Ms. Berhane Demissie is co-founder and Managing Partner of one of Ethiopia’s first private equity funds, Cepheus Growth Capital Fund. Born in Ethiopia, she is one of few African female leaders within the finance sector.

With significant international fund management experience, strong knowledge of the local investment environment and extensive local networks, she aims to provide much-needed growth capital to Ethiopian companies.

Cepheus Growth Capital Fund targets export-oriented and import-substituting small- and medium-sized enterprises, mainly within manufacturing, agro-processing and services.

Critically important to have more female leaders in Ethiopia

Ethiopia is a low-income country with more than 100 million people. Over the past 15 years Ethiopia has registered impressive double-digit economic growth rates, largely driven by public sector investments.

However, Ethiopia is among the world’s most challenging markets to operate in. The Covid-19 pandemic and the recent internal conflicts have made the markets even more challenging.

Women remain significantly underrepresented in finance and the private sector.

Studies show that where women are part of diverse leadership teams, financial returns increase and that risk management significantly improves, creating sustainable institutions in the long term.

Demissie emphasizes that it is critically important to have women leaders in the industry to bring diversity in perspectives and decision making.

Norfund addresses gender equality

Norfund made its first investment in Cepheus Growth Capital Fund together with the British Development Finance Institution, CDC and the European Investment Bank in 2018.  Norfund’s aim is to promote access to capital and business competence, as well as creating a large number of jobs, for men and for women.

Norfund is committed to addressing gender equality in our own organization, in our investments, and through Business Support.

Cepheus’ portfolio as of today

Cepheus has so far made two investments in Ethiopia, providing much-needed equity and active ownership resources that will enable the companies to grow and reach their strategic targets. The portfolio consist of a Ceramics manufacturer and an FMCG manufacturer, both in the processes of increasing production capacity by expanding and upgrading its manufacturing lines. Cepheus is an active partner to its investees, providing input on operations, corporate governance and ESG.

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By investing in The National Development Bank in Sri Lanka, Norfund aims to contribute to increased access to capital for SMEs and the unbanked in a country hard hit by Covid-19.

Sri Lanka is a lower middle-income country with a total population of 21.8 million.

Low usage of formal financial institutions

During the period 2010-2019, the Sri Lankan economy grew at an average 5.3 percent. Although a large number of adults have bank accounts, only 29 percent of adults in Sri Lanka have savings at formal financial institutions and just 17 percent have loans.

The COVID-19 crisis is believed to have triggered sharp jobs and earnings losses, and informal workers, about 70 percent of the workforce, are particularly vulnerable.

Serving millions of Sri Lankans with financial services

National Development Bank PLC (NDB) is a premier bank with 113 branches and over 150 ATMs and CRMs across the island, serving millions of Sri Lankans through a host of financial services.

During the COVID-19 pandemic, NDB has been in the forefront of efforts to ensure the resilience of the MSME sector and supporting the economic revival of the country.

Norfund to invest up to 9,99% in the bank

Today, NDB and Norfund announced that they have reached an agreement for Norfund to invest up to 9.99% in National Development Bank.

This is the first foreign equity placement agreement for NDB bank, and the investment will increase its foreign shareholding percentage to around 21%.

The investment comes at a time when international rating agencies have downgraded Sri Lanka’s credit rating. This shows that Norfund endorses NDB’s resilience in a challenging environment and alignment to international standards.

Under this agreement, Norfund will participate in the Rights Issue that NDB has already announced by way of subscribing to unsubscribed rights and also by way of a private placement if required. This investment is subject to other conditions, including regulator and shareholders approvals.

In addition to investing equity capital, Norfund will provide technical assistance and global expertise assisting the bank to promote global environmental and social standards, and to achieve best in class corporate governance.

For Norfund, this is the first equity investment in Sri Lanka, and the second investment in the country.

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While foreign direct investment in developing countries fell by 12% in 2020 as a result of the pandemic, Norfund increased investments by 20 %, to a record of NOK 4,8 billion.

The COVID-19 pandemic caused one of the worst economic setbacks for the world economy in history and has halted the progress towards SDG 1 – No poverty.

According to an UNCTAD Investment Trends Monitor global foreign direct investment (FDI) collapsed in 2020, falling 42% from $1.5 trillion in 2019 to an estimated $859 billion.

Developed countries had the largest decline, but vulnerable economies of developing countries were also hit hard. FDI flows to developing economies decreased by a total of 12 %, and in Africa by 18 %.

