Dr. Frannie Léautier is a globally respected development expert with over 25 years of professional experience from both public and private sectors. She is a Senior Partner and CEO at SouthBridge Investments, the asset management subsidiary of SouthBridge Group. Prior, she was Chief of Staff to the President and VP at the World Bank and Senior VP at the African Development Bank (AfDB). She has a PhD in Infrastructure Systems from MIT, has also graduated from Harvard University, and taught graduate courses at MIT, Harvard, Duke, Sciences Po, and the University of Tokyo.
Dr. Léautier has been recognised for her innovative projects in the water and energy sectors, and her consolidation of World Bank investments in the transport sector. In 2013, she received an Honorary Doctorate from North Central College in Naperville, IL, in recognition of her contribution to Africa’s development. She is a member of the Word Economic Forum’s Global Future Council on the New Economic Agenda and serves as a Co-Chair for WEF Africa. She holds advisory and governance roles on several boards, including the UN Foundation, MIT OpenCourseWare Advisory Board, African Risk Capacity (ARC), the Journal of African Trade, Orca Explorations, UONGOZI Institute, and AZA Finance. She is the Chairperson, CEO and Co-founding Partner at Mkoba Private Equity Fund.
Marcus Courage: What do you do at SouthBridge? You’re a relatively new organisation, with highly esteemed colleagues assembled. What is your mission?
Dr. Frannie Léautier: I joined SouthBridge Group at inception, more on the governance side. I chaired their Audit and Risk Committee. The firm was established by former African Development Bank (AfDB) President, Donald Kaberuka, and former Benin Prime Minister and Economist, Lionel Zinsou, who spent over 20 years working in private equity internationally, with the intent of bridging demands for capital in Africa with the availability of capital globally. We are an investment bank. The firm’s founders started on the advisory side of the business and attracted people with very experienced track records to join. For example, Andrew Alli, former President of the Africa Finance Corporation, who joined as group CEO, and other partners from across the business world, including from Goldman Sachs. I joined the firm on the executive side in July last year and took over the leadership of SouthBridge Investments, the new arm intended to balance out the advisory business with the investment business. In my role, my focus is on building the investment arm of the Group.
Marcus Courage: What are you investing in?
Dr. Frannie Léautier: When I came on board, at partnership level, we looked around Africa and realised this big gap in the market for finance that isn’t really being properly filled by any of the existing players. We decided to take a slice across that gap. Primarily, we wanted to intervene through financial institutions, to start, focusing on small and medium enterprises, that really are the workhorse of the continent, yet are having a challenging time finding the kind of investment they need to grow. Our first intervention is with financial institutions, which are banks, insurance companies and micro-meso finance areas. We invest in buying up and transforming small banks, bringing in fintech solutions, creating SME lending platforms and helping them to create innovative solutions that extend financing to those who would otherwise not have it. Our second intervention is focused on unique solutions for SMEs in the equipment purchasing space. And the third is bridging the gap for finance for women entrepreneurs. Those are the three areas we have selected, to start with, which is stretching impact investing to reach those markets where it otherwise wouldn’t.
Marcus Courage: I suspect that there’s a technology common thread running through these investments. That you’re using technology to disrupt old traditional markets and to provide a more efficient service to small and medium sized enterprises and in target segments.
Dr. Frannie Léautier: Technology is the common thread amongst all our activities. We believe that the disruptive element of it is fundamental because when you look at reasons why finance has not reached some unserved markets, it’s either because it’s very costly to do so in the traditional methods, or it’s labour-intensive and takes long human hours, or it has some implications on the speed at which decisions are made. So when you use technology, you are able to break these three barriers and reach markets that would otherwise be difficult to reach. Technology runs through all the solutions we are bringing to the market.
Marcus Courage: I’m recalling Bob Diamond. A few years ago, he raised a lot of money to acquire ABC Bank and build a Pan-African institution with technology as a key enabler, as he saw it, for that business. I think shareholders were disappointed. Do you feel the legacy of that big play of a few years ago in your current approach to the market as you approach the investment community?
