Investors across the world are changing their approach – instead of searching for opportunities that yield more monetary returns, they want their investments to create a meaningful and lasting impact on communities, according to Bruce Raw of GreenCape.
Raw was the keynote speaker at an investment summit at Touwsrivier on Friday. Several members of the Touwsrivier community and representatives from local government and business came together to share ideas of how to revive the small town's ailing economy.
Touwsrivier used to be known for the national railway which passed through it, making it a gateway between the Karoo and the Boland in the Western Cape. But the railway has not been in use since the 1990s, which has led to Touwsrivier suffering a substantial decline in its economy, according to town manager Neville Fourie.
Raw who spoke of his work with GreenCape, which aims to find ways to create jobs and develop the Western Cape economy – shared with the delegation current trends in investment. This was with the hopes that community members would be mindful of what investors are seeking when they worked out an economic revival strategy for the town later that day.
Globally investors want to get back more than just money from their investments – they want their investments to develop people and social infrastructure, Raw said in his address.
"Just money on its own does not achieve anything. We assume life will be better if we have more money. But if we have money and things have not got better, has the investment really grown?"
He used the example of another Western Cape community - Atlantis, which used to have a thriving manufacturing industry. But when the incentives for manufacturers, which were offered during apartheid, were removed the businesses left. "The investments were not built on a proper business case, but only to take advantage of the incentives. So, when the incentives left there was no proper business case to remain," he explained.
However, a Special Economic Zone has been set up in Atlantis and the community is now attracting investment through the solar plant located there.
The difference now is that the Atlantis community is making sure that the investment is lasting and can continue to yield benefits for the community, long after the solar plant runs its life.
Raw had studied over 50 cases of small towns and identified common factors among them which led to their successful securing of investment needed to boost their economies.
These seven factors include:
1. Strategic plan
These communities had a strategic plan in place and understood where they wanted to go and what they wanted to do. "They think of the future – embrace change and assume risks," said Raw.
As small towns - they knew they could not be conservative and stick to the way they used to do things, he said. They had to become proactive and not wait for anyone else to get the ball rolling.
These small towns could not complete the task on their own and needed partnerships, either with government or the private sector, he explained.
3. Shared community vision
The whole community had to be on board with the same vision – something investors look for. All the communities had got together to decide on a way forward.
4. Focus on development
Communities wanted to develop themselves and focused on building their human capacity so that the programmes could continue. The available skills of the people are considered an important asset by investors, Raw explained.
5. Fully behind the risk
The communities were committed to the investment and were willing to see the decision through, given all the risks. "[Investors] want to know that the people will support their investments. For investors to feel they have an impact they must work together with the community. They want to feel that the community is part of them and that they are part of the community," said Raw.
If communities are willing to take a risk - it is an important element any external party would want to see. If the community is driving something and if they are not afraid to try something new, it gives the investors an idea of what to expect, he explained.
"If the community takes on a risk, and understands the risks, it helps external investors believe this is something they can buy into… If the community is strongly behind the plan and believe in what they are doing then it makes it easier for investors to put their own risk, effort, and energy into it," he said.
6. Think about assets differently
"Investors find assets in strange places," said Raw. He encouraged the Touwsrivier community to thinking differently about the assets they could leverage off. For example, Cape Town's asset is its beauty which is used to sell a lifestyle. Raw also knows of a case where freshwater crabs are exported from the Karoo, something which would not seem obvious.
"Sometimes you have a great obvious resource, sometimes it is your location, the roads, and railways."
There will always be competition for investment, so communities know which assets they have and use it to create a competitive advantage.
For example, in Touwsrivier their resource is the sun, which led to the CPV1 solar plant being developed there. Raw added that a joint collective effort by communities is more powerful in developing strong competition compared to communities which are not connected.
7. Think broadly about investments in the green economy
Raw concluded with an example of how communities thought more broadly about what they wanted their investment to achieve.
For example in the Ivory Coast, which at first was the world's largest exporter of cocoa beans eventually started processing the beans to export chocolate - which shifted the economy of the country. However, this has now evolved and the Ivory Coast is embracing "green technology" by investing in the largest cocoa powered energy plant, Raw explained.
"Think differently about how the green economy is changing the way investment and success happens," he said.
He further encouraged the Touwsrivier community not to rely on a single investment but to develop a comprehensive, multifaceted investment strategy.
This article was written by Lameez Omarjee and first appeared on the Fin24 website www.fin24.com
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