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Meet The Swiss Entrepreneur Who Is Funding African Innovation

This article is more than 9 years old.

Jean-Claude Bastos de Morais, a Swiss-Angolan, is a successful entrepreneur and the founder of the African Innovation Foundation (AIF), a Swiss-based organization that promotes innovation and sustainable development for Africa. The African Innovation Foundation mobilizes innovators across the continent to release untapped potential in Africa, enhancing the way Africans live, work, and learn. The Foundation also awards the Innovation Prize for Africa (IPA), an annual award that provides $150,000 to individuals who develop and deliver market-oriented solutions to African challenges. The IPA honors and encourages innovative achievements that contribute toward developing new products, increasing efficiency or saving cost in Africa.

I recently had a brief chat with Jean-Claude Bastos de Morais to learn about the African Innovation Foundation and to pick his brains on how private and public institutions on the continent can improve access to funding for innovative entrepreneurs.

Who is Jean-Claude Bastos de Morais?

By profession I am an economist, venture capitalist and philanthropist. I have an active interest in the social and economic development of sub-Saharan Africa, which is where my father is from. I grew up in Switzerland, which is where my mother is from. I studied Business and Administration at University of Fribourg in Switzerland. The entrepreneurial side of me was existent from my early days and to finance my studies I started a regional Mergers and Acquisitions boutique business that sold small companies such as hair dressing, beauty and carpentry. I had also supported my friends in listing the first internet company in Germany. In 1989, I joined Deloitte as a Consultant and then later Abegglen Management Partners. Then in 1995, I launched a venture capital company that was focused on the thriving SME sector in Switzerland.

In 2002, when peace came to Angola, I launched an investment advisory company there. In seeing the potential that Angola could offer, I knew then that I wanted to focus my business ambitions in Africa. Since finance has always been one of my strengths, I decided I would create an African-centric company, one which would bring together investment, private equity and wealth management experts with a genuine and long-term vested interest socio-economic development in Africa. So in 2003, I founded Quantum Global group, which today is an international group of companies that is active and expanding in the fields of corporate finance advisory, asset and private wealth management, real estate and investment consulting.

Then in 2008, I founded Banco Kwanza, Angola’s first investment bank. It supports economic development in the country by providing investors, corporations and institutional clients around the world with strategic Investment Banking services related to Corporate Finance, Mergers & Acquisitions, Venture Capital and Private Equity Management, Fund Management, Debt Structuring, Debt Refinancing, Asset Management, Fund Raising and Private Placements.

I also saw early on that there was so much potential, ideas and drive in Africa, and amongst African people. There was so much to be done to unlock this potential. So in 2009, in response to my philanthropic ambitions, I founded the African Innovation Foundation (AIF). The Foundation is focused on driving African-led development through fostering innovation.

Tell me the story of how the AIF came to be. What are the odds that a Swiss investor would fall in love with African Innovation?

I am very much an African as I am Swiss. I had a very close relationship with my late Angolan grandmother who taught me the importance of valuing humanity.  She always told me that when you have enough, give to those in need. She also taught me the importance of remembering my origins. Before she passed away, I promised her I would help to make a difference on the African continent.

My passion for innovation and my belief that Africa’s future lies in its ability to innovate according to its socio-economic needs led to the founding of the African Innovation Foundation (AIF). Our aim is to unleash Africa’s dormant potential and support sustainable projects that improve the lives and the future of people in Africa.

In 2011, we took the AIF to the next level by launching the Innovation Prize for Africa (IPA), together with the United Nations Economic Commission for Africa (UNECA). The IPA focuses specifically on technological breakthroughs in the manufacturing and service industries, healthcare, agriculture and agribusiness, environment, energy and water and ICTs. Over the years I have witnessed how it has helped to unearth incredible African potential that would otherwise have gone untapped.

Through the IPA, we achieved a major milestone in 2012 when the African Union (AU) and the United Nations Economic Commission for Africa (UNECA) passed a resolution to promote an innovation society for Africa’s socio-economic transformation, which has led to many African nations investing behind innovation.

The AIF also focuses on promoting good business practices within both the private and public sector. In 2013, we launched and funded the African Law Library (ALL), which aims to give all Africans free access to the law by digitizing African laws and making them publically available.

