Spear Capital welcomes a local focus on ESG performance in sub-Saharan Africa

The recently published 2024 Sanlam ESG Barometer is to be welcomed for shining a light on how the business sector is faring as regards to integrating ESG principles. The report – only the second edition of the Barometer – provides a much-needed focus for the sub-Saharan region of Africa. It’s a part of the world that desperately needs improvements in numerous elements of social and economic responsibility.

The region is both a producer of negative environmental impacts, and the victim of these impacts, while, in terms of its record as regards to poor societal practices, sub-Saharan Africa, for instance, is ranked as the worst-performing region in the United Nations Development Programme’s Gender Inequality Index. With this in mind, more attention needs to be given to integrating ESG into the business sector.?

The Barometer, which provides an in-depth consideration of ESG compliance in South Africa and Kenya, highlights the need for collective action in addressing the challenges we face. This includes the need for the business community as a whole to embrace the principles of ESG practices into their strategic planning, rather than accepting that just an isolated few companies become ESG ‘champions’.?

This point highlights one area in which the Barometer fails: it focuses only on the ESG performance of listed companies in South Africa and Kenya. Yet, if the potential contribution of non-listed firms were to be added to that of listed companies, we could talk more accurately of collective action across the business sector.?

Smaller non-listed firms – the businesses that are the biggest source of employment in a country like South Africa ?– can make a significant positive impact as regards particular elements of ESG. For instance, adjusting a firm’s recruitment policy so that it has a focus on? the employment of more women can improve the economic gender imbalance in our region. We at Spear Capital have seen significant success in this regard with our investee company, MyRunway. Presently, MyRunway’s workforce comprises 54% women, reflecting that women make up the majority of the almost 200 full-time employees.

This example reflects the power of private equity to drive positive change in the region. We at Spear Capital adhere to a number of initiatives geared to encourage the adoption of ESG principles among businesses. We believe, just as the Sanlam Barometer showed, that the adoption of an ESG focus in a business environment must be geared to have purpose-driven impact and must become a core part of the business strategy. This belief is core to our investment decision-making and is a driver for positive change in the way in which the firms we invest in go about doing business.

The Sanlam ESG Barometer provides a much-needed focus on the issues that the business sector should take up more strongly so that we can improve on many of the challenges faced in the region.?