Investing “against the flow”

Despite this, Norfund made record high investments in 2020, investing NOK 4.8 billion in developing countries. This is an increase of 20 % from 2019, when total investments were NOK 4,0 billion. Norfund’s role as a countercyclical investor is more important than ever.

-More than half of Norfund’s investments in 2020 were in Africa. We have seen that we can make an important difference, among other things through contributing with capital to companies that have needed to invest to adapt to the new reality as a result of Covid-19, says Thorleifsson.

Circulating development aid

In 2020, Norfund also agreed on the largest exit in the fund’s history, with the sale of SN Power to Scatec for NOK 10,9 billion, which gave Norfund an annual return of 19%.

The investments of NOK 4,8 billion are more than two and a half times the total 1.85 billion that Norfund received from the state budget in 2020.

– We see that Norfund can use development aid effectively to help create jobs and fight poverty by exiting when we are no longer needed and reinvest the capital, says Thorleifsson.

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By investing across the African food value chain, a new fund aims to create 2000 new jobs and increase food supply.

A group of development finance institutions (DFIs) – CDC Group, Norfund, Finnfund, FinDev Canada and BIO – announce an $82 million joint commitment to Phatisa Food Fund 2, managed by Phatisa. PFF 2 will invest across the African food value chain, considering investments in mechanisation, inputs, poultry and meat production, food processing and manufacturing, logistics, aggregation and distribution across Sub-Saharan Africa.

Norfund has committed $20m to the investment that aims to strengthen and increase food supply, local production and distribution across the region.

The Fund has reached a final close of $143m, bringing DFIs and commercial investors together to boost the supply of quality food in Sub-Saharan Africa – where an estimated 239 million people are affected by food insecurity.

The Fund, via its investment in companies in the food value chain, targets over 90,000 small-holder farmers and micro-entrepreneurs and aims to create over 2,000 permanent jobs and sustain another 10,000 jobs. The investment follows the success of Phatisa’s African Agriculture Fund (AAF), which has created more than 1,800 jobs and benefitted 86,000 farmers operating in over 20 markets across the continent.

Building on AAF, Phatisa Food Fund 2 will enable small-holder farmers and micro-entrepreneurs to develop their skills, broadening access to markets and economic opportunities. The new fund will also address access to, and affordability of products among farmers and promote smart agricultural methods – enhancing crop resilience, reducing food loss and waste by 50% in the companies it finances, while increasing outputs, yields and incomes.

Norfund has already co-invested with the fund in a Malawian provider of agricultural equipment and services, Farming and Engineering Services Limited (FES).

– The Fund’s plans are aligned with Norfund’s strategy, directing its focus towards companies with strong financial prospects that will contribute to economic growth and improve the value chain in the food and agri-sector, says Olav Akrawi, project manager in Norfund.

By investing in Lilongwe Dairy in Malawi, Norfund will contribute to increased income for small scale farmers and access to locally produced dairy products to the Malawian population.

Norfund has recently committed 5.8 million USD in Lilongwe Dairy in Malawi.

The aim is to contribute, through capital and active ownership, to sustainability and growth of the dairy. This will further help providing stable income to farmers and meeting the increasing demand for dairy products – with local production.

Buying milk from 10.000 smallholder farmers

Lilongwe Dairy receives milk from over 10,000 small farmers, who are organized in 36 cooperatives.

By facilitating increased production and higher quality based on locally produced milk, the investment will also help to replace imports. This strengthens both food security and Malawi’s trade balance.

With access to more capital, the dairy will invest in larger warehouses, increased pasteurization capacity, new packaging machines and improved distribution equipment to consumers.

-Through active ownership, Norfund will also contribute to professionalising the operation of the company by introducing better structures and control mechanisms, and put in place systems for food safety and waste management, which can both reduce expenses and increase revenues, says Rasmussen.

Making it more attractive to produce milk

Malawi is one of the world’s least developed countries, and is ranked 174th out of 189 countries on the UN Development Index. The agricultural sector accounts for 28 per cent of GDP and almost 65 per cent of total employment in Malawi.

A large part of Malawi’s population is malnourished (18.8%). Increased consumption of dairy products can be a positive contribution. The market is currently quite small, but strong growth is expected in the next few years.

Most of the farmers who supply milk to the dairy have only 1 to 3 cows each.

Low prices and lack of knowledge on how to achieve high quality milk have so far made it unattractive for small farmers to invest in milk production. Lilongwe Dairy wants to provide financing to smallholders so that they can buy more cows and invest in better capacity. Norfund also plans to contribute by co-financing cows and training for new smallholders through Norfund’s Business Support program.

For many small scale farmers in Malawi, diversification and extra income through the supply of milk can be an important insurance if the crop fails or other income is lost.

