Friday, October 30, 2020

Swedfund Investments in Africa

Swedfund is a Development Finance Institution, whose mission is to invest in and develop sustainable businesses in emerging and challenging markets. These investments aim to create employment and to combat poverty. 

Eradicating poverty is not one of the easiest tasks to accomplish, especially in Africa, where one-third of the 420 million youth between 15 and 35 years of age are unemployed. Another third is underemployed. Although countries have different levels of unemployment, on average, the youth face double the unemployment rate of other adults. 

However, Swedfund has had significant progress in providing a stepping stone for many Africans seeking a way out of poverty. It has been doing this since 1979 and has invested in more than 230 companies. 

Swedfund is not just strategic when it comes to sectors it invests in, but the companies matter as well. With Swedfund, there is no room for failure, and this has helped ensure employees of the various companies have financial security and are guaranteed that performance will be rewarded. 

The Model Swedfund Uses to Choose Ideal Investment Opportunities

Africa is not short of companies that need financial and technical support to help them achieve sustainable growth. However, Swedfund has a model it follows to determine the viability of the investment, the social and environmental impact of the said investment, and the economic benefits to its investors and communities the companies serve. 

One of the models that Swedfund follows is a sector approach. This determines the area where communities are most in need, one with a broad range of investment opportunities, and a sector most in need of specialist expertise. This guide led Swedfund to concentrate its investments in three main sectors;

Energy & Climate

Electricity supply is critical for any country to progress, especially for the business community. Electricity leads to increased productivity and ultimately increased employment opportunities. A steady supply of energy also helps children get an education, and communities to keep their businesses open for longer, leading to more sales and subsequently profits. 

Since 2014, Swedfund has been investing in renewable sources of energy, in a bid to conform to the UN 2030 Sustainable Development Agenda, where affordable and clean energy are key components. Swedfund believes that investing in systems that will allow for the use of wind, solar, and hydropower in electricity generation will help African countries to build their prosperity sustainably. 

Financial Inclusion

Small and middle scale businesses drive most emerging economies. Unfortunately, most businesses struggle with cash flow, which makes growth almost impossible, at least in the first few years of operation. 

Swedfund investments help in increasing financing and ease access to funds for businesses that have growth potential. The financial investments are also designed to help low-income earners, women and people living in poverty to have access to financial assistance for their businesses.
Swedfund provides financial support in two main ways;

Investing in financial institutions, like banks and microfinance institutions, which provide financial support to small and medium scale businesses. Swedfund also supports institutions that provide financing to low-income earners who need support to improve their skills. Swedfund and the beneficiary financial institutions agree on the type of financial assistance Swedfund should give. Usually, the investment is divided between loans, equity, and funds. 
Swedfund also uses different established funds to increase its reach. There are hundreds of funds which invest in various countries in Africa. Swedfund looks at their target population to assess the level of vulnerability before choosing the fund through which to channel financial support. 

Health

Access to health care is a pipe dream for about 400million people living in developing countries. Unfortunately, access to health care is made worse because the quality of care is also low. The inadequate number of qualified medical personnel, ill-equipped hospitals, and lack of medication is partly responsible for the low life expectancy and high mortality rate in Africa. 

Swedfund is working with other development financial institutions to raise the quality of health care, adequately equip hospitals, encourage skill development and offer doctors opportunities that will make them choose to work in their home countries over traveling abroad and leaving their fellow citizens helpless.

In addition to providing financial support, Swedfund provides technical support necessary to help business owners succeed. Successful businesses make investments worthwhile, but they also guarantee employment security for thousands of people. 

Swedfund Investment Portfolio

In 2019, 58% of all investments made by Swedfund were in Africa, with financial inclusion taking the largest share at 53.5%, followed by Energy and climate at 37.1%. Only 7.7% of investments went into the health sector. 

Jacaranda Maternity

Jacaranda Maternity is one of the latest beneficiaries of financial and technical support from Swedfund. This facility provides safe and affordable delivery services, and aftercare services to ensure mothers and babies are healthy. 

Jacaranda Maternity was selected because it has a 5/5 quality rating and has continued to demonstrate it has the health of mothers and babies at heart. The business was founded in 2011, and its first facility was a mobile clinic in Nairobi. One year later, Jacaranda Maternity opened its first permanent hospital. As their client base increased, it was evident that expansion was the only option available. 

