Scalable Enterprises
Strengthening value chains that create jobs
Why invest in scalable enterprises?
A country’s development and growth depend on successful businesses. Scalable and large enterprises play a particularly important role, being engines for growth and job creation. On average they are more productive, make stronger contributions to professionalizing supply chains, recruit more staff, pay higher wages, and generate more government revenues.
There are few large companies in Sub Saharan Africa, especially in the poorest countries. Hence, we focus on identifying and investing in businesses that have the potential to scale. We also want to reach businesses in the SME and start-up segment, and we do that through fund investments.
To guide our efforts and clarify how our investments contribute to long-term development, Norfund has developed two separate theories of change for investments through funds and in the agribusiness and manufacturing value chain. These were updated in 2024. These theories of change outline the problem we aim to address, the inputs we provide and the steps through which long-term impact is achieved.
Our ambitions
In our strategy 2023-2026, our defined ambitions for agriculture & manufacturing are:
- 3 billion NOK additional revenues generated
- 10,000 new direct jobs created
And our defined ambitions for funds are:
- 16 billion NOK additional revenues generated
- 70,000 new direct jobs created
Agribusiness and manufacturing
Fund investments
Through fund investments, Norfund reaches more companies and other business areas than we could on our own. Investing in private equity funds contributes to building and developing local businesses as well as contributing to more professional and efficient business practices.
Local fund managers provides entrepreneurs with access to risk capital and create value through active ownership, efficiency initiatives, industrial insight and local knowledge to support the company’s development.
Private Equity Funds
Our strategy is to invest in funds in which our participation will have a significant developmental effect. We do this through investing in a broad spectrum of funds. On the larger end, we invest in larger, often pan-regional funds that themselves invest in relatively large companies. Several studies have shown that large companies often are more efficient than smaller ones. Moreover, there are relatively few large companies in many of Norfund’s prioritized countries. Hence, helping these larger companies getting access to capital may lead to more professional and efficient businesses.
Small and Medium Sized Enterprises Funds
Historically Norfund has focused on small and medium sized enterprises (SME’s) in its fund investments. This continues to be an important area. This business segment often faces a particularly challenging funding environment. These businesses are often owned and run by persons with roots in the local communities, and an investment in these companies may have a direct effect for people we want to reach.
Impact/Venture Funds
Thirdly, Norfund also invests in very challenging business environments. Several countries don’t have developed markets for funding neither through banks nor through equity markets. In such situations Norfund may support the establishment of new private equity funds, such as the Kinyeti Fund in South Sudan. One may also invest in established funds that addresses the special challenges in such markets. These initiatives may be time consuming, but if successful also proves very valuable to the local communities with an undisputed development effect.