Investing in the agribusiness value chain

Norfund’s purpose is to create jobs and improve living conditions by investing in companies that promote sustainable development. The state fund has invested in the agricultural sector over several years. A few years ago, the strategy was changed, in the direction of investing more in companies higher up in the value chain.

– We see that we can make a big difference by investing in companies that make it possible for small scale farmers to sell their products, says Rasmussen.

This is Norfund’s first investment in a dairy, but it may offer Norfund an opportunity to learn and grow in the sector.

Investments in financial institutions to strengthen agriculture sector

Norfund also contributes to developing jobs in small and medium-sized enterprises, including in agriculture, by investing in banks.

Historically, traditional banks in Africa have had a low share of the loan portfolio for primary agriculture and for the agriculture value chain. Many African banks lack expertise in the area and do not have suitable loan products for such small customers.

Norfund has established the platform company Arise, which owns banks with operations in 33 countries in Africa, including Malawi, together with its Dutch sister fund, FMO, and Rabobank, a Dutch bank with special expertise in agriculture.

It is an important focus area for Arise to help banks develop customized loan products for farmers. From 2018 to 2019 alone, the banks in Arise’s portfolio had an increase in lending to primary agriculture of 10%.

Norfund also invests in microfinance, with 2.7 million loan customers in 2019. These also reach a large number of small scale farmers and micro-enterprises related to agricultural production.

Solar energy in combination with batteries provides new opportunities for people in developing countries without access to the grid . Through a new financing facility, Norfund will contribute to as many as 1.9 million people gaining access to electricity.

The combination of increasingly cheaper solar panels, batteries, LED lamps and other energy-efficient products has made distributed solar solutions more accessible in the world’s poorest countries.

Norfund is now entering into a new facility, that will enable the solar energy provider d.light to provide electricity to as many as 1.9 million people.

Poor households buy their own solar systems

d.light’s business model is that the consumer buys a solar system which they pay down via their mobile phone. While the household previously spent the corresponding amount weekly on kerosene, they now spend the money on becoming owners of their own solar system. Once the system is paid off, they will have free power.

Flexible working capital enables d.light to offer more solar systems

With this business model, where the customers have a long repayment period, d’light becomes dependent on borrowing a lot of money. The interest d.light must pay from the solar system is sent from the manufacturer until it is repaid by the customer, is decisive for how affordable solutions can be offered – and thus how many can access them.

Since 2016, Norfund has been an equity investor in d.light – one of the largest players in off-grid solar energy. Norfund has now contributed to a new innovative solution to ensure the company access to flexible and affordable working capital.

The new solution also allows the company to plan long-term based, knowing that they have capital available at a reasonable price.

The company that Norfund has financed is called Brighter Life Kenya 1 Limited. It is structured to provide d.light Kenya financing in local currency, Kenyan shillings.

– Postponing the handling of outstanding loans in this way is a well-known way of protecting a business against credit risk and reducing working capital requirements here in Norway. However, as far as we know, this is the first time this has been done on this scale within decentralized energy in developing countries, says Valvik.

Norfund’s loan is in addition to the loan United States International Development Finance Corporation (DFC) contributed in June 2020 of NOK 170 million. Norfund’s entry with NOK 128 million means a significant strengthening.

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New funding will enable Starsight to continue to deliver its market leading energy-as-a-service hybrid solar solutions to commercial and industrial customers in Nigeria and Ghana.

Starsight, Finnfund, and Norfund closed the original $10 million facility in June 2019. Since then, Starsight has expanded its portfolio to over 500 sites, 36 MW of installed generating capacity, and 28 MWh of storage capacity across Nigeria and Ghana.

Every Starsight client benefits from the company’s end-to-end service, 99% uptime guarantee, and freed capex, while making their businesses green and sustainable.

Senior debt facility increased to USD 20 mill

Today, Starsight annonsed in a pressrelease that Finnfund and Norfund have increased their senior debt facility from $10 million to $20 million.

Tony Carr, Starsight’s CEO, commented, “We are proud of our continued relationship with our partners at Finnfund and Norfund, and we value their confidence in Starsight’s world-class team, value offering, and service reputation. As we expand from Nigeria to Ghana and beyond, this funding will be key to our ability to swiftly deploy hybrid-solar solutions to new C&I customers. Starsight is uniquely positioned to remain a market leader thanks to this backing from the Nordic DFI’s, as well as our equity investors Helios Investment Partners and Africa Infrastructure Investment Managers.”

