks and dense personal contacts of the founders (Shaw, 2004) social

networks make social enterprises’ mission easier. It’s important for them to know the reality of the

community in which they are operating. Having a good network of local workforce as well as

intermediate connections with the local community, makes a better fit socio-economically speaking.

Social enterprises are also supposed to be Adept in communicating and presenting the hard

realities of the society creatively, so that they come across as solutions to the organizational

objectives or business needs of the funders (Finkle and Mallin, 2007).

All of the aforementioned crucial elements were present in the case of Susamati, which played a role

in the author deciding to use it as a case study to verify the programme model proposed above. Next,

the author tries to summarize the Susamati case study in key points that explain what the social

enterprise is doing and trying to achieve in its local community in Maputo, Mozambique’s capital.

The author also discusses the background, the project plan and the target group as well as the

challenges facing the social enterprises during its scaling-up process. The following information

about the project has been stated on the VIA Water’s official website about the Susamati project:

https://www.viawater.nl/projects/mozambique-biological-urban-sanitation-bus-project-in-maputo



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5.1. Susamati’s Project Summary

The main idea is an alternative sanitation system that is targeted to BoP communities in a cheap and

innovative way. The system consists of a toilet made of concrete instead of ceramic to reduce costs

and a Biological Urban Sanitation system that aims at gradually reducing the sanitation chain to

practically nothing. The system builds on the impressive appetite of a Black Soldier Fly larva that

after about a month becomes a pupa and a black fly that only lives for 8 days. This project aims to

develop low-budget marketable designs minimizing the need for pit emptying and reducing the

amount of water needed for flushing to just 0.5 liter.

Further it investigates the socio-economic acceptance of the use of black soldier flies. It also

develops Pia fantastica (toilets) for commercial production and marketing, and the project documents

all steps in the development process as learning and monitoring tool.

5.2. Background

The starting point of this project is to convert existing and/or new latrines from being traditional or

pits for accumulation of faecal matter to small on-site sludge treatment stations where the faecal

sludge is converted to CO2 and to seepage water which can be infiltrated (or used for control of pest

flies). According to recent research Black Soldier Fly (BSF) Larvae can convert fresh human faecal

matter in latrines to virtually no volume with reduced environmental risks and substantial long term

savings.

Using the right techniques this is also accessible and affordable to the lowest income groups,

especially in urban areas. In addition a low-cost, low water toilets, makes sure that pits are not

getting too wet for black soldier flies to reproduce themselves.

5.3. Project Plan

The Project covered a period of 32 months from May 2016 till December 2018:

1. The first year focused on research and prototype development.



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2. The second year focused on piloting, assessment of socio-economic acceptance and training

of entrepreneurs.

3. The third year focused on scaling-up and marketing.

Given the innovative character of the project and that there are no earlier experiences of the

biological sanitation system in Mozambique (or elsewhere) the implementation of the year 2 and 3

programme is subject to successful outcome of year one.

Year 1 – Research and prototype development

Year one was a design and experimental year aiming at assessing the viability of the biological

sanitation idea to build and maintain sustainable latrines.

a. Ongoing internet research (with support from academic researchers),

b. Design and testing of a small-scale BSF cage where a BSF colony is started by “inviting”

pregnant BSFs by posing egg collectors at strategic places and let them hatch inside the cage,

c. Tentative design of technical options to understand function and the aspirations of the

different client categories,

d. Experimental construction of 10 prototypes and conversion of 40 SanPlat latrines to

biological sanitation with pia fantastica in Polana Canica, Maputo,

e. Training of 2-3 entrepreneurs,

f. Setting-up a monitoring and evaluation system, Experimental implementation,

g. Documentation (through written articles and a blog on the progress) of the activities,

successes, failures and findings in all phases of the project implementation.

Year 2 – Piloting, assessment of socio-economic acceptance and training of entrepreneurs

The objective of the piloting phase is to assess possibilities and constraints for the expansion of the

BioBed approach:

a. Pilot implementation to test the findings in a real setting (60 SanPlat conversions) in Polana

Canica, Maputo while entrepreneurs market more biological sanitation and pia fantastica in areas of

their own choice.

b. Discuss technical and socio-economic acceptance and potential strategies with humanitarian

and development organizations, private sector, universities etc. in Maputo and beyond,

c. Promotion of the project with possibility for up to 20 social entrepreneurs to apply for

participation; Selection of social entrepreneurs, training and testing, support (both technical and in

marketing), support to setting-up businesses,



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d. Participatory assessment of user and acceptance aspects with potential consumers/users,

e. Documentation (through written articles and a Facebook blog on the progress) of the

activities, successes, failures and findings in all phases of the project implementation.

