Meanwhile, local African companies wanting to attract investments need to demonstrate that they have sound approaches to address risks and opportunities associated with their operations. This requires, inter alia, undertaking effective stakeholder engagement; or in other words, building solid relationships with individuals/groups who are affected or have an interest in their projects.

Effective stakeholder engagement in emerging markets is not ‘another tick in the box’. It is a vital process that can bring multiple benefits for companies (i.e., reduced legal, security costs and potential fines); and it can increase their competitive advantage (i.e., enhance corporate reputation; identify new markets and easier access to project finance; improve information about local distribution networks, inclusive growth and value chains).

Stakeholders are commonly defined as individuals or groups affected by a project, or those who may have interests in a project and/or the ability to influence its outcomes. Depending on their level of organization, interest and influence, stakeholders can either promote or oppose a project. By ‘project’ we mean anything from the launch of a new product/service, or the development of new policy or a solution to a public problem, to engaging an indigenous community whose natural resources are being tapped.

Stakeholders are commonly categorized along internal and external lines. The internal ones are those with whom interaction and engagement is a core business function and subject to national regulations and/or established corporate policies and procedures. These include, among others, suppliers, distributors, shareholders/investors, regulators, customers, or employees. External stakeholders lie beyond the core business operation and include affected communities, local governments, international donors, NGOs and other civil society organizations and other interested/affected parties (IFC)

The importance of effective stakeholder engagement cannot be overstated – it bridges the gap between perception and reality of running successful operations in changing environments. It requires local companies, therefore, to build proactive, inclusive and iterative relationships with their stakeholders throughout the project life cycle.

There is, however, no one-size-fits-all approach in the analysis and selection of stakeholders – it is context-dependent and needs to be tailored to the requirements on the ground. The stakeholder engagement process starts by identifying and analyzing stakeholder interests and their potential impact on a project. There are quantitative and qualitative tools that can be of help. These include Stakeholder Engagement Planning Template (Emergent Insights); Stakeholder Analysis tool (Mindtools); and IFC Handbook on stakeholder engagement for companies doing business in emerging markets.

Second, the process requires disclosing information, consulting and building partnerships with stakeholders. Sharing timely and quality information plays a critical role in managing project-related expectations. It implies early consultations in the design stage, and making it easy for stakeholders to communicate their grievances, and allowing a dialogue throughout implementation stages. Particularly when it is known or assessed that major social, financial or environmental impacts are expected to emerge from a project, potential grievances must be mitigated to prevent critical issues from escalating throughout next stages. Building strategic partnerships with external stakeholders can best address this, and demonstrates managerial commitment to address issues.

Third, stakeholder engagement requires regular monitoring and transparent reporting throughout the project. Involving stakeholders goes beyond participatory monitoring or consulting. It sometimes requires the physical presence of affected individuals at the time data is collected, as well as the evaluation of performance against social, economic and environmental indicators meaningful to those affected (IFC). The AA 1000 Stakeholder engagement standards or the GRI, are internationally recognized sustainability standards on effective stakeholders reporting.

In conclusion, irrespective of the type of organization, building a sound stakeholder engagement process into the business is good business. It creates competitive advantages and benefits, managing project expectations and building trust. Most importantly it helps shaping a brighter future, making the difference between failure and success.

Surprisingly, there are a limited number of events on investing in Africa in New York City, the financial capital of the US. To change this, a band of Africa thought-leaders, investors and enthusiasts are hosting a networking event at Pranna Restaurant (79 Madison @ 28th St.) on Tuesday, April 24th at 6:30pm.

Led by Zoravar Dhaliwal, Tuesday’s event promises to convene investors, entrepreneurs and executives that are keen to conduct business in Africa. This event is the first in a series of events that seek to highlight emerging investment trends and develop a community in New York that is committed to doing business in Africa.

You will hear from Wale Adeosun, Founder and Chief Investment Officer of Kuramo Capital, and Zoravar Dhaliwal, Managing Director of Osaka Capital and Managing Editor of IDEAfrica.org, on their experience investing and working in Africa. The event will be held at Pranna restaurant in the charming cellar on the lower level.

This event is hosted by IDEAfrica.org, in collaboration with Osaka Capital, Africa.com, Community Lab, Benedict Lehman LLC, the Africa Business Club at Kellogg School of Management and the Series on Impact Investing at NYU.