About Starsight

Founded in 2015, Starsight is the leading West African Commercial & Industrial (C&I) energy-as-a-service provider. It has deployed approximately 36 MW of generation assets and 28 MWh of storage at over 500 sites in all Nigerian states and Ghana.

The Company’s team of highly experienced professionals provides power solutions to a diverse clientele, including banks, gas stations, schools, and large commercial agricultural companies. Starsight’s proprietary smart technology optimizes energy consumption enabling customers to significantly reduce energy costs and boost profitability without incurring any upfront expense.

Starsight delivers an end-to-end service, starting with assessing a client’s energy needs to the installation and maintenance of a renewable energy solution. This is then followed by ongoing technical support. Starsight’s long-term relationships with its blue-chip clients reflect the quality of its in-house engineering, procurement, and construction services, along with the reliability of its operations, maintenance, and customer service. Together these provide customers with the peace of mind that all their power-related issues are in trustworthy hands.

Starsight has consistently maintained the highest ESG credentials and continues to reduce its customers’ carbon footprint and harmful diesel emissions. The Company is backed by Helios Investment Partners and Africa Infrastructure Investment Managers.

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In December 2020, in the middle of the Covid-19 pandemic, a new growth capital fund for fast growing small and medium-sized enterprises in Central America, CASEIF IV, was launched.

The objective is to boost the economic recovery and create jobs in Central America, Panama, Colombia, and the Dominican Republic. 

These countries have all been severely affected by the Covid-19 pandemic and the hurricanes that hit the region the previous months.

This new regional initiative will support the economic reactivation through investments in sustainable companies that create local jobs and opportunities – especially for women.

About the new fund, CASEIF IV :

This new fund brings innovative ways to finance medium-sized companies facing high-growth and expansion stages.  Among these, it features mezzanine loan instruments, whose flexible terms allow for a better tuning to the specific needs of each business, thus allowing a robust and sustainable growth for the companies that receive them.   

In addition to seeking the typical profitability and sustainability investment criteria, CASEIF IV LP has adhered to the 2x challenge and will strive to promote gender equality policies in all its investments and finance women-led companies.

CASEIF IV is managed by LAFISE Investment Management (LIM) which was established by Norfund and LAFISE Group in year 2000. This new Fund is the 4th in the CASEIF Funds family.  It was launched with an initial closing of US$  40  million.  The total fund size is expected to reach US$75 million by the end of 2021.   

11.000 new jobs are already created

In year 2000, LAFISE Investment Management (LIM) was the first regionally managed fund for SMEs in Central America. Norfund initiated the fund because this is an important tool for creating a large number of local and sustainable jobs.  

During the past 20 years LIM has managed 33 investments in different sectors and industries in 8 countries.

The investments have directly and indirectly contributed to the creation of more than 11.000 new jobs, whereof 40% are occupied by women. 70% of the companies in the portfolio are exporters which have grown into regional operations.

Increased female management at Newvana in Costa Rica

Newvana is a food and beverage company in Costa Rica that was acquired by CASEIF III in 2016. As part of the investment agreement, CASEIF required the company to develop a code of ethics. This approved in 2017 and included among others the promotion of gender equality in the organization.

Since then, Newvana has made several initiatives to promote gender equality through leadership, equal opportunities, inclusion and promoting women to managerial positions and to different types of committees. In 2018, they also implemented an inclusive scholarship program in which 44% of the participants were women.

And the results are considerable:

• Today, women represent 50% of line management – compared to 30% in 2016
• 40% of the total workforce are female

45% business growth in two years at Meat Depot in Dominican Republic

Meat Depot is a combined butcher shop and kitchen-diner brand in the Dominican Republic. In 2018, Meat Depot partnered with CASEIF III by receiving a mezzanine equivalent facility.

Since then, the company has also received technical support in areas such as accounting, HR, quality assurance and marketing. Thanks to the additional funding, Meat Depot was able to acquire more efficient equipment, triple the manufacturing capacity and to build a new cold-storage facility. The business grew with more than 45% in 2019, and they had a similar path ready for 2020. But then Covid-19 hit the region. Despite the difficult circumstances, the company has been able to move forward also in 2020, although in a slower speed.  

Norfund’s contribution

Since year 2000, Norfund has invested in total USDM 19.5 in CASEIF I, II and III.

Now, in 2020, Norfund has signed on as Limited Partners of CASEIF IV with a commitment of USDM 20. The due diligence for CASEIF IV was among the first done virtually due to the COVID 19 restrictions.

