Lilian holds a Bcom in Financial Management and has over five years of experience in investment banking in Africa.

Selected articles by Lilian

Embedding ethics among Africa’s funds and investors

By Lilian. Posted in Financial Markets & Economics on 17 Dec 2012.

“Look at the risks before the figures,” Khalid Ben Jilani of Africinvest Tunisia urged fellow investors at the Netherlands Development Finance Company’s (FMO) Achieving Sustainability in Finance course on environmentally and socially responsible investing (Jilani 2008:1). The Dutch institution gathered key investors together at the high level workshop in January 2008 at the Park Hyatt Hotel in Johannesburg.

The two-day workshop held in Johannesburg brought together financial institutions and investment corporations from all over the continent, including Africinvest Tunisia, Investec Asset Management South Africa, Grofin Capital South Africa, Kingdom Zephyr Africa Management Ghana and I&P Management Mauritius, among others: all have been financed by FMO to invest into Africa. Its focus was to discuss the importance of investing in companies that are environmentally and socially responsible, and the risks of not doing so.

The workshop encouraged investors to thoroughly scrutinise their planned investments, in order to clarify whether potential investment targets comply with social and environmental standards set by both national law and by the International Finance Corporation (IFC). Such analysis is vital to the long term sustainability of investments and institutions.

Lack of ethics drives up cost

To underline the seriousness of this issue, in May 2004 the Johannesburg Stock Exchange launched the first socially responsible index (SRI) in emerging markets, with the aim of making companies and the public more aware of those companies that comply with environmental and ethical standards. Research shows that at least 34% of European and American consumers attach value to corporate social responsibility (CSR) issues, and are prepared to pay higher prices for products and services that have embedded them (Strandberg Consulting, 2009).

Consumers in emerging markets need to be better informed about companies that comply (or don’t comply) with environmental and social standards, so that they can make informed decisions on the products and services they choose to support. These days, financial institutions do not want to get involved with companies that are not serious about acting with absolute probity and sensitivity to local issues. For example, companies that do not comply with national legislation – from breaching employment regulations to not having the correct licenses and operational documents – face a high risk of being shut down by the government, causing investors to lose their stake.

Companies that are not eco-efficient can bog down operations by relying on old machinery (for example) that not only pollute the environment but are also not cost effective. These high costs reduce the return on investments for investors. Likewise, turning a blind eye to illegal practices, such as toxic waste pollution or the use of child labour, can have an enormous negative impact on a company’s reputation and make it the target of sustained, effective and damaging NGO campaigns, and in extension reducing its investment outlook.

Nanama Dowuona, Chief Operating Officer of Kingdom Zephyr Management Ghana, attended the aforementioned workshop in hopes to initiate the process of developing a policy on sustainability issues within her organisation. “This is an enlightening course; it is helping us streamline our company processes in line with what the DFIs are looking for”, she explained (Dowuona, 2008:1). Founded in 1994, Zephyr Management LP is a global private equity and marketable securities firm that specialises in the creation and management of highly focused and value-added investment funds. The firm currently joint manages two funds, the Pan-African Investment Partners and Commonwealth African Partners. Together these funds have US $122million under commitment.

Zephyr aims to invest in companies that have a pan-African scope or have the potential to be pan-African businesses, and, at the time of this writing, was in the process of raising another standalone fund, with a target of US $500million. “A fund that invests in Africa has to be socially minded. Investing in a socially responsible index is something we are definitely considering, as environmental and social management is embedded in our co-values. We will be considering all the issues raised in this course in our due diligence processes, and we take this course very seriously” (Dowuona, 2008:1). She says Zephyr works with the companies it invests in to improve their SRI standing, particularly in terms of corporate governance and transparency in business practices.

Zephyr is not alone in championing social responsibility within its funds and investments. Around Africa, companies, NGOs and DFIs are waking up to the need to build ethics into company practices and investors are beginning to see the business potential of engaging with those funds.

*This article was first published, in a similar form, in the July 2008 edition of Africa Investor.


Dowuona, N., 2008, ‘Achieving Sustainability in Finance’, Johannesburg, South Africa, January 2008.

Jilani, K.B., 2008, ‘Achieving Sustainability in Finance’, Johannesburg, South Africa, January 2008.

Strandberg Consulting, 2009, “The Business Case for Sustainability”, Solutions for a Sustainable World.

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