How Africa’s mining industry is leveraging demand for critical minerals + Next steps for place based investing

It's Friday, February 13th. Happy Friday the 13th to all who celebrate. I'm Brian Walsh and welcome to this Week in Impact, where I talk with Impact Alpha journalists and editors about some of the most interesting impact investing stories we featured this week. I'll discuss three different topics with three colleagues. Jessica Pothering will report from Cape Town about how the surge in global demand for critical minerals essential for technology such as batteries, renewable energy and digital infrastructure creates an opportunity for African countries to secure more equitable and beneficial roles in global supply supply chains. Plus, I'll talk with CEO Dennis Price about the next chapter of community development finance and place based investment as part of the Urban Institute's rollout of its new center for Local Finance and Growth. And finally, Rudy Sanatis will report from Philadelphia about how one local community there is leveraging the model of a perpetual purpose trust to foster urban renewal that actually benefits rather than displaces local residents. That's all coming up on this Week in Impact. First up, I'm joined by editor Jessica Pothering, who covers emerging markets for us. Welcome back to the podcast, Jessica.

0:00

Hi, Brian.

1:09

Thanks.

1:10

It's great to be back.

1:10

Now, I know you were in Cape Town for an African mining convention and you wrote this week about that global rush for critical minerals that's driven by this energy transition and other technological demand which places African nations at a pivotal moment to redefine their economic participation in global supply chains. So tell me about the conference and what you learned.

1:11

Thanks, Brian. Yeah, I'm, I attended the Investing in African Mining in Daba Indaba, meaning convention. And it's a 30 year old conference. It's been happening in Cape Town. It's the biggest convening for African mining professionals, policymakers, academics, other stakeholders in the sector. And there were 11,000 people that convened here in Cape Town this week. It was enormous and it was a really interesting experience for me. I mean, at Impact Alpha, we sort of COVID the energy transition through the lens of sustainable finance and impact investing. And it was just interesting to be in the room with people that I'm not normally sitting with hearing about how they're talking about the energy transition in the context of Africa's mineral wealth, which, you know, anyone from the United States to China to Europe is sort of clamoring for more of these critical minerals like copper, lithium. And so the conversations I was tuning into this week were very different than the types of energy transition, green sustainability, climate change conversations I've listened to in more usual impact settings.

1:30

Yeah, so you're kind of in the belly of the beast kind of the mainstream commercial sector here. And how they think about mining and these critical minerals might be different from how perhaps an impact investor or a sustainable finance professional might think about them.

2:47

That's right. I mean, when we write about the energy transition and the climate change agenda, it's through the lens of finance that is really just takes for granted that renewable energies are the way to go. We have to phase out fossil fuels. We need all of these critical minerals. That is considered a necessity. And we're not often digging into the issues behind actually securing those supplies. In the impact investing world here the conversation is really different. South Africa is an incredibly coal dependent country, both from the mining standpoint and from the usage standpoint. And the conversation wasn't about phasing out coal at all. It was do we think of coal as a critical mineral and how do we continue finding technologies that can make coal greener while adding more renewables to the energy grid? And so it was, truthfully it was a really eye opening conversation for me. A lot of the talk around sustainability and just transition was just focused on the jobs that would be lost if coal was phased out immediately and what the overall economic impact that would have on South Africa specifically, but then also just more broadly in Africa. I think there's some frustration here with this expectation that South Africa, other countries in the region and just emerging markets more generally are expected to develop and industrialize their economies while also leapfrogging fossil fuels.

3:01

And this global rush for these critical minerals though, really does change the nature of how African countries think about their place in the global supply chain. So how are African governments balancing the need to attract foreign investment with the need to ensure that those local communities and domestic industries kind of capture that meaningful economic value?

4:46

It's a good question. The topic actually of shared prosperity was really front and center here at this conference and also on pan continental collaboration around mineral extraction, value additional and export. Because you know, we've seen in the past when global powers from the north have come to Africa to mine critical resources, it's been local communities who have not only been left behind, but who have been disenfranchised by that. And the conversation here today was here we are again. You know, the world recognizes that Africa has a wealth of resources and how do we ensure that the value is retained for our own local economic development rather than just exporting raw materials? And none of the benefits from Africa's own resource wealth being retained locally.

5:08

Yeah. So what kind of policy frameworks or other governance mechanisms did you hear are being talked about to ensure that African countries kind of move beyond that raw mineral export towards capturing more of the overall value upcycle from their extraction.