Today, I am proud of what is being achieved in Africa via AIF, and I feel certain that I am fulfilling my late grandmother’s legacy.

In my travels across Africa, I’ve met several innovative African entrepreneurs who are building great products. I keep hearing from them that there is a general reluctance by international investors to fund innovations and new technologies in Africa. Why is it so and how can this be overcome?

I agree. Africans are innovating incredible products and services that are revolutionizing many of our key sectors from agriculture to banking. But to answer your question, let me first begin by addressing the role of local investors in supporting African entrepreneurs. Then we can look at foreign investors. I believe that Africans themselves first need to create a viable business eco-system that can support local enterprise.

Small to medium enterprises (SMEs) are economic growth engines. They create jobs for locals, which in turn creates competition, which then drives innovation, opportunity and growth. Yet in Africa, the SME sector is not growing at the rate that it ought to. This is because they lack access to capital from home sources such as local banks and financiers. Many startups or small businesses without a credit history are simply unable to gain funding as banks are often cautious to lend under such circumstances; or the interests rates are so high that the returns are no longer attractive. The African Development Bank reported recently that the credit gap for SME lending in sub- Saharan Africa is estimated to be around $70bn to $90bn. This poses a real dilemma for local entrepreneurs.

Things, however, are beginning to slowly change. Many African governments are now stepping in to incentivize SMEs through strategic programs designed to fill the funding gap created by the conservative local banking sector. The Angolan government, for instance, now incentivizes small businesses by offering attractive tax regimes to foreign investors (particularly outside of Luanda). The Ghana Micro, Small and Medium Enterprises (MSME) Project, Rwanda Entrepreneurship Development Program and Small Enterprise Development Agency (SEDA) in South Africa are examples of such programs.

Venture capital firms are also playing an increasingly important role in helping to facilitate the growth of SMEs. An example is the Angola-based Fundo Activo de Capital de Risco Angolano (FACRA), whose supervisory committee I am a member of. It is a public venture capital fund that specifically supports Angolan SME’s in building, innovating and expanding their businesses. Its main focus is to identify high quality opportunities to support Angolan enterprise, particularly in technology, agriculture and engineering.

Still, more needs to be done on the local front. The local banking sector, as well as private African investors with financial means need to step up efforts to establish a financial eco system to support African entrepreneurs and startups. Only then should we look outside for foreign investment.

There are a number of factors that make foreign investors uneasy about investing in local inventions and new technologies. International venture capitalists will no doubt look to fund businesses that can demonstrate that they are profit-driven, interested in maximizing returns for themselves and their financiers, and have a sound exit strategy. So despite the high number of startups on the continent, only a handful are ever funded.

But, when reputable local investors are backing local businesses, it creates confidence amongst local innovators, young entrepreneurs and international investors. This is the only way to make African startups and SMEs less risk averse to foreign investors.

So to sum up my opinion, I believe the answer lies in smart investment, which is an “in-house” approach. Essentially it is a combination of timing, business maturity and the right mix of local elements. Local innovators need to connect with local entrepreneurs and partners or management teams in order to achieve tangible business milestones that make them attractive to international co-investors. This can only be achieved when all parties have a unanimous understanding of the risk profile and return expectations of the innovation they are investing in, and if they are all motivated by the same ethical principles, values and vision in pursuit of their business objectives that have real social impact. So it’s a combination of many local factors that need to happen together.

Conventional financing models that apply to other markets do not necessarily have to be applied in Africa. It is time to rethink the financing models to ensure that they can sync and evolve with the way in which African entrepreneurship is developing at present.

Are you surprised at the speed at which Africa is fast transforming to a market economy?

No. In fact, this is what the African and the global business communities have anticipated. With strong GDP growth, increasing political stability, a burgeoning middle class and a young population, Africa is an emerging market with great potential. With vast natural resources and a public sector focus on infrastructure development, there are vast opportunities for international investors to leverage this growth.

Given Africa’s performance during the global recession, its economies are ranked among the most resilient in the world. The social reforms that are taking place across the continent make Africa an increasingly promising place to do business and reap long-term rewards.

At present, Africa’s economic growth is being driven largely by demand for Africa’s natural commodities including oil and gas, minerals, precious metals, palm oil and timber amongst others. The BP Energy Outlook 2035 reported that Africa will remain an important producer of oil and natural gas, accounting for 10 percent of global oil and 9 percent of natural gas production in 2035.

