My name is Eline. I started my internship in the Scalable Enterprises investment department in Norfund in August. Our focus is on investments in agribusiness and manufacturing companies that have potential for growth and job creation. Now I will present one of the projects I have been working on.

I am writing a case study about Marginpar, a summer flower producer with farms in Kenya and Ethiopia. In 2018, Norfund invested USD 8.5m as equity to finance the acquisition of several distressed farms. In addition to providing capital, Norfund has assisted in strengthening corporate governance and enhancing environmental and social performance in Marginpar. To get information for this case study, I got the opportunity to travel to Kenya to visit two of the farms. 

Norfund has a regional office in Nairobi, which I got to visit during this trip. We work closely with the regional offices, so it was very nice to spend some time together outside of Skype and mail.

The farms I visited are located in Nanyuki and Rongai in Kenya. It was very inspiring to see the farms’ operations, and how the employees at all levels are involved in continuously improving the way they work.

On my way back home, I spent a day in Amsterdam where I got to meet the marketing and distribution part of the company. I also visited the flower auction in Aalsmeer, which is the world’s largest, where part of the flowers from Kenya are distributed. This is kind of cool if you are into logistics ?  

After the week of getting to know the company, I returned to the Oslo office. I will use the information I got about Marginpar to write a case study that presents Norfund’s role in the company and the development effects of the investment. It was very interesting to visit one of Norfund’s investments, and it was motivating to see in practice how Norfund contributes to development.

It is safe to say that the past few months of working in Norfund have been very educational and fun. It has been very valuable to learn about the challenges and risks of investing in Norfund’s geographies and sectors. The experience and competencies of the people working here are truly impressive. 

Associated Foods Zimbabwe Ltd (AFZ) is Zimbabwe’s leading producer of peanut butter, jams, nut spreads, and canned tomatoes and fruit. After successfully installing a new state-of-the-art production line, the company is now eyeing the export market in addition to serving the domestic market.

Background

AFZ was established on 1 January 2016, as a result of a merger between Zimbabwe’s leading producers of jams and peanut butter – Honeywood Enterprises Ltd and Spread Valley Ltd. Norfund’s 17 million NOK investment contributed to partly-finance the merger and provided capital expenditure to facilitate improvements, such as the installation of a new peanut butter production line. In addition, Norfund’s investment also provided working capital.

Collaboration

By combining the manufacturing strengths of Honeywood Enterprises, and the sales, marketing and distribution skills of Spread Valley, the new company is now benefiting from economies of scale and is adding value for stakeholders, including its customers. The company is now also able to developing products for export.

Increased Employment

AFZ plans to expand its local raw material sourcing via outgrower schemes. This will result in increased employment throughout the agribusiness value chain in Zimbabwe.

Improved productivity and product quality will increase the consumption of local produce and thereby reduce dependence on imported goods. This is especially important as most African countries struggle to build their foreign currency reserves, and must therefore promote processing and consumption of quality local goods, while limiting imported goods.

Vertical Agro (Sunripe & Serengeti Fresh) farms fruits and vegetables in Kenya, Tanzania and Ethiopia.

Background

Vertical Agro Limited is one of the oldest horticulture exporters with presence in Kenya, Tanzania and Ethiopia. The three key business areas: primary production of fruit and vegetables, packaging and marketing. The main operations are in Tanzania through Serengeti fresh and in Kenya through Sunripe. Vertical Agro produces 6500 tonnes of fruits and vegetables annually and is the largest exporter of organic vegetables in Kenya. Norfund was the first external investor in this local family business and in 2014 Norfund committed to a convertible loan facility of 41 MNOK to allow Vertical Agro expand its product range and improve yields and productivity.

Through its wholesale and marketing company in the United Kingdom, Vertical Agro also sells ready-to-eat and ready-to-cook products in several European countries.

The agriculture value chain

The agriculture and food industry is a priority area for Norfund’s investments in Sub-Saharan Africa. To spread investment risk and contribute to developing the full agricultural value chain, Norfund has decided to include a wider scope of the agriculture value chain in the portfolio.

The Banco Promerica Group, a Norfund investee with banks in Nicaragua, Costa Rica and Ecuador, is among the first signatories of The Principles for Responsible Banking.

Banks can be agents of change and support the UN Sustainable Development Goals (SDGs) through their daily banking activities. To do so, the banks must be  clear about how their products and services create value for their customers, clients, investors, as well as society.

Banks shall have a positive influence in the communities we serve. This is one of the key components in Grupo Promerica’s strategy.