Norfund was also a founder and minority shareholder in the General Partner entity of the fund, Lafise Investment Management and has supported with a role on advisory committees and as an observer at the Board level. Norfund also provided technical assistance to LIM which has been used to help the SMEs strengthen their accounting and financial reporting standards as well as their ESG and occupational health and safety standards.

Evolution II Fund, Norfund and Sagemcom have closed an US$35 million commitment to establish ESCOTEL and enable affordable, cleaner energy services for African mobile telecom operators.

The new company ESCOTEL will provide clean energy services to mobile tower owners and operators in Africa.

Inspired Evolution, an Africa-focused investment advisory firm that specialises in clean and renewable energy, led the US$35 million equity investment by its Evolution II Fund and co-investors, Norfund and Sagemcom, with the aim to establish and finance ESCOTEL.

Supplying energy systems for 900 telecom towers

ESCOTEL will initially supply, install, operate and maintain decentralised solar and storage hybrid power systems for a portfolio of around 900 telecom sites in Sierra Leone, Liberia and over time the Democratic Republic of Congo.

Avoiding 16.000 tons CO2 annually

ESCOTEL will provide the most up to date power solutions for telecom networks all over Africa, and thereby contribute to increased mobile service quality, reduced cost of ownership, and decreased CO₂ emissions.

The business model is to hybridise existing power systems of telecom sites with the supply, installation, and operations of solar and storage power systems, as well as to deploy these cleaner power systems to new telecom sites.

This will abate more than 6,240 tons of CO₂  every year in Sierra Leone, and 10,092 tons of CO₂  every year in Liberia.

Norfund’s contribution

Norfund has committed US$10 million alongside US$20 million from Evolution II and US$5 million from Sagemcom Energy & Telecom.

Norfund have played a central role since the initial stages of this venture and have participated in the structuring of the business.

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Equity Bank aims at empowering small and medium sized businesses in East Africa by increasing their access to credit and financial services. This week, Equity Bank won the 2020 SME Bank of the year at the Global SME Finance Award.

Lack of access to finance is regarded as the most important constraint to the development of businesses in low income countries.

With over 14.2 million customers, the Equity Group is one of the biggest banks in East and Central Africa. The bank operates in Kenya, Rwanda, Uganda, South Sudan, Tanzania, DRC Congo and Ethiopia.

The SME business forms the spine of Equity Group’s business portfolio. By the end of 2019, SMEs accounted for more than 60% of Equity’s loan and 78% of total deposits.

On the 23rd of November, Equity won the 2020 SME Bank of the Year at the Global SME Finance Awards. The award is managed by World Bank’s IFC and recognises outstanding achievements of financial institutions and fintech companies in delivering exceptional products and services to their SME clients.

Equity Bank loans enabled Florence to flee poverty and start a profitable business

Some years ago, Florence Wanjiru Kirika was a poor, young widow left alone with two schoolchildren. Paying school fees was a struggle every month. Florence owned a plot of land and her dream was to build a house with rooms for rent and to become self sufficient. However, with no access to capital, there was no way to get started.

Things changed the day two Equity Bank agents visited her village, stopped and listened to her dream. As a new bank client, with no business expertise, Florence got a small loan of 100.000 Kenyan shilling. She used the loan to build a small house with four rooms and installed electricity, running water and clean bathrooms and toilets. The rooms became popular and were all quickly rented out, which enabled Florence to earn enough income to pay off her first loan before the time. She was then granted new loans, and gradually she has built additional buildings with more rooms for rent.

Equity bank is a bank for those who want to work from small to big. They work with me, visit me to see how the business is going and push me up.

Florence

Today, Florence is a successful businesswomen. She has plans to expand her properties and also to build some office spaces. Paying school fees is no longer a problem.

Equity Group initiatives to protect medics from Covid-19

“COVID-19 has challenged the normal operations for many SMEs in Kenya and across Africa. As a leading financial institution, we remain committed to training SMEs, availing opportunities for growth and helping them recover because together, we can build a resilient economy and a greater world,” Dr. Mwangi said.

Through the Equity Group Foundation, the group has contributed to helping public hospitals and medical students during the Covid-19 pandemic. Together with Kenya COVID-19 Fund Board, the Equity Group Foundation commenced the distribution of locally manufactured personal protective equipment (PPE) to public hospitals across all 47 counties in Kenya including all final year medical and dental students. This is done as part of its sustained efforts to protect medics from the COVID-19 virus.

“We chose to also include medical and dental final year students who are eager to complete their training be posted across the country to serve as interns where they are needed.  The PPEs donated will protect them and will also allow them to continue with their duties without worrying about their safety as they complete their noble duties.” said Dr. Mwangi.

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