Year 3 - Scaling up and marketing

The third year is for assessing the possibilities of wide scale promotion and policy development:

a. Modifications and further development as required (in design and marketing),

b. Development of transformation kit concept (from SanPlat to biological sanitation with pia

fantastica) for large scale application.

c. Scaling up the experiences from the pilot phase in order to understand possibilities and

constraints of a rollout programme,

d. Documentation of the activities, successes, failures and findings in all phases of the project

implementation,

e. Draft policy development (depending on the outcomes of the project).

5.4. Target group

The targeted experimental group is BoP communities in an area in Maputo called “Polana Canica”.

Within this area, special focus will be given that the test models are used by a representative

population of the area, including women, single headed households, disabled, senior citizens, etc.

Further a group of 11 social entrepreneurs will be trained on the production and marketing of pia

fantastica and BSF production.

5.5. Challenges

In correlation with the aforementioned challenges explained in the Relationship between Literature-

review, Interviews and Programme sub-chapter, the author was able to apply and validate those

challenges faced by Susamati with the startup’s CEO Manuel Gangulo (including a few that were

recognized during the field research process) with no specific order:



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1- Susamati finds difficulties sourcing funding for the post-VIA Water fund which already

ended in December 2018 as Investors perceive high risk among funds with little track record and

small startups.

How the Programme model could help: The Cooperation for Social Good Programme offers

Susamati a chance to meet investors, fund managers and grow its network of finances as well as a

chance of being funded by the government.

2- Susamati needed tickets’ size is too small for most impact investors to consider as Investors

often seek to invest larger amounts of impact capital than investees need, leading them to pass

over smaller deals, which results in SEED/VENTURE stages startups unfunded and with no

capacity to scale up their operations to reach the investment-ready stage.

How the Programme model could help: The programme is focused on small-sized investment

tickets regardless of the financier and thus the financiers know the size of the business they would be

investing in.

3- Susamati faces legal challenges when it comes to taxes and hiring employees and volunteers

as there is no regulations for social businesses and no facilities and thus he Mozambican

government treats them as a regular business.

How the Programme model could help: Being at the center of the programme, there could be a

good chance of the government introducing laws that aid social enterprises. However, the

programme cannot guarantee such applications.

4- Susamati finds no support from public institutions as Governments have a negligible role in

the impact investing/social entrepreneurship spectrum in general. Legally, financially, and

professionally.

How the Programme model could help: The programme is wholly built around the support and

role of the government as a coordinator or a credible base on which the programme can be built on.

However at the same time, not being too involved in technicalities to avoid bureaucracy and that is

what the ‘team of experts’ there for.

5- Susamati as most social enterprises have Limited business, management and financial

capacity due to lack of experienced workforce or having experience in other fields like:

engineering for instance.



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How the Programme model could help: The programme offers training camps like the one

attended by Manuel Gangulo (Susamati’s CEO) by VIA Water. These camps are crucial to build

business and management capacities for the management board of the social enterprise as well as for

the networking capabilities and exposure to other businesses and actors.

6- Susamati find it hard to scale-up business operations due to lack of presence by the actors

involved in the sector like intermediaries, fund-managers, research institutions to

governments and impact investors. This results in a limited number of investment-ready

businesses because of insufficient cooperation among these players across the impact investing

industry acting as barriers to placing capital and building capacity.

How the Programme model could help: The programme involves many diverse actors in its

processes as a main objective for cooperation and a boost to the learning process.

6. Conclusion

The challenges that businesses, governments and regulators are unsuccessfully facing, has increased

private investors’ awareness towards a new business approach, where social and environmental goals

are positively valued. Unfortunately, despite its potential, impact investing is facing major challenges

which are limiting its flow and growth despite the increasing interest of investors. The major

limitation of impact investing diffusion is due to the lack of clearness about the impact investing

boundaries which have limited academic research as well. In this context, this thesis work represents

an explorative research of the impact investing phenomenon, in particular in the frame of the

Southern Africa region with a focus on Mozambique using explorative and deductive approaches.