Ramiro Ortiz, Chairman of Banco Promerica Group 

The Principles for Responsible Banking provides a framework for sustainable banking, and helps banks to align its business strategy with SDGs.

The world is at a crossroads and each of us needs to play an active role in shaping the future. At Banco Promerica Costa Rica, we understand our responsibility to all our stakeholders and to the world. We are proud to endorse the Principles for Responsible Banking. 

John Keith, CEO, Banco Promerica Costa Rica

As part of Banco Promerica Costa Rica’s eagerness to contribute to the SDGs, Norfund will, through a 15MUSD sub-debt instrument, support their green lines initiative. The term is 10 years.

This is the first time in Central America that sub debt is provided to support green lines of which a majority is in clean energy. Focus is on providing funding for smaller PV clean energy projects in Costa Rica. In addition, the quasi-equity instrument will provide a strong value add as it unlocks additional funding.

We would like to thank Norfund sincerely for showing us the way and supporting us with financial resources, technical assistance, motivation and advice. Without this it would not have been possible to be the first Costa Rican bank signatory of “The Principles of Responsible Banking” at the United Nations.

John Keith, CEO, Banco Promerica Costa Rica

The government of Uganda has identified micro, small and medium enterprises (MSMEs).

Read the case study here

In Angola’s post-civil war capital market, risk capital was unavailable to small and medium sized companies. Norfund therefore decided to establish Fundo de Investimento Privado – Angola (FIPA), Angola’s first private equity fund. Since the first closing in 2010, FIPA I and II have invested in six companies, including the integrated fishing operation, African Selection Trust.

Read the case study

Arise is Norfund’s main vehicle for large scale equity investments in banks in Africa. It is a unique specialized investment company with a growing portfolio of leading financial institutions across sub-Saharan Africa.

Background

Arise was established in August 2016 when its four founding owners – Norfund, Rabobank, FMO and NorFinance – agreed to transfer their various equity holdings in financial institutions in sub-Saharan Africa.

The aim of founding Arise is to contribute to the building of economic growth and poverty reduction by developing strong and stable financial service providers. These will support retail enterprises, SMEs, companies in rural areas, and other clients lacking access to financial services. Arise will thereby strengthen their ability to empower themselves.

Investments

Arise provides capital and expertise to the growing financial sector across Sub-Saharan Africa. Arise is directly or indirectly invested in more than 30 countries across sub-Saharan Africa.

Since its inception Arise has made the following investments:

• acquired a 28% shareholding in CAL Bank of Ghana in 2017
• increased its shareholding in DFCU of Uganda to 59% in 2017 in connection with DFCU’s acquisition of Crane Bank
• acquired a 30% stake in Moza Banco of Mozambique in 2018 through a capital raise a a merger with BTM Bank
• acquired a 14% stake in pan-African Ecobank in August 2019
• Providing a USD 7.5 million senior unsecured shareholder loan to Moza Banco in December 2019

Arise portfolio

Arise today has direct or indirect ownership in 18 top-3 financial institutions in SSA and presence in 38 countries in SSA.

• CalBank 28% stake
• Moza 30% stake
• iiDENTIFii 20% stake
• Ecobank 14% stake
• Zanaco 45% stake
• Equity Bank 12% stake
• Socremo 35% stake
• NMB Tanzania 35% stake
• DFCU Bank 59% stake
• NMB Zimbabwe 18% stake

Active Ownership

Arise gives priority to equity investments and is an active owner. It claims board positions in the investees, organises technical assistance programmes, supports investees financially and helps the banks to improve the services they provide to their clients. Arise focuses particularly on improving the compliance functions of investee companies and ensuring adherence to the highest environmental, social and governance standards.

Electrifying hundreds of telecommunication towers and rural communities across Myanmar.

Background

In 2017, Yoma Micro Power successfully completed a 10-plant pilot scheme in Sagaing Region whereby 10 telecommunications towers and four villages in off-grid areas were given access to electricity.

The same year, Yoma Strategic Holdings, IFC and Norfund entered  into a partnership with the aim to establish distributed generation micropower plants and mini-grids in Myanmar. 

Electricity infrastructure development is a priority for Myanmar to drive economic growth. According to the World Bank only 16 percent of rural households in Myanmar are connected to the power grid. The limited production and distribution of power severely hamper economic development and the powering of telecommunications towers.