Dr. Frannie Léautier: In fact, we took a lot of lessons from Bob Diamond and the efforts that he brought to the market. One of the good things about working with tech is the “fail-fast solutions”, because by failing fast you actually learn. I trained as an engineer and engineers don’t succeed at the first go. But you are trained to learn from your failures and continue to experiment and fix until you get it right. The approach we have taken is to first of all look and see what others have tried and why they didn’t succeed. Based on that, to pick on those lessons, and to start small. Start very humble and then grow, because organic growth is much easier, you can always add new elements. And so, we are starting at a very humble level, small ticket sizes, small fund sizes, having permanent capital structures in some instances, so that you don’t have the pressure of exit in a short period of time. At the moment, working with private capital rather than going to the markets – because the pressures from the market are quite different and may take you in a direction that doesn’t necessarily solve the problem in the short run, to leave market solutions for the future, and grow organically in a way that allows the solutions to actually drive the pace of growth.
Marcus Courage: I’m assuming that there’s no shortage of capital, that you’re not having any difficulties in raising the sort of finance from impact investment funds. From everything that I read, there’s a lot of money that’s being allocated for impact investment, particularly in emerging and frontier markets. Is that the case? Is that what you’re experiencing?
Dr. Frannie Léautier: There is a lot of money, but it’s not that easy to get. You have to have a very credible market story, why your solution is going to work and which market you’re targeting. There’s a lot of focus on the execution methodology and track record. So even if you have done amazing things in your previous life, you still have to prove that you can do new things with a different team in a different place, and that makes it challenging to raise funding in any situation. However, I must say that we have been very encouraged to see that Africa during the COVID-19 – and we hope the post-COVID-19 phase – has been able to attract financing in areas where it would have been very difficult to imagine in the past. And I think this is why innovation really matters, and the way in which you can talk about the approach you’re taking, the credibility of the team you’re bringing together and your ability to link the past track record that you and your team have to the solution you’re proposing. When you’re able to bridge those, investment becomes quite straightforward and people are willing to take a risk on you.
Marcus Courage: Last year, Africa Practice in collaboration with the World Economic Forum’s Africa Leadership and Values Initiative (LEVI) launched a platform called Stories Africa where we profile examples of innovation and leadership from across the African continent. We’ve been featuring African entrepreneurs who are disrupting markets with new technologies and new business models and it’s given me a better insight than I had previously into the amount of innovation that is happening on the continent. I get the sense that COVID-19 has accelerated this innovation, or certainly shone the light on these innovators. All of us have become just that much more aware of how many young Africans are disrupting, not just in fintech, which is quite well established now, but in medical devices, education, and other fields. Are these some of the things that you’re observing as you look to provide growth capital to African entrepreneurs and SMEs?
Dr. Frannie Léautier: You raise a fundamental issue, Marcus. This is something that even growing up as a child I was very observant of. Because when you are living in an environment of scarcity, in terms of material resources to make things, but you’re surrounded by nature and other materials existing right next to you, you become very innovative in creating your own space, your own toys, and you learn and grow up in that environment. Travelling around Africa and learning, particularly in this current environment which limits mobility but has created unique opportunities to interact with one another remotely, I’ve been struck by how frugal innovation has really taken root. People are looking at all kinds of ways to solve problems within the complexity and environmental challenges that they are facing.
Dr. Frannie Léautier: Frugal innovation has the advantage that once you succeed with your innovation, scaling becomes quite straightforward. It’s much harder to go from big to small, but there are many pathways from small to big. Because of this, I believe that when African innovations crack the market, they do it in a big way, because these small innovations can be scaled up in many different paths. They were born out of frugality and, therefore, there is no excess. Usually in innovation, it’s quite costly to put innovations together. So if you’re able to do it in a manner that is economic and efficient, even if it takes time, and you have tinkered around and come up with a solution that works nine times out of ten, scaling it up from there becomes straightforward, because you can scale it in six or seven different ways. This is something that is quite amazing. The young twelve-year-old boy in Kenya who came up with a foot-operated hand-washing machine to prevent further contamination of COVID-19 is just one example of this. That really is the heart of innovation. Thinking about solutions and tinkering around until you find a way to solve the problem. I’m very excited about the innovations, small and big, that have been born out of the COVID-19 crisis. Stories Africa is amazing because very few people would have come across those stories. I’m very happy that LEVI has taken that initiative to focus on bringing those African stories to the world.