The research aimed to analyze the state of social startups/enterprises operating within the impact

investing system in the Southern African context and study the challenges faced by social businesses

in the early business stages (SEED/Startup) that prevent them from scaling-up their businesses and

operations and how governments with the help of the sector’s most influential players can aid social

businesses in achieving economic, social and operational sustainability, navigating these critical

business stages to attract private impact investing bodies in the process while offering a framework

that could aid the process. Literature review has been performed with the intent to define the current

interpretation of impact investing, the roles and challenges facing its main actors. Moreover, using

qualitative research tools based on grounded theory and on field, allowed the author to explore the



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challenges facing social entrepreneurs and whether these challenges matched the ones mentioned in

literature. Qualitative methodologies work well capturing multidimensional phenomena and non-

linear, sometimes fuzzy, patterns of the reality offering a clear and holistic view of the context of

study (Sinkovics et al., 2008). Therefore, given the low level of theoretical knowledge on the

phenomena studied and its complexities, qualitative research was a suitable instrument to examine it

(Bonoma, 1985). Consequently, taking into consideration methodological issues, integration of

research instruments is recommended for complex researches were several issues must be explored

(Martinez, 2016).

By a conduction of interviews to thirteen different actors within the social entrepreneurship

ecosystem in the region, in Mozambique and on a global level, of whom once was interviewed 3

times, taking the total number of interviews to fifteen. Results have been analyzed using a thematic

analysis in order to gain a multi-perspective take on the impact investing system in general and the

possible role of governments to aid the system, further leading the author to funnel down the

research question through a deductive approach from the more generic to the more specific, as

explained in the Research Question Formulation sub-chapter.

Furthermore, a case study of a Mozambican social startup operating the sanitation sector was

identified and used as studying field to verify the following issues most focused on, hindering the

development of social businesses detected:

4) The lack of seed funds to kickstart a social business leaving social entrepreneurs to

count on self-funding or crowdfunding by family and friends.

5) The lack of business, financial and management capacity, absence of an efficient and

effective governmental role within the impact investing sector.

6) The absence of a legal framework for social businesses that could ease the development

of the sector and the inflexibility of impact investors risk-return paradigms, among

others.

The case study was also used as a verification for the Cooperation for Social Good Programme

Model which the author developed after having analyzed the data collected through interviews. The

idea of the programme revolves around three main pillars:



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1) An online platform: Social enterprises interested would register their business plans and ideas on

it. The use of an online platform is to foster technological advancements and gather data about the

social entrepreneurship field.

2) A training camp: To build business management capacity for the entrepreneurs. In the same

time, acting as a research field for researchers to carry out a deeper academic research based on an

empirical and practical analyses.

3) A prize competition: To provide funding to social businesses with different ticket ranges,

depending on their degree of development. As well as create a network between impact investors and

entrepreneurs.

The programme is mainly sponsored by the government and through a public-private partnership and

involves the main actors of the impact investing system including intermediaries, fund managers and

research institutions in a trail to improve the cooperation between different actors and the learning

process. However, the programme will be managed by a coordinating team which would be called

the “Team of Experts”. This team will consist in five different actors, one from each of the following

backgrounds: Policy (governmental), Academia, Investment, Management and Entrepreneurship.

The team of experts will carry out due-diligence and screening processes for the registered social

businesses on the online platform and accordingly accept or reject the registrars. Feedback would be

sent to both accepted and rejected enterprises. The accepted enterprises would be divided into three

categories according to their degree of business development: 1) SEED 2) Startup 3) Investment

Ready. Accordingly, a training camp would be arranged to each category to prepare them for the

competition which investors, fund managers and donors would attend. The team of experts with the

votes of these actors will decide the winners of each of the three categories’ prize competitions

which would consist in a pitching presentation. However, investors, fund managers and donors are

free to contact non-winners in case of interest.

The programme model was introduced, discussed, and analyzed with the interviewees, who in turn

verified the model or rejected it. Some gave different feedback on how to improve it in accordance to

their field of expertise. The main comments were as follows:

1) Titia Wouters, programme manager at VIA Water, highlighted the criticality of the data

disclosure issue. Expressing her concern that social entrepreneurs would be reluctant to share

their business plans with other actors in fear of rights violation. However, a confidentiality



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agreement could be a solution to this issue. Future research, could survey whether this issue

could be a deal breaker.

2) Anne-Luise Thon Schur, an impact investor, highlighted the fact that speaking for her

organization, they are not interested in online platforms or the work of intermediaries as

it puts entrepreneurs away from their reach. She highlighted that as an impact investor, she

has no interest for other organizations to find her investees or carry out the screening

processes. This puts Investors and fund managers interest in the programme under scrutiny.

