Norfund, a Norwegian investment fund for developing countries is used to drive sustainable development by investing in businesses and projects with strong developmental impact and commercial returns. The fund’s investments are helping to drive economic growth, create jobs, and sustainably improve lives in various countries of its operations. Naana Winful Fynn, regional director – West Africa of Norfund, in this interview with Josephine Okojie, discusses the fund’s commitment to driving sustainable development through private sector investment and its plans to expand its investments across Africa.
What role does Norfund play in sustainable development?
Norfund, also known as the Norwegian Investment Fund for Developing Countries, is a state-owned investment fund based in Norway. It was established in 1997 to promote sustainable economic and social development in developing countries. Norfund is owned by the Norwegian Ministry of Foreign Affairs and operates under the guidance of the ministry.
Our primary role is to provide investment capital and expertise to businesses in developing countries, and markets that would otherwise have struggled to obtain financing.
We focus on investing in profitable and sustainable companies that have a positive impact on economic growth, job creation, poverty reduction, and transition toward a more sustainable and inclusive economy in these countries. We primarily target sectors such as renewable energy, financial services, agribusiness and manufacturing, and green infrastructure.
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We play a crucial role in sustainable development by addressing the funding gap faced by businesses in developing countries. We provide long-term risk capital, including equity, mezzanine, and debt financing, to support the growth and expansion of enterprises.
Moreover, we place a strong emphasis on environmental and social sustainability in our investment decisions. We assess potential investments based on their environmental and social impacts, aiming to support projects that promote sustainable practices, resource efficiency, and social responsibility.
This approach ensures that our investment contributes to sustainable development goals (SDGs) while generating financial returns.
Additionally, we collaborate with local partners and stakeholders to build capacity, transfer knowledge, and foster sustainable business practices in the regions where we operate. We seek to promote good governance and support the development of vibrant private sectors.
Why is sub-Saharan Africa a top investment priority and how has the fund been implemented?
Sub-Saharan Africa has been prioritised as our main investment region for several reasons. First, the region faces significant development challenges, including high poverty rates, limited access to financial services, inadequate infrastructure, and unreliable energy supply. We recognize the potential for impact in addressing these challenges through strategic investments.
Second, Sub-Saharan Africa has vast renewable energy resources, including solar, wind, hydro, and geothermal.
We aim to capitalize on these resources to support the transition to clean and sustainable energy systems. By investing in renewable energy projects, we contribute to mitigating climate change, increasing energy access, and promoting environmental sustainability.
Furthermore, Sub-Saharan Africa offers significant opportunities for private-sector development. We believe that a strong private sector is essential for sustainable economic growth and poverty reduction. By investing in businesses and financial institutions, we help stimulate entrepreneurship, job creation, and inclusive economic development in the region.
We have implemented our investment strategy in Sub-Saharan Africa through various approaches. We directly invest in businesses in the region, particularly in sectors such as renewable energy, agribusiness, manufacturing, green infrastructure, and financial services. These investments provide growth capital, expertise, and support for the expansion of viable enterprises.
We also invest in private equity and venture capital funds that focus on Sub-Saharan Africa. By partnering with these funds, we leverage their expertise and networks to reach a broader range of businesses and sectors. We collaborate with local financial institutions, such as banks and microfinance institutions, to strengthen their capacity and expand their outreach.
By providing capital and technical assistance, we help enhance the availability of financial services to underserved populations, including small and medium-sized enterprises.
We actively seek partnerships with other investors, development finance institutions, and local stakeholders. These partnerships enable us to leverage resources, share risks, and create synergies to maximise the impact of our investments.
Through these investment approaches, we have made significant contributions to sustainable development in Sub-Saharan Africa. We have supported the development of renewable energy projects, expanded access to finance, promoted job creation, and fostered inclusive economic growth in the region. Our investments have demonstrated the potential for private sector-led development and have helped address key development challenges in Sub-Saharan Africa.
Read also: Norfund invests $12m in Nigeria’s cocoa industry
What are some of the businesses Norfund has invested in or partnered with over the years in Nigeria and West Africa?
We have made several investments and partnerships in Nigeria and other countries in West Africa. We recently invested in OH Ecosystems Ltd, a player in sub-Saharan Africa’s cocoa processing and confectionery industry.