Marcus Courage: I love the term “frugal innovation”. It’s the first time I’ve heard it. Is it a common term? Or is it something that you and your colleagues have brought into the vernacular?
Dr. Frannie Léautier: It’s a term that’s been around but not usually used in the context of what we’re trying to do in various sectors across the world. It’s a common phrase in places such as India where people have been hugely innovative with very limited resources. There is a partnership between France and India to uncover frugal innovation. When I heard about it, I said, “The heart of frugal innovation is Africa.” And maybe this is a place where we can go and uncover some of these amazing innovations that nobody has heard about. Innovation is an excellent example of where frugality can actually be a virtue, especially because limited resources are the future. When you look at where we are headed as humanity, with all the challenges we have, with climate change, being able to innovate where you are with what you have is going to be the norm. In many ways, Africa is leading the way in that space.
Marcus Courage: There’s a lot on the international agenda, culminating in the Conference of Parties in Glasgow at the end of the year. I was really pleasantly surprised by the number of international events and multilateral fora dedicated to climate change, biodiversity and conservation. I’m optimistic that by the end of 2021, the context in which we’re talking today would have changed. Climate finance will be much more understood, and the opportunities that are availed for African countries, in particular, but emerging countries, perhaps more generally, will become much more apparent. And hopefully, the transition to green growth and to renewable technologies, and to making use of the vast expanses of land, unique biodiversity and forests, and to maintaining them, will have a commercial value that African leaders and African countries will see value in focusing energies and attention on this transition. I wonder what your own views and expectations are for this year 2021 when it comes to humanity’s efforts to get to net zero by 2050 and to stop the pace of global warming. Practically, from the perspective of someone who has spent a career in finance and international development, what’s your hope in terms of African nations’ ability to access pools of funding to pursue green growth and the transition away from fossil fuels?
Dr. Frannie Léautier: This is a critical area where Africa has an opportunity to lead and also follow the examples of others and scale up. I’m very impressed, for instance, by what you can do at the city level. We had this big event at the Climate Action Summit where all the mayors of the world got together and shared ideas on how they are tackling a variety of climate-related challenges, how they are coping, innovating and thriving. The better we are able to solve the problems in the cities, given that Africa is urbanising at a rapid pace, the better we are in solving the climate problem overall. When you look at the majority of issues we are grappling with, they have to do, for example, with flooding. We have had incidents of flooding in a number of cities, whether it’s Kigali where you have whole slopes of earth falling after heavy rains, or the coast of Dar-es-Salaam where people drown every year around Christmas because of the high level of the sea, or what happened to Mozambique and the entire Indian Ocean coast because of the surge in the storms that have impacted the city. Flooding is one of the big areas that cities are grappling with.
In the Sahelian cities, it’s the opposite problem, of drought, and how to find clean water for city residents. What is really impressive is how mayors have come about working with young people and innovators to solve problems and tackle challenges in a way that others may not have imagined before. You see a small team of researchers using physics and chemistry in a very unique way to actually create water, because they know water is hydrogen and oxygen, and you figure out a way to create it. These are some examples where people can start from the basic principles and create something new. At the same time, they can work with traditional things like cleaning up the rivers so that you have fresh water sources protected, better waste collection so that you don’t find garbage finding its way in the seas and big rivers, using waste to generate energy so that you solve two problems at once, circular economy solutions that are quite innovative, that make things out of materials we would otherwise throw away, bioengineering, to go on the higher scale of innovation.