Future research could survey this probability further.

3) Manuel Gangulo, CEO at Susamati, expressed his concern that through his past experience

working with the Mozambican government, the less involved the government is, the better

the results are. The team of experts is to be put in place to avoid the bureaucracy of the

governmental framework.

4) Manuel Gangulo, CEO at Susamati, also highlighted the fact of the possibility of the lack of

funding from the government or facilitation which could hinder the programme’s

development. Public-private partnerships resulting in sponsoring is a possible solution.

However, future research should include the governmental perspective.

7. Limitations and Further Future Research

As with all research works, this thesis presents several limitations which need to be highlighted for

the sake of completeness. For instance, the topics explored here were approached from a

qualitative perspective. Thus, further analyses making use of quantitative data may be piloted.

Furthermore,

With the objective of building a relevant range of contexts and phenomena (Mason, 2002), the

methodology used for the selection of the interviewees was purposive sampling. (Glaser & Strauss,

1967) Purposive sampling provides a high-level of consistency and representativeness that allow to

build a robust theoretical explanation of the phenomena studied (Glaser & Strauss, 1967).

Consequently, in order to maximize the diversity of visions and approaches, different kind of entities

were selected. The main problem behind using this strategy is the inherent bias associated to

selecting interviewees through online research and references (Martinez, 2016).



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Even though the author firstly mapped the actors of the ecosystem, this work was subjected to

practical restrictions such as geographic limitations, the availability of information on public sources,

and the willingness of practitioners to be interviewed (Martinez, 2016). Therefore, even if the sample

counts on diverse entities, certain limitation on representativeness should be considered (Martinez,

2016). A limitation of this research is the focus on the demand side, mainly on the social

startups/enterprises’ perspective of the field and the role of the government which is incomplete as

the government’s perspective was forcibly not taken into consideration. Which takes us to one of the

limitations of the interviews which is the lack of governments’ representatives in the

interviewees sample. This was due to the language barrier between the author and the governmental

personnel in Mozambique who only speak either Portuguese or local Mozambican tribal languages,

which made the communication almost impossible. The author tried to interview two government’s

representatives during the “Susamati” project prototype field visit with Manuel Gangulo (Susamati

CEO) being the translator, but this proved inefficient as the interviewees were always drifting away

from the intended topic and not being able to answer the questions asked to them in an way that

could be easily translated to English, which led the author to eliminate them from the interviewees

sample. Further future research could include a wider range of interviewees and focus on the

government’s perspective of the industry and what could be the challenges facing governments

in supporting the impact investing industry.

Another limitation related to translation was the difficulty of finding data from public

Mozambican online institutions due to the language barrier. All website are in Portuguese and

very few of them offer the date in English, which made the data collection unreliable to an extent.

Specifically, it is possible that certain dissimilarities may be present in the quotations used due to

problems with translation (Young, 2004). In fact, according to qualitative researchers, translation

issues have been a problem widely neglected in the literature (Young, 2004).

Moreover, on a more basic level, impact investing is a relatively new phenomenon and little

academic and empirical research have been carried out on it. And given the scope of this research

and the shortage of data to perform a quantitative analysis, qualitative data was used to test the

hypotheses formulated. The literature offers a wide range of methods for qualitative research as case

studies, ethnography and participant observation, grounded theory, biographical and participative

inquiries, and these methods appear particularly suitable for research where multiple actors and

environments are involved (Sinkovics et al., 2008).



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Accordingly, the case study was adopted as a real-life testing field for the explored literature, in a

trial to understand the real challenges and impediments faced in the impact investing sector and the

role of the governments in either supporting or hindering the sector. Furthermore, the author carried

out interviews with different actors within the impact investing sector involved with the case study

sphere of work to gain practitioners’, academics’, actors’ involved with the government in various

projects and experts’ perspective on the field and the role of the government in the impact investing

system. However, qualitative approaches presents some limitations on its own. another limitation of

the interviews made was the lack objectivity as each respondent always offered different

interpretations of the industry. In spite of that, the data collected could still represent a close

approximation of the full-reality, with further research and more reliable data, it would be

possible to reproduce similar experiments with more precise and accurate data.

