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Kenya client Watervale Investments receives intensive COVID-19 support

The COVID-19 pandemic has wreaked havoc on economies around the globe – and the small business sector is taking the biggest hit by far. As a result, small businesses have seen their income all but disappear, while also facing increased input costs. Many have been left struggling to cover operational costs, including salaries. Businesses had to innovate to survive.

GroFin’s response to the pandemic was to provide intensive business support to its clients, including Watervale Investments in Kenya which employs 215 people. Watervale Investments, trading as Moko Home and Living, manufactures mattresses and furniture. Watervale offerings include low-cost, zero-waste cushions made from by-products of European foam factories. These are distributed through Moko’s partner network of over 150 micro-enterprises operating across Kenya which in turn retail Moko products to serve the end customers.

GroFin’s investment in Watervale goes back to 2017 when the company needed funds to meet working capital needs to purchase raw materials required to expand its operations.

GroFin Kenya assisted the business by giving cash flow management and social media training, as well as training and implementation of COVID-19 infection control measures. Training in COVID-19 infection control measures and implementation of ESG policies have improved the company’s workplace safety for all employees. Watervale shifted all B2C sales and marketing activities to digital channels to make up for reduced retail showroom activity. Its digital sales grew from 50% pre-COVID to 70% of all sales during the COVID period.

COVID-19 has also affected the cost of raw materials which was on the high. Luckily, the company had diversified its supplier base before COVID, especially for imported raw materials, to ensure that Watervale is not dependent on a single country or supplier. This has been extremely beneficial for Watervale and it has been able to adjust its sourcing dynamically and minimise supply interruptions during the lockdown.

In an effort to reduce cost and improve performance, Watervale has innovated to use steam as a utility.

The rationale was that this would reduce the steam cost of our factory since we would only pay for steam used and that an expert service provider would have the responsibility for maintaining the boiler to avoid downtimes. – Eric Kouskalis, Director of Watervale Investments

By switching from diesel-powered boiler to biofuel, Watervale is making a huge step toward reducing its carbon footprint.

GroFin introduced Watervale to the Challenge Fund for Youth Employment that is seeking to co-invest in innovative private sector-led initiatives. Watervale’s application has been submitted and is being reviewed by the investors. With this new investment in perspective, the business wants to launch new products soon.

We have grown the business successfully over the past two years providing sofas and mattresses. We have developed concepts for dozens of new home furniture products, and we are working to secure the financing and build our internal capabilities to bring them to market at scale. – Eric Kouskalis

Impact Investing & Education–Learning to make a difference in Africa

Africa’s education story is waiting to be written, but whether it will be written by Africa’s children is a pressing question that haunts the emerging continent.

Consider this – Sub-Saharan Africa (SSA) still has 30 million children out of school, and tertiary education is suffering from severe capacity constraints. SSA is also the worst-performing region globally for educational quality and learning outcomes, with up to 40% of children not meeting basic learning outcomes in literacy and numeracy. Moreover, by 2035, the number of Africans joining the workforce (15–64) will exceed that of the rest of the world combined, but SSA’s education systems are not meeting workforce needs.

Sounds like a challenge for any government? It certainly is, and one that no government can possibly rise to. A report highlighting the key role that the private sector is poised to play in Africa’s education landscape then comes as a fitting response to this challenge, replete with a powerful foreword by Liberia’s President, Ellen Johnson Sirleaf.

This definitive report by Caerus Capital is aptly titled “The Business of Education in Africa”, focusing as it does on the contribution of the private sector and on how government can act as the steward of the whole education system.

“The Business of Education in Africa” paints the current landscape of private education in Sub-Saharan Africa, goes on to discuss how African governments can better engage with private education players, highlights opportunities for investing in private education in SSA and delves deep into case studies of interesting companies in education in SSA. It ends with case studies of the education market in South Africa, Nigeria, Kenya, Ethiopia, Senegal & Liberia that may well be some of the most comprehensive insights into the education markets of these key African economies as on date.

While Sustainable Development Goal (SDG) 4 mandates that governments have and must continue to commit to access to a free, quality education for children, statistics highlight that around one billion African children will need to be educated over the coming three decades. Keeping pace with this demand requires enormous investment in schools, universities, and other infrastructure; recruitment and training of teachers, school leaders, and support staff; and learning materials. Public education systems will struggle to keep up with this unprecedented increase in demand.

Private sector education is then key to unlock the potential of this vital sector, and meet the rising tide of demand that otherwise threatens to engulf the continent’s children in a sea of darkness.

The report notes that the private sector is already playing a significant role in SSA. While publicly reported data compiled by UNESCO indicates that the private sector has a share of 13.5% in the education sector across 15 countries, the report’s own surveys indicate that the actual share of private schooling might be 21% (or one in five pupils), and this number is only set to rise (to one in four) over the next five years.

However, this enormous opportunity comes with the significant challenge of financing private players in education, with the report identifying a private investment requirement of US$16–$18 billion over the next five years.

The report highlights that education makes for a compelling investment opportunity because it delivers wider benefits in the form of high individual, social, and economic returns, and investors & donors are consequently willing to secure lower financial returns, or even a purely social return on investment.

Impact investing that focuses on social returns over purely financial returns then comes to mind as a lasting solution to the financing woes of private sector schools. While impact investing is a nascent field and impact investors in Africa are few and far between, some stories of positive change in local communities are already being written.

Be it Kenya’s Nairobi International SchoolTanzania’s Daystar SchoolRwanda’s Highland SchoolGhana’s Firm Foundation or South Africa’s Zambesi Akademie, these small businesses hailing from across the African education landscape have one strong link that binds them all — GroFin.