It’s endless the list of things that people have been able to come up with. It makes me very happy to see that that is not limited to cities, particularly now with the limitation of travel and the real challenges countries are facing that are dependent on nature tourism. Seeing how they have been able to innovate and produce incredible tourist experiences for people without having them leave their homes by using technology, so that you can actually go inches close to a gorilla or be able to see a rhino in its natural habitat as close as you can get, or bringing you the thundering of animals as they migrate, being able to actually feel the dust in your nose, is impressive. Those kinds of technological solutions allow us to bring tourism to someone’s living room in a way to generate income for the countries dependent on it, but at the same time preserve the natural habitat and disturb it less. I saw, for instance, the procedures taken to protect gorillas from Coronavirus; because the tourists can bring the virus to them. Technology is helping us find those solutions, during a time of crisis, that solve urban problems. My hope is that we use these techniques to save carbon so that we are not flying around all the time to go and see unique things, and at the same time, to learn, observe and contribute to the protection of these amazing habitats that we have on the continent. I hope we innovate and push the frontier and become first to the technology nose in terms of innovation on the urban side. We are a unique continent to do this. We have a chance to do this, and I hope we can take it and move forward with all these opportunities.
Marcus Courage: The beginning of the year, January 1st, marked the inauguration of the African Continental Free Trade Agreement (AfCFTA). The proportion of trade that Africa does with itself is significantly smaller than the quantum of trade that African nations do with the rest of the world. That presents a problem, in as much as we’re leaving value on the table within African nations, and we’re not keeping those value chains within the continent where those opportunities should perhaps exist. There’s a lot of excitement in certain quarters, but also some cynicism in others, recognising that there are still a number of countries still to ratify the agreement and a belief that we still have a crop of relatively older political leaders who are motivated by political and, dare I say, nationalist priorities, and perhaps won’t be as ready to embrace the integration agenda that the AfCFTA necessarily involves. Tell us about your experience in promoting and supporting trade, specifically on the continent, and what your hopes and aspirations are for the AfCFTA.
Dr. Frannie Léautier: First of all, what we have accomplished in Africa, having the first day of trading happening in the middle of COVID-19 and taking place as planned with no delays, is an amazing achievement. The continent and its leadership have been focused on getting a subgroup of countries to ratify and we move, and the others will come along as their political processes sort out at the national level. That can-do attitude that says we know our bigger dream, we know it’s difficult to achieve, let’s start with a few who can start and get things moving, was a very smart political choice because it allowed the AfCFTA to get going on day one. I believe the success of the AfCFTA will be driven by individuals and companies who see the opportunity and capitalise on it.
What’s easy to do is to fire up the imagination of the youth. The youth see Africa as a continent of possibility and they are less encumbered by historical and other factors that hold them back, and they’re ready to charge and move. You can see them doing it on the cultural side, when you look for instance at the consumption of the creative arts. The movies made in different African countries make their way all over. In Nigeria, you will see a movie made in Uganda, Nigerian movies are all over the world, South African theatrical pieces can be seen even in DRC. Africans are sharing the cultural space in an amazing way. To the extent that we even have jollof rice wars, with people saying, “our recipe is better than yours”, or, “we really are the originators of jollof rice”. Today, jollof rice is an African dish in almost any major African restaurant on the continent. People are starting to feel that commonality, and that is really the space in which integration of trade takes place. You’re trading food and agri products, agribusiness, and creating pathways by which cultural products are moving on telecommunication systems, movie networks, and so on.
Furthermore, infrastructure development is vital in enabling countries to connect. Previously, all the countries were thinking of sending their products outside the continent, so the infrastructure has been generated to move towards the ports, and the landlocked countries are forced to connect to those that have access to the ports. Now with the AfCFTA, trade is looking inside, and therefore landlocked countries have a chance because they can trade with their neighbours and don’t necessarily need access to the sea. That requires investments in infrastructure. Exciting solutions have already come in place, like the completion of the last 200 kilometres of a road that connects Africa from North to South. Building that infrastructure that connects the countries, knowing where we want to go, knowing there are going to be bumps on the road because it is costly, we may have border disputes, we may have challenges in finalising it on time, but we will get there. We have to build the roads, the electricity. Very soon, you will be able to trade electricity from Mozambique to Ethiopia.
Then there is the country-to-country cross-border trade, which was previously happening already. For example, the Senegalese textiles that made their way to Cameroon and northern Nigeria transported by women carrying them on their backs and crossing the borders from one country to the next. There was already trade happening, albeit dangerous, with women going through extreme difficulty to trade in those areas. Now, we can support that by secure borders where trade can flow with agreements between countries, where you can have the logistics supply chain come in place with technological monitoring where you know exactly where the vehicles are, when a package has been picked up and when it has been delivered. We have all these possibilities now, and therefore trade should be straightforward.