Time: Tuesday, April 24th @ 6:30pm
Location: Pranna Restaurant (79 Madison @ 28th Street)
RSVP: http://africainvestment.eventbrite.com/
Price: Free

After having managed an $800 million hedge fund by the ripe age of 32, you would think activist investor Mr. Ravi Sood would planning a multibillion dollar fund or relaxing in Muskoka. Instead, Ravi decided to reinvent himself and now sits on the other side of the transaction, building sustainable enterprises in Africa. I had an opportunity to speak with Ravi about his passion for investing in Africa. Driven by financial returns and social impact, Ravi shares his enthusiasm for building businesses and investing in Africa.

Ravi has a long track record of investing in Africa and other frontier markets. He is currently the Chairman of Feronia, a plantations and arable farming company operating in the Democratic Republic of the Congo, and the Chairman of Galane Gold, a gold mining and processing operation in the Republic of Botswana.

What attracts you to investing in Africa?

I am attracted to investing and operating in Africa for several reasons but I will highlight three: risk-reward ratio, domestic economic growth, social impact.

Assets or opportunities in Africa are typically ascribed very high implied discount rates. There is good reason for this depending on the jurisdiction, however, this presents a major opportunity for those who can mitigate the operating risks and can source the necessary finance on reasonable terms to fund these opportunities.

A second major driver for my interest in Africa is the high domestic growth rates. Not only are these growth rates superior to most other jurisdictions but there is reason to believe that many of these countries are at the beginning of a long period of sustained growth.

Finally, I will highlight the opportunity to have a positive impact on the communities in which the companies I invest in operate. Re-investing in our communities has a positive economic return through improved education, health, prosperity and stability. It is also personally rewarding.

Are you optimistic about Africa’s growth? Why?

The African growth story has moved beyond one of extractive industries. The commodities boom has led to increased revenues for commodities exporters and an influx of foreign capital as in other cycles. In recent years however the story has extended to the expansion of local markets and intra-regional trade. This is in turn leading to greater stability and the promise of lower discount rates and long periods of growth. Mobile communications has been a great enabler. Investment in improved infrastructure including transportation and power generation will continue to fuel this trend.

What geographies and sectors interest you?

I am primarily a bottom-up investor and therefore driven by opportunities versus a top-down approach by geography. However, in general I am interested in jurisdictions where there is a local market large enough to create a very large business that need not become an exporter of its goods or services for growth. I also have a particular interest in what might be considered the higher risk countries in western and central Africa. These markets are typically less mature, and have higher implied discount rates and lower competition.

I will consider opportunities in most sectors. However my areas of expertise and focus are agriculture and mining.

How do you assess investment opportunities? What size investments are you attracted to?

I am looking for a very compelling risk-reward ratio. This does not prohibit investments in high-risk jurisdictions, in fact it often draws me to them since the opportunities are often much larger in places avoided by most investors. Beyond the potential to earn a high risk-adjusted return I seek only opportunities where I believe I can make a significant contribution through my own expertise and capabilities. I will not participate as a passive investor.

I seek out world-class opportunities. To justify the time and costs required for investments in Africa the potential size of the opportunity must be very large. As such the only size restriction is that the long-term potential must be enormous. Initial capital investments are typically a small percentage of the total capital requirements and my ideal opportunity is one where I can create a lot of value with a limited initial investment of money and a large investment of time and expertise.

What risks does one face and how do you mitigate them?

Above and beyond the risks that face any investment, sourcing funding on timely and compelling basis and sourcing world-class talent to staff operations are key challenges in Africa. Focusing on sectors where I have a strong base of relationships in both finance and operations mitigates these risks but they are always a challenge and indeed, these challenges are a key reason for the opportunities existing in the first place.

Ravi Sood’s Bio
After working at Deutsche Morgan Grenfell in Equity Trading Mr. Sood joined Lawrence & Company, a family office where he worked to deploy funds in public markets and private markets through venture capital and private equity investments. In 2001 Mr. Sood co-founded Lawrence Asset Management Inc. which grew to manage as much as $800 million. In 2010 he sold the company, then known as Navina Asset Management Inc. , to a public company called Aston Hill Financial. Shortly after closing the sale of Navina Mr. Sood left the combined company to focus on his own investments which are primarily in Africa.

Mr. Sood is currently the Chairman of Feronia Inc., a plantations and arable farming company operating in the Democratic Republic of the Congo and the Chairman of Galane Gold Ltd., a gold mining and processing operation in the Republic of Botswana.