6:18

There were two kind of contrasting examples on display. I mean, actually there wasn't a lot of conversation around this deal that the Democratic Republic of the Congo just struck with the United States for mineral exploration and mining. But I felt that was on one side kind of highlighting exactly what I think many nations don't want to replicate. The concern on the ground is that this is just going to be a repeat of these old extractive models where the economic potential isn't realized locally. It's just giving the resources away. And then on the other side of that you have Zambia, which has reserves of, I believe, cobalt and copper and some other minerals as well. And the government of Zambia has really made a concerted effort to regulate how foreign mining companies engage with local small businesses. There's a requirement that any mining company operating in the country has to spend 20% of their procurement budget with local businesses as suppliers. And then also there's a whole raft of just, they call them artisanal mines. A lot of them are informal. They can be quite unsafe. And so the government's making a big push to formalize small and informal mines so that local mining companies can also participate.

6:35

Now, what's the role for impact oriented investors to play in catalyzing more equitable and sustainable partnerships in Africa?

8:00

I didn't actually see all that many financial models on display here. I mean, again, this wasn't really an impact investing conference. It was, I think a lot of the conversation around capital flows into African mining were really more focused on commercial. But there were some, some great creative examples. Anglo American, the big British mining company, has for the last five years been providing technical assistance through a program called the Impact Finance Network that it provides technical assistance to small businesses that are disconnected from the mining operations in communities where it owns mines. And the goal of that is really to ensure that when Anglo Americans mines eventually close, that there are other pillars in the economy that are creating jobs and driving value and giving people meaningful work so that there isn't just this economic collapse when the mine is finished. And so they just started, they've been doing this technical assistance facility. They've supported more than 80 businesses across Southern Africa. And they launched a new catalytic finance facility in partnership with the UK government that will provide catalytic capital to both fund managers and small businesses that are in the process of trying to raise additional funding for their growth. And one of the examples they provided was a fund manager who's based here in South Africa. She is backing it's really emerging sector of kind of green startups here. And so she's providing early non equity financing to green companies. And so they provided a catalytic recoverable grant that helped that fund manager raise its first institutional check.

8:09

That's exciting. So what else can you tell us about what to look forward to moving forward as this demand for critical minerals creates new opportunities for African countries?

10:06

I think what's interesting to me a couple of things is one, just there's a lot of learning that I think I can do as a journalist on understanding what local context around these impact themes that we talk about all the time mean shared prosperity will mean something different in South Africa than it will mean in the United States, even though they're common themes and just energy transition will also be similar. And then the other thing I think is it's just a really good reminder that impact finance is a relatively small part of the capital markets that still. And so it's just important for us to lift our heads up and be participating in some of these bigger commercial conversations from time to time. Because actually, you know, in a forum like this, we're not having many of the same types of conversations that we have in the impact investing environment. And in order for impact finance to be relevant then I think, you know, we just need to be more broadly aware of these bigger commercial conversations that are happening.

10:18

All right, well, thank you so much Jessica for your reporting. You can read Jessica's article about how the demand for critical minerals creates new opportunities to put Africa first on impactalpha.com there's also a link in our show Notes. Later on, Rudy Sanadis will share how a Philadelphia community's use of a perpetual purpose trust demonstrates neighborhood level revival. For now, we're going to take a quick break. When I come back, I'll talk to Dennis Price about the next chapter of community development, finance and place based investment.

11:25

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11:55

Next up, I'm joined by Impact Alpha CEO Dennis Price. Welcome back to the podcast, Dennis.

12:20

Thanks Brian. Thanks for having me back.

12:25

Now Dennis, earlier this week you moderated a panel at an event organized by the Urban Institute's new Center for Local Finance and Growth. The launch of this effort comes at an interesting time for the community development space, which faces an increasingly volatile federal policy environment. So what does the next chapter of community development finance and place based investment look like?

12:27

Yeah, that was the question of the day. So I was in D.C. the Urban Institute, like you said, has launched a center for local finance and growth led by Brett Theodos, a longtime research fellow there that we've been tracking with for a while now, has just put out consistently good research on opportunity zones on local place based ecosystems around the country. So now this, this effort at urban is saying what is the next phase of community development local place based investing that looks beyond some of the federal programs that communities have become reliant on or have relied on and are increasingly diversifying away. Like you said, the uncertain federal environment and the way that these local leaders describe it is a whiplash. So you know, this time a few years ago, communities were gearing up to make investable climate oriented projects in their communities with the sort of promise of this wave of funding coming from the Biden administration that has largely been put on hold, though a lot of the projects are still there, like we've pointed out at Impact Alpha. So I think the next phase is for a lot of these leaders is diversification of revenue streams. It's absolute coordination and collaboration within cities and within institutions within cities, but also growing interest in learning from each other in communities across the country.