The project

The purpose of the partnership with Yoma is to generate and distribute electricity to off-grid rural communities and telecommunications tower companies. The project expects to secure long-term power supply contracts with telecommunications towers and telecommunications network operators in off-grid locations, which will serve as the anchor tenant. Distribution generation micro power plants will be set up around such areas, powered by a combination of PV solar modules, diesel generators and energy storage solutions, with surrounding communities connected through mini-grids.

Our impact

The ambition is to scale up to more than two thousand micro power plants by 2022. The aim thereafter is to expand coverage to meaningfully serve millions of people in the country.

The mini-grid company We Light aims to build mini-grids in hundreds of villages in Madagascar, and thereby improve the rural populations access to cheaper and more reliable electricity – at work and at home. We Light will also explore opportunities elsewhere in Africa.

Background

Madagascar is one of the poorest countries in the world. With a population of 25 million people, about 80% live below the poverty line (less than 1,9 USD per day) and 77% lack access to electricity. 

In 2015, the Malagasy government published a new policy that targeted 70% grid electrification by 2035. However, recognizing that large parts of the country may remain beyond the reach of the national grid, the government of Madagascar is embracing the potential offered by off-grid technologies. 

Our Impact

In November 2019, Norfund closed an investment agreement with We Light, a company that provides access to renewable energy to un-electrified villages in Sub-Saharan Africa. The aim is to build mini-grids in hundreds of villages in Madagascar, and thereby improve the rural population’s access to cheaper and more reliable electricity – at work and at home. 

To date approximately 500 000 households have solar home systems in Madagascar. We Light’s hybrid plants, with solar, battery and diesel generators are very flexible and scalable. They can optimize electricity generation as best suited to the load pattern of the customers, and thereby be a reliable and cost effective source of electricity for the village.

For the rural population, this means amongst others that kerosene lamps can be replaced with safe lamps with improved light. Mobile phones and computers can be charged whenever needed, and the public information will become easily available through internet, TV and radio.  

The mini-grid will also improve electricity services for productive use, like that of a conventional national grid. Examples are use of electrically powered machines, tools and appliances, irrigation pumps and cold storage. This  will enable more businesses to grow, and thereby create more jobs and more local tax income.

Other uses may be public lightning, electricity to health centers, schools and public administration buildings. 

Experienced Partners

We Light is a company founded by Norfund, Sagemcom and Axian Group with plans to build mini-grids in several countries in Africa. Sagemcom is a French broadband, telecom and energy company with presence across the African continent. Axian is a Malagasy conglomerate active in the energy, telecom, finance and real estate sector and long-term partner of Sagemcom.

Together, these partners have the resources, technology and network it takes to execute this business plan. Sagemcom has delivered mini-grids as a contractor in many African countries, and Axian has a strong presence in Madagascar.

Capital and expertise from Scatec Solar, KLP and Norfund enabled the construction of Mozambique’s first large-scale solar power plant. Central Solar de Mocuba (CESOM) provides over 79 GWh of electricity annually, which is equivalent to the electricity consumption of more than 170,000 households in Mozambique.

Background

IN 2016 Scatec Solar and Norfund signed a Power Purchase Agreement that secured the sale of solar power over a 25-year period to the state-owned utility, Electricidade de Mozambique (EDM). The plant was built in the Zambezia Province in north-central Mozambique.

The project

The Mocuba Project was part of the Government of Mozambique’s Economic and Social Development Plan for 2015/16. The Mocuba plant was identified as part of a least-cost supply plan to improve the capacity, reliability and diversity of electricity supplies in northern Mozambique.

The project contributes to the economic and social development of one of the Special Economic Development Zones designated by the Government of Mozambique, and facilitates new private sector investments. It was also a unique opportunity for EDM to gain technical, commercial and practical experience in utility-scale solar solutions.

Our impact

Central Solar de Mocuba has increased Mozambique’s energy generation capacity by 40 MW and will produce approximately 79 GWh per year. The project’s strategic location will reduce energy transmission losses and improve the security of energy supply in northern Mozambique and stabilize the grid. It is estimated that the power plant’s connection to the EDM grid will result in a seven percent improvement in the network default level.

At peak construction, 1,209 people worked on the site; 1,052 were hired locally. The job creation impact of power projects are created mainly through their effects on the wider economy and can only be estimated. Better, more reliable energy supplies, and fewer and shorter outages are helping to foster job creation and economic growth as new businesses are established and productivity improves.

The solar power plant will also result in a reduction of approximately 79,000 tonnes of CO2 emissions annually, compared to standard national grid emissions.