The last area is the non-tariff barriers that we need to remove because those have been creating a lot of friction in trade. One example is the payment system. If I can buy something in Tanzania shillings and pay for it in a market that asks for Rand and they don’t ask me for Rand, it’s great because the exchange rate can be handled now through technological algorithms that can give you the market rate instantaneously. I should be able to buy something without going through the central bank or even needing a credit card. If I’m connected to you by telephone and there’s an accepted market for currency transactions or brokering, then you and I can trade. As we go, removing these barriers on payment systems, currency conversion, ability to move goods from one place to the other, getting to common standards, certification, etc., are key. Those soft issues will take us to the last leg.
Marcus Courage: Your story is an inspiring one. You grew up one of seven children in rural Tanzania, and you made it to MIT in the United States by sheer force of will and a lot of hard work. You were the only woman in your lecture hall of the 70 or so students at Dar-es-Salaam University studying engineering. You then moved into an engineering job, which is an industry that’s not known for having a high number of women. I wonder, based on where you’ve come from, your own experience and what you’ve observed over the course of your career and lifetime travelling all over Africa, are you pleasantly surprised by the progress that’s been made in addressing gender equality, particularly over the last five years where there really have been some breakthroughs and victories, or are you disappointed?
Dr. Frannie Léautier: I’m an optimist by nature. It’s the only way you can get out of bed and get things done, especially if you are in a very challenging environment or you’re facing very complex problems. When you have so much adversity hitting you, you learn to adapt and survive. I was born very fragile and almost died several times in the first nine months. Perhaps that’s where my fighting spirit comes from. I’m quite happy with the achievements we have made towards gender equality. When I went to the University of Dar-es-Salaam to study engineering, there were sixty men in my class. But today, the majority of the students in that very same School of Engineering are female. In the space of my living time, I have seen that transformation take place, and this is just one country.
Today, Africa has the largest share of women in parliament in the world. We have made huge achievements in getting women into the political sphere to make decisions in parliament that shape the law and the future. On corporate boards, Africa leads the world in gender equality. One in every four board members in Africa is a woman. Most of the women on these corporate boards are given nurturing roles like human resources or law and are not in the core part of the business. Even then, the rest of the world hasn’t even gotten to where Africa already is. Those are the positive things. Where things are still challenging is in education, where access to education still remains a major challenge for many women across Africa. They still are married too young in some countries, they still have activities to do to support the family because there is no water or electricity and somebody has to fetch the water and firewood, and that usually means the young girls. That takes away from learning and developing themselves. Way too many young women are having babies when they are still babies. In some countries, girls drop out of school if they get pregnant and any chance to develop themselves ends there. So these young women get penalised multiple times. Fixing these has to still be a focus for all of us.
The second area to address is finance; investment bias that disfavours women. It was shocking to see in an independent evaluation done by the International Finance Corporation (IFC) and the World Bank looking at why it’s so hard for women to access finance. They found a number of reasons, but one of them, and the most difficult to handle was investor bias. That a good idea pitched by a group of women – the same idea, same qualifications and track record as a group of men – would be turned down. There’s this pure bias towards women, thinking of them as more risky investments or having market ideas that are more difficult to execute. Here is a place where we still have a lot of work to do. It has to do with education in general on assessing risk so that investor teams feel comfortable investing in women because they look at what matters on execution, rather than thinking through all the biases that one grows up with around how women execute or make business decisions. It has a lot also to do with providing opportunities where equity investments can be made available to women, supporting them at early stages of the idea through venture capital, and other forms. Accelerators and helping women think through their solutions. What was also interesting in the IFC-World Bank evaluations was that the most important form of training necessary for women to succeed as entrepreneurs was psychological. That if you believe in yourself, you’re confident and know and can shape where you’re going, you’re able to succeed, because psychology helps you interpret not only yourself but the behaviour of others. We’ve evidently made a lot of progress, it’s globally impressive. But there still remains these hard drawbacks that we face in education, in the attitude towards women in business and finance, and in supporting some of the last mile challenges that women are facing. Confidence, as these studies show, is the key.
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