The company recently successfully acquired a majority stake in FTN Cocoa Processors Plc, and our investment will go toward upgrading FTN’s facilities and extending its reach to produce and sell additional products into the cocoa supply chain.
We also committed to investing in WeCyclers, a for-profit social enterprise operating in Nigeria focusing on waste management and recycling to promote environmental sustainability, improving waste management practices, and creating economic opportunities for low-income communities. Our investment will finance a new plant for the recycling of PET bottles for use locally and in Europe.
In 2017, we made an initial commitment to Sundry Foods, a leading indigenous food services company that operates bakeries, canteens and the ‘Kilimanjaro’ Quick Service Restaurant Food chain across Nigeria. Since our initial investment, the company has grown its footprint to over 180 QSR outlets across the country.
Through our Frontier Facility, Norfund invested in Arnergy Solar, an early-stage solar systems provider that provides solutions for residential, commercial and industrial clients. We have been a shareholder in Arnergy since 2019. We have also exited two investments in Nigeria; an investment in Starsight (2017 & 2022), a C&I solar power provider; and Access Bank Nigeria (2017).
Across other West African countries, some selected investments include Miniplast Ghana Ltd (2023), CBI Ghana Limited (2022), Nouvelle Mici Embaci [NME] (2023), Valency CIV (2022), First National Bank Ghana (2020), Ecobank Transnational Incorporated (2021), AktivCo (Solar Power, 2021), and Baobab+ (Solar Power, 2021).
Readlso: Finnfund and Norfund increase Starsight facility to $20m
How does Nordfund operate within its investments and what value does it add in terms of governance and ESG performance?
We operate within our investments by taking an active role as a responsible investor, bringing value to our portfolio companies in terms of Environmental, Social, and Governance (ESG) performance. We often seek board representation in our portfolio companies. By having a seat on the board, we actively participate in strategic decision-making, provide guidance, and ensure that the company’s operations align with our sustainable development objectives.
Nordfund supports the development of strong governance structures and practices in our investee companies. We provide expertise, training, and technical assistance to strengthen their management capabilities, financial reporting systems, and risk management frameworks.
Additionally, we incorporate ESG considerations into our investment process. We assess potential investments based on their environmental and social impacts, governance practices, and adherence to international standards. We actively work with portfolio companies to improve their ESG performance and reduce any negative environmental or social impacts.
We also promote knowledge sharing and collaboration among our investees by facilitating the exchange of best practices, experiences, and lessons learned to foster continuous improvement in governance, sustainability, and impact measurement.
We engage various stakeholders including local communities, regulators, and other investors, to promote transparency, accountability, and responsible business practices. The Fund encourages dialogue and collaboration to address social and environmental challenges and ensure positive outcomes for all stakeholders.
Read also: Norfund’s Sundry Foods deal gives Silk Invest partial exit
What are some of the challenges the fund has faced in implementing its investment strategy?
While we have been successful in implementing our investment strategy, we have also encountered various challenges along the way. Some of the key challenges we have faced include political and regulatory risks, ensuring financial viability, market volatility, and technological disruptions, environmental and social risks, and existing investments while preserving value.
Despite these challenges, we continue to address them through rigorous due diligence, risk management practices, active engagement with investee companies, and collaboration with local stakeholders. We leverage our experience, expertise, and network to overcome obstacles and achieve our sustainable development objectives.
Looking forward to the next 5 – 10 years, what are Norfund’s plans for West Africa?
We will continue our commitment to West Africa in the coming years, aiming to further promote sustainable development and private sector growth in the region. We will continue investing in renewable energy projects, leveraging the region’s vast renewable resources.
We will also continue to prioritise investments in financial institutions, supporting microfinance institutions, fintech companies, and banks that provide innovative financial services to underserved populations, including SMEs, women, and rural communities. Furthermore, we will further our investment within the agribusiness and manufacturing sector to improve food security, enhance market linkages for smallholder farmers, and develop local supply chains.
Through our Frontier Facility, we will continue to take on higher risks by investing in early-phase project development thereby reducing risk for commercial investors. We will also expand our investment footprint to fragile states across the region with offset in 11 countries.