African exports to world markets are also on the rise, with many sub-Saharan African markets moving towards Asia. According to the International Trade Centre (ITC), which has a joint mandate from the World Trade Organization and the United Nations, trade between Western Africa and Asia, for instance, is forecast to increase by 14% annually over the next decade, significantly outpacing the overall growth in world trade. Regional trade between sub-Saharan African countries has also been on the rise, leading to increased production of value-added goods.

The World Bank reported that Africa needs $60bn in infrastructure investments up to 2015. African governments are now prioritizing large scale infrastructure projects, especially trade-related infrastructure, in order to reduce the time and cost required to get products to market. ITC projections indicate that the expected benefit for sub-Saharan Africa of investing in trade-related infrastructure alone is an increase in exports of up to 51% beyond the baseline growth forecast, along with a gross domestic product (GDP) gain of US$ 20 billion per year by 2025.

All these factors have led to foreign direct investment (FDI) steadily pouring in, with China taking the lead at 16% of total FDI into sub-Saharan Africa.

However, in order to sustain this growth, African countries need to step up efforts to diversify their economies at a faster rate, enable wide scale job creation for locals, grow its SMEs sector and reduce poverty in the next 5 years. Governments will need to continue to focus on political reforms that create more synergies locally and across the region so that future generations of Africans can benefit from Africa’s growing wealth and progress. Overall, African leaders are making good progress towards securing sustainable development of the African economy.

What technologies, if any, have you seen in Africa that you think should also be used in developed countries?

The true worth of any technological breakthrough lies in its ability to be adapted and shared with end users where it is most needed. Technology should be a universal enabler for increased quality of life, not a monopoly or a get-rich-quick scheme.

There are a number of technologies developed on the continent that have a great potential to follow in the footsteps of innovations such as M-Pesa, which pioneered in Kenya and is now being adopted internationally, bringing mobile financial ease to millions of previously unbanked people in rural communities in other parts of the world such as India.

Many of the inventions of recent IPA winners and finalists can go a long way in improving the lives of communities around the world. For instance, this year’s Prize was awarded to the creators of Osteogenic Bone Matrix (OBM), the world’s first injectable bone graft substitute derived from bone morphogenetic proteins (BPM). It is used for the treatment of bone injuries leading to the complete and natural restoration of the bone, including the bone marrow. As the only bone graft substitute containing naturally extracted bone growth proteins, this innovation is expected to radically change the way orthopedic surgeons treat bones injuries, not just in Africa but all over the world.

Another IPA winner this year, from Ethiopia, created the Aybar BBM, a low-cost farming device that is used to easily drain excess water from waterlogged fields. It is the only known effective device that is capable of creating drainage furrows for excess water while building a broad bed for planting. Millions of hectares of land in Ethiopia and the rest Africa, as well as parts of India and Bangladesh for instance are not available for farming because they are water logged. This innovation can go a long way in helping poorer farming communities around the world improve their food production capacity.

Innovations such as GMPBasic®, a software program designed by yet another IPA finalist, is used in the unique identification and tracking of livestock. It tracks the life and health history of every individual animal, and is especially useful when monitoring livestock during animal disease outbreaks. It is the only animal tracking electronic database that allows the transfer of data for each animal from one owner in the value chain to the next throughout the animal’s lifecycle from birth to slaughter. The GMPBasic is an improved global solution for Livestock identification, disease management and traceability for Government Veterinary Services worldwide.

Apart from IPA-related innovations, there are many others being developed each day on the continent and I expect that we will continue to see more African innovations on the world map.

The IPA 2015 has just opened for entries. What are your expectations for this next edition?

We are now in the fourth phase of the competition and each year I am more and more impressed with the wide range of innovations that come through. Each year, the IPA winners have proven to be very sophisticated in their innovations and truly deserving of the Prize.

One of the IPA criteria is the ability of the innovations to address African-specific challenges. I am looking forward to see what new technological innovations the IPA 2015 will bring, especially in manufacturing, farming, engineering and healthcare.

To date we have not had too many women innovators and I hope to see that change in the next edition. I would also like to see more entries from sub-Saharan African innovators, where there are tremendous opportunities for them to succeed.

Follow me on Twitter @MfonobongNsehe