Authors: Cameron Ormesher, Tebogo Masekwameng, Brendan Mullen — Secha Capital

For a few years, the phrase in the investor-philosopher world that would lead to outsized financial returns was: “narrative violation”.

A narrative volition can be defined as: Find a broad topic on which most agree and be contrarian via unique, differentiated insight.

Ironically, unlike most VC and PE trends from the US and Europe, it never made its way to any region in the Africa VC and PE ecosystems.

Maybe it should have….

Our asset class is under-performing in both financial and impact returns.

Sources: SAVCA, AVCA, Preqin, Pitchbook

This under-performing capital has been flowing to the extremes, 95% of capital bar-belled to start-ops and and large businesses and infrastructure.

The companies in the middle have clear needs: financial and human capital.

So then why the lasting narrative for investing in Africa? Why not learn other lessons from these same markets and apply them to the local context?

Funds in the small-cap space allocate capital quicker, across more deals and outperform due to value creation, not financial engineering. Plus, the rate of companies that go out of business — those that risked survival for growth — is 20x lower.

Source: Small is Beautiful, Secha Capital white paper

Our narrative violation?

Every region in Africa has unique opportunities and unique challenges.

We cannot copy and paste the same playbooks from other markets.

Thus, let’s design funds to re-think the flows of the three components (small businesses, financial capital, human capital) with biomimetic, contextual first principles

Sources: AVCA, SA Jobs Fund, Shore Capital, Alpine Partners

And if we do, we can create superior returns, better diversity outcomes, more jobs and an economic multiplier effect which will crowd in more capital.