12:48

Yeah, and as you notice, we've been covering the inflation reduction act and the Greenhouse gas reduction fund, which is on pause pending some federal lawsuits that are in motion. But that was supposed to deploy billions and billions of dollars through community development financial institutions to provide funding for these local communities and retrofitting and clean energy projects and climate resiliency projects and the like. So with diversification, where are additional or other sources of funding coming from?

14:37

Well, there's been a shift. For example, under Trump 1 administration, the introduction of opportunity zones was more of an incentive to bring private capital to the table for real estate and business projects in low income neighborhoods across the country. So there's a bit of philosophical change around incentives. So that's bringing some private capital to the table. In Detroit, there's a CDFI Invest Detroit that has helped helped mobilize a coalition of CDFIs to Pooler funds and be able to leverage those funds to bring on additional capital from local foundations and others that is then able to be loaned out to businesses and real estate efforts across the state. The port in Cincinnati was there in D.C. is using things like land banks and tapping municipal bond markets to out compete commercial investors. In efforts to preserve affordable housing, turn residents into owners and bring advanced manufacturing to these cities. So tapping some local public finance and in Cleveland at the city level, they're sort of leaning into their own ability to generate revenue streams and make sure they have, make sure they're bringing their own capital to projects. So when they, you know, private investors come in, they can do it on their terms. They're also partnering with institutions like the Cleveland foundation in Cleveland that can bring their own. So it's a bit of figuring out how to work more with private capital, tap some of the increasing Mission alliance capital that are focused on cities and then getting creative with things like municipal bonds and driving those proceeds more in line with inclusive growth in these cities.

15:05

So necessity is the mother of invention in this case. So that as the federal subsidies or funding dries up or is on pause, cities and local communities can get creative by turning to other types of capital.

17:09

I think one of the messages and just the real feelings at the, at the conference was that this isn't the first time communities have faced shifting policies or absence of federal support. And so in a time like this where it's not clear exactly where things are heading or who will be in power next or if these federal students will revive, these are the actual leaders that will find like, have found ways to bring money and capital to the projects that advance the local residents well being and then their citizens well being. So in a way, it's not a sense of fear, it is a sense of opportunity. And we are the ones that know how to do this. That said, we always say this in the mission finance world is a bit of a misunderstanding of supply and demand and that you have. It's not the supply of capital for projects in need. There's family offices, there's foundations, there's local insurance companies that are in demand for high impact projects, in some cases that deliver financial returns and that these are the ecosystems and the leaders fulfilling the demand for those projects. And so it's a bit of a call to action to capital providers too, to take seriously what's happening in cities, communities across the country.

17:22

So finally, Dennis, what's next for the Urban Institute center for Local Finance and Growth and what are they planning to do?

18:57

Yeah, I mean, it's timely. I mean, this is at some level, some of the work that Urban Institute's been doing for a long time. But an increased focus on evidence and best practice and coordination that I think is in high demand from communities around the country. Leaders in communities around the country as well as the other institutions that are figuring out how to to play a role. So they've already put out a number of reports analyzing the policy changes underway, looking at the sort of latest status on opportunity zones. So definitely a place to watch as folks are figuring out what's next and how to proceed.

19:04

All right. Well, if you want a place to watch the conversation that Dennis moderated, we'll have a link in our show Notes for that conversation at the Urban Institute center for Local Finance and Growth. Thanks so much, Dennis.

19:45

Thanks, Brian. Great to be back.

19:55

We'll take one more quick break. When we come back, speaking of local funding, we'll talk to our Rudy Sonatas about the Kensington Corridor Trust in Philadelphia, which is pioneering a neighborhood controlled real estate strategy as a model for urban renewal. And finally this week I'm joined by reporter Rudy Sanadis who focuses on the ownership economy beat for us. He wrote this week about the Kensington Corridor Trust in Philadelphia, which is pioneering a neighborhood controlled real estate strategy as a model for urban renewal. Welcome back to the podcast, Rudy.

19:57

Thanks for having me, Brian. I'm happy to be back.

20:33

All right. Well, tell us about the Kensington Corridor Trust and how does this fall under the ownership economy lens as an example of community ownership models?