Swedfund, through Africa Healthcare Fund and Johnson & Johnson Foundation, is helping turn the dream of expansion a reality. Jacaranda Maternity intends to open branches in other parts of Kenya. It has also incorporated sexual rights and reproductive health to the services it offers. 

Since Swedfund investments are guided by the UN 2030 Agenda for Sustainable Development, this investment addresses Good Health & Wellbeing (goal #3), Gender Equality (goal #5) and Decent Work & Economic Growth (goal #8). 

Metier Sustainable Capital II

This financial institution in Mauritius is a fund that focuses primarily on renewable energy, water and waste management in sub-Sahara Africa. Swedfund has committed a $15 million investment to boost renewable energy capacity in Africa. The financial assistance will also help in finding resource efficiency solutions. 

Metier Private Equity International is a fund manager with the right expertise to manage investments in Africa. It has previously raised funds to help invest in renewable energy in South Africa and Uganda. This fund works with other financial institutions to ensure sustainability. 
The support from Swedfund will help meet three major goals for UN Agenda 2030, Affordable & Clean Energy, climate action, and responsible consumption and production.

Equity Bank Kenya

Swedfund has provided $15million long-term loan to Equity Bank Kenya. This bank was selected because of the favorable financial support it gives small and medium-sized enterprises (SMEs). Through this financial support, Swedfund is contributing to responsible lending practices, job creation, and private sector development. 

SMEs contribute about 33% of Kenya GDP and accounts for 4 out of 5 job opportunities in the country. Equity Bank was selected because it has had steady growth over the years, and has raised more than $100 million from European financial institutions to strengthen its capitalization and boost its expansion to the entire East Africa region. 

African Development Partners III (DPI)

This fund manager has had two successful investments in Africa, under ADP I and ADP II, where more than 20 companies in 29 African countries benefitted. Swedfund, together with other development financiers like English CDC and the Norwegian Norfund, unveiled its support for ADP III.  

Swedfund has invested $15 million in ADP III, and this money is to help ADP invest in more companies for sustainable growth. ADP has been investing in various companies in Africa since 2008, and this has led to new employment opportunities for the communities. The governments have also benefitted from additional tax revenue. 

Once the investment support is given, the fund takes active ownership of the business, with a focus on providing technical skill and monitoring business ethics. Corruption is one of the issues that bring down many companies in Africa, so Swedfund commits to introducing anti-corruption techniques that will help the company improve its relations with clients, and employees will focus more on productivity and career growth, over finding ways to extort customers. 

The portfolio companies are selected from various sectors of the economy, including food, retail, banking, insurance, education, and telecommunication. 

Hospital Holdings Investment BV

Swedfund has, together with FinnFund, Proparco, IFC, and the Danish Investment Fund for Developing Countries – IFU, invested $15 million in Hospital Holdings Investment (HHI). HHI is an investment platform that focuses on healthcare in sub-Sahara Africa. With a particular interest in the provision of health expertise in East and Southern Africa. 

This investment from Swedfund is expected to help HHI establish up to 5 hospitals and 52 clinics, over five years. Before the financial support, HHI was running one hospital and 35 clinics. The additional investments are expected to serve up to 1.8 million people. HHI intends to build some of the facilities and also acquire existing health care assets. 

DBL Industries

Swedfund and DBL entered into a loan agreement, where Swedfund, through Development Bank of Ethiopia, will provide financing for the establishment of a textile plant in Mekelle, Ethiopia. This textile industry is expected to employ at least 4000 people. Additionally, H&M is expected to expert knowledge in textile production and be a long-term buyer for the products. 

Besides the creation of employment opportunities, this investment is expected to create decent working conditions for women, be environmentally friendly, and to push one of Ethiopia’s prized sectors forward into sustainable growth. 

Azura-Edo IPP

In 2013, Swedfund together with IFC and other financial institutions agreed to provide a loan to facilitate the construction and fund operations of Azura-Edo IPP, a 450-megawatt gas power plant located close to Benin City, Nigeria. 

Deacons Kenya

This retail chain in Kenya received financial support, in the form of equity investment, from Swedfund in 2010. Deacons Kenya Ltd owns and provides a range of internationally recognized brands to consumers in Kenya, Uganda and Rwanda. Some of the popular brands are Mr. Price, Angelo, Mr. Price Home, Adidas, Truworths, 