Norfund invests in food ingredient producer Synercore to finance the company’s expansion, creating highly skilled jobs and promoting import substitution in South Africa. 

Norfund, the Norwegian Investment Fund for developing countries, is investing ZAR 80 million in convertible debt in Synercore Holdings, a South African food ingredient manufacturer, formulator, and distributor to fast-moving consumer goods companies in Africa.  

“We are happy to contribute to develop Synercore as a core local producer of food ingredients, and thereby creating more highly skilled jobs, while strengthening food security, increasing product shelf life, thereby reducing food waste, and promoting import substitution”, says André Kemp, Investment Manager at Norfund.  

As part of the transaction, Synercore will acquire two other companies, Impilo and Sizwe. Impilo supplies soy flour to predominantly the baking, confectionary and culinary industries. Sizwe was established to extrude, roast, steam cook, pack and blend any type of grains in the baking, cereal, dairy and meat industries, both from GM or non-GM source.  

“Through these acquisitions, we will expand capacity and improve efficiencies as far as blending and manufacturing is concerned. It will allow Synercore to backwards integrate to improve supply chain sustainability, and further diversify and expand on our service offering”, says Dr. Tertius Cilliers, CEO of Synercore. 

South Africa has a well-developed food sector, but many large food companies have traditionally preferred to source ingredients directly from overseas suppliers. In 2019 the country imported more than USD 1bn of food ingredients. Synercore is one of few local formulators within the dairy and bread industries in South Africa. The company also sells to other southern African countries. 

“By owning core ingredients in the baking and cereal industry, we believe Synercore will be able to formulate more tailored solutions to clients at the best price in the market, leading to further business development, that creates jobs and reduces imports”, says Kemp.  

Synercore has a strategy of investing in the future of the agricultural and food industries, attracting the best food formulators, product developers research and development and application specialists to also promote food safety and security on the African continent. 

“Through the involvement of Norfund, as a key stakeholder, we will be able to extend our reach even further, and we believe that we can inspire the next generation of farmers and scientists within the agriculture and food industry”, says Dr. Cilliers. 

Norfund is investing 5 million USD in 260 Brands to finance the company’s expansion into production of soymilk, creating jobs and increasing access to locally-produced nutritious food.   

260 Brands is an agro-processing company based in Lusaka, Zambia, that manufactures, markets, and distributes consumer products, mainly based on maize and soy. The company’s key products today are textured soya pieces, powdered beverages, snacks and high energy protein supplements, primarily for the local markets. The company demonstrates value addition in soybean in various consumer foods products and beverages, besides traditional cooking oil. 

“Through providing capital to allow the company to expand into the production of soymilk, Norfund will contribute to create much needed jobs and increased income for smallholder farmers, while increasing access to locally produced nutritious food”, says Andreas Davidsen, Vice President and head of Agribusiness and Manufacturing at Norfund. 

100 direct jobs and 12,000 new outgrower farmers  

The capital from Norfund will finance an investment in a turnkey soymilk production facility to meet estimated potential in the market whilst benefiting from synergies with existing business and established access to soybeans. 

260 Brands has developed a network of 2,500 small holder farmers that supply soybeans, while receiving support for investing in its small holder farmers as long-term partners by providing agronomic training, inputs on credit and purchase of the farmer’s commodity conveniently at his or her doorstep – all helping to contribute to a profitable farming enterprise for a local, small holder farmer.  

“We expect the investment to create 100 new direct permanent jobs, and an increase of local farmers that receive increased income through supplying the company of more than 12,000 small holder farmers”, says Davidsen.

Watch 260 Brands’ impact:

Increasing access to locally-produced milk 

The Zambian milk alternative market is currently small and consists of imported products, with prices at 30-60% above dairy milk. The company is targeting a price on their soy milk close to dairy milk. Most of the population in the region are lactose intolerant and the company believes soymilk can be an attractive alternative. Providing the soymilk in UHT form allows for a long-shelf life in ambient temperatures, which is also an important factor for sales and distribution in Zambia, where the cold-chain infrastructure does not allow for availability of such beverages country-wide.  