20:36

Yeah, happy to. So not too far from me here in Philly, there is this neighborhood trust that is acquiring properties in the Kensington commercial district. And this district was once vibrant during the industrial era and is now blighted a lot of vacant properties. Vacant spaces. It's also seeing high rates of crime, low rates of education, health outcomes. And the Kensington Corridor Trust is going around and acquiring properties and placing them in this perpetual purpose trust that essentially allows the neighborhoods of that resident to govern the properties and decide how they're redeveloped, what kinds of businesses become tenants in those properties and get to govern it long term.

20:45

So the goal here is to kind of revitalize this neighborhood but not bring in gentrification and displacement, but to kind of preserve the benefits of the revitalization and redevelopment for the residents who are already there.

21:45

Yeah, that's right, Brian. And part of that, you know, ownership strategy is allowing the residents to buy a stake in these properties. And and so Kensington Corridor Trust is partnering with the Guild in Atlanta to set up a community stewardship trust that will allow residents to become part owners in these properties for as little as $10 a month.

21:59

So what are the key governance mechanisms that ensure those local residents voices actually influence the decisions?

22:25

Well, the residents of Kensington come together every year and they help form a board of about 11 members and these members are young folks from the neighborhood, folks that have lived there for decades, the elderly, small business owners. And they come together and they vote for this board, who essentially decide, for example, what Kensington Corridor Trust is going to do with this lot, whether or not to open a grocery store for the community, or to open a barbershop or to open a childcare center. And the folks in the community get to decide what kind of businesses or spaces that the community needs, and they decide that together.

22:32

So how does this model compare to other community land trust or other collective ownership models?

23:28

Well, Kensington Corridor Trust is setting up this community stewardship trust that works very much like a community investment trust that is currently being used in places like Portland where local residents have an ownership stake and a local strip mall, basically keeping it affordable for the businesses that work there. They get to get a slice and the upside of that property. And so it's an emerging community ownership play that we're seeing come up and cities across the US where decades of disinvestment and redlining and speculation have hollowed out commercial corridors.

23:33

Now, you mentioned that the team of the Kensington Corridor Trust partnered with the Atlanta based organization the Guild. Tell us more about the Guild and their work in this area.

24:18

The Guild is led by Nikishka Iyengar, who is currently doing a fellowship at Harvard University. In 2015, Nikishka launched, she created and incubated this community investment trust, this community stewardship trust, excuse me, which is this model that allowed communities of color in Atlanta to get a stake into the developments that were coming up in their neighborhoods. And it's part of the whole, it's part of the play of gentrification without displacement. If you're going to help drive gentrification in your neighborhood, you want to make sure that the businesses, the local residents stay there long term. And a way to do that is to give them an actual ownership stake and those properties.

24:29

And how does that ownership stake work? You said that residents could give as little as $10 a month, but how does that actually operationalize?

25:26

So there is an ownership pie of these properties. It could be a single property or it could be a portfolio of select assets. And by putting, say $10 or $100 a month into a trust that buys actual stakes in these properties, residents get paid out in dividends every once in a while as, as the renters and tenants of these properties pay their rents to the trust. And essentially, not not only do they get this, this check, this dividend check, but they also get a slice of the upside of the property and say 10, 15 years depending on how long they investing.

25:35

So what are the main takeaways for this Kensington Corridor Trust model and what should other communities think about and take away from this?

26:26

Yeah, I'm glad you asked Brian, because KCT is already working with community leaders over the US to replicate their neighborhood trust. In fact, in New Jersey, KCT is working with April DeSimone, who has stood up Vessi, thanks to support from the Robert Wood Johnson Foundation. And VESSI is a neighborhood development trust that will go out and acquire properties like KCT to place them in the ownership and governance of the residents and the neighborhoods where those properties are located.

26:35

All right, you can read Rudy's story about the Kensington Corridor Trust on impactalpha.com there's also a link in our show Notes, but for now, that's going to do it for this episode of this week in impact. Thank you all for listening. This week in Impact is production of Impact Alpha and part of the Impact Alpha Podcast network, Smart Conversations by and for impact investing professionals. For exclusive stories and insights about the world of impact investing and sustainable finance, join thousands of other agents of Impact by subscribing. Just go to impactalpha.com subscribe for full access. Thanks as always to our producer extraordinaire, Isaac Silk for Jessica Pothering, Dennis Price and Rudy Sonatas. I'm Brian Walsh, managing Director of the impact advisory firm Human Nature. We'll see you next week for more Impact.

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