Furthermore, through the case study, the author was able to develop a deeper understanding as

originally intended which resulted in the emergence of the ‘Cooperation for Social Good Programme

Model’ as a potential solution and support system by the government although not controlled or

managed by the government to the social impact investing system in the country. The progamme

model was verified by both sets of interviewees. However, a limitation of the programme could be

its attractiveness for impact investors. For instance, Anne-Luise Thon Shur, an impact investor

and an interviewee, showed no interest in online platforms, emphasizing on the fact that investors do

not prefer any parties to do their work (Due-diligence and screening) and that online platforms

already exist, however, investors know how to find good investment opportunities and do not need

intermediaries as much as widely speculated within the scientific community. This contradicts what

literature suggests. Another limitation of the programme is that it is only verified theoretically,

due to time and resource limitations. The programme model could not be implemented and tested

on the case study, which could be a stronger support to the validation of the model. Nor was the

online platform developed. Further research could include a survey to gather data of the

feasibility of the programme before exploring possible ways to implement it as a pilot test. An

idea that the author has discussed with the verifiers as enthusiasm and willingness for collaboration

were shown. However, one of the main limitations of this research is that Mozambique is one

country in a region that extends over 12 countries with different resources, economic realities

and challenges. Thus, Mozambique cannot represent the whole region.

Further research can cover more countries and compare them to Mozambique’s reality to gain

a more insightful idea of the field in the region as a whole. However preliminary indicators show



141


many similarities between Southern African and even Eastern Sub-Saharan regions’ countries’ social

entrepreneurship realities as per two Kenyan social entrepreneurs interviewees who indicated the

same issues facing social startups and young social enterprises in Kenya as the challenges in

Mozambique mentioned in The Ecosystem’s Elements and Challenges and Relationship between

Literature-review, Interviews and Programme Sub-chapters. Furthermore, another limitation

regarding Mozambique is the absence of scientific literature made about the country’s impact

investing sector, leaving mostly gray literature by development institutions to cover the topic

which led the author of over-relying on gray literature. This research is a contribution to the

academic world about the Mozambican Impact Investing context, that could be used for further

future researches that are trying to map the industry more accurately in the future.

The study contributes at academic level as it extends the literature on Social Business and BoP by

proposing a new framework that aims at clarifying the process through which Social Enterprises go

through when willing to operate in BoP markets.

8. Research’s Contribution

This research extends the existing literature related to impact investing, social entrepreneurship and

social innovation. Moreover, the programme model also contributes at a practitioner level as it

provides a new framework and guidelines for fostering social entrepreneurship and social enterprises

willing to operate at the Base-of-the-Pyramid (BoP). The framework can be used as a tool that can be

implemented by not only governments but also by impact investors willing to support the impact

investing system and connect its different actors under one roof that unites the language used and

decrease the differences between them. Furthermore, the verification of the framework on a real case

study provides the willingness of practitioners with different backgrounds to accept new ideas and

identify opportunities for improvement.

9. Acknowledgments

First of all, I would like to thank my supervisor and elder sister professor Irene Bengo for her

constant support despite her tight schedule and belief in me. I would like also to thank my co-



142


supervisors and friends Federico Bartolomucci and Nicola Ballerini for their help and guidance that

helped me to illustrate my work in the best way possible.

I would also like to express my gratitude and honor for all of my 13 interviewees for passing on their

knowledge and expertise in their respective fields and helping me understand a sector in which I am

interested to help achieve its potential, especially my friend and CEO of Susamati Manuel Gangulo

who have inspired me to try and help him in the best way possible to drive change in his local

community and country.

Furthermore, I would like to thank every single person who’s helped me write this research from

friends and colleagues.

Last but definitely not least, I shall thank for my parents, who have guided, supported and motivated

me along the way of this tiring but exciting journey, not only during the research period but rather

through the whole master’s degree and my whole life. To them, all my admiration, love and

gratitude.



143


Annexes

Photos from Susamati Field Visit in Maputo, Mozambique:

Picture 1 - Polana Caniço community (project implementation community)

Picture 2 - Toilet mold



144


Picture 3 - Proposed toilet prototypes

Picture 4 - Black Soldier Fly (BSF) pit, where waste goes.



145


Picture 5 - Final bathroom shape



146


Picture 6 - Final pit shape



147


Photos from VIA Water’s Training Week:

Picture 7 - Social Entrepreneurs during VIA Water training week



148


Picture 8 - The Author (center right) with Titia Wouters (center left) and Manuel Gangulo (far left) during the VIA Water training

week in Rotterdam.

Picture 9 - Gangulo pitching to investors during VIA Water training week



149


Picture 10 - The author (in the background, left) interviewing Silas ( A post doctorate Researcher at IHE Delft Institute)

Source – VIA Water



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