The total milk consumption in the country is currently at 20 liters per capita, well below the annual world average of 104. In neighboring South Africa, the consumption is at 58 liters – in Norway it stands at 82 liters¹.  

We are happy to be able to contribute to the health benefits of improvements in nutrition, increased food safety and reduced imports.

Andreas Davisen, Vice President and head of Agribusiness and Manufacturing at Norfund. 

Active support of the company 

Norfund aims to support programs to improve productivity and infrastructure for the smallholders. There are also plans to assist the company in strengthening ESG and management systems, and to improve corporate governance.  

“We’re honored to have Norfund on board with us on this new innovative project, which is the first of its kind, in Zambia. They’re a partner who share similar values as us on equitable growth and job creation, alongside positive impact towards climate action”, says Gaurav Vijayvargiya, Chief Executive Officer, 260 Brands. 

The funding from Norfund of 5 million USD will be used to finance the CapEx and working capital requirement for a new soymilk production facility at the company’s existing premises. The facility will have an annual production capacity of 9.6 million liters of soymilk. 

“The company sees opportunities to expand further as the market grows, and we believe there is a potential for further co-operation in contributing with capital and competence to develop the company in the years to come”, says Davidsen. 

Investing in the agribusiness value chain 

Norfund’s goal is to create jobs and improve lives by investing in companies that promote sustainable development. The agriculture sector is a key part of the fund’s strategy, and it sees great opportunities in investing in companies higher up in the agricultural value chain. 

“We see that we can make a significant difference by investing in companies that provide small scale farmers long-term agreements with the possibility to sell their products at a decent price”, says Davidsen. 

“We believe this investment and project will be a start to transform the plant-based beverage sector in Zambia and region at large and The Board is grateful for their support and excited about the journey ahead together”; says Gaurav Vijayvargiya, Chief Executive Officer, 260 Brands”, says Vijayvargiya.

The Nordic Horn of Africa Opportunities Fund is one of the first commercial investment fund in Somalia. It focuses on investing in small and medium sized companies and aims to demonstrate Somalia’s investment potential.

Challenging business environment

The business environment in Somalia is one of the most challenging in the world. Access to capital is constrained, electricity supplies are limited, and the protection of minority investors is problematic. Some areas face severe security challenges, and international investments are few. However, Somalia is now recovering from civil war and is rebuilding the legal framework to attract more investments.

Somalia has a lot of opportunities, and investments are important for building peace and prosperity in our country”

Prime Minister, Mr. Khaire

The Nordic Horn of Africa Opportunities Fund

In this context, Norfund has initiated a USD 10 million Fund to support small and medium sized companies. The Nordic Horn of Africa Opportunities Fund is one of the first commercial investment fund in Somalia, and will fill an investment gap by funding SMEs that have no other sources of capital.

The Fund was created together with the Danish development finance institution, IFU, and Shuraako, a US-based NGO and fund manager with a local presence across Somalia. Another important Fund enabler was the Norwegian Development Fund (Utviklingsfondet), an NGO which operates in Somalia.

“Any country needs a profitable private sector and in order to achieve this, you need investors. This fund is therefore a very important start for Somalia

Nikolai Astrup, prev. Minister of International Development

The Nordic Horn of Africa Opportunities Fund seeks to create positive development effects while also generating a positive return on capital. By adding risk capital to the Somali region, the Fund will enable Somali entrepreneurs to build sustainable businesses, create jobs, and contribute to the country’s economy and tax base.

Invested in 14 companies across Somalia

By the end of 2018, the Fund had invested in 14 companies across Somalia. The investments were made in different sectors, including fisheries, agriculture, light manufacturing, hospitalities, and energy.

One of the investees is Maandeeq Poultry Company, a chicken producer with a stock of 35,000 chickens. Maandeeq Poultry Company has 50 employees, about half of whom are women. The company has received a Sharia compatible loan from the Fund, for the purpose of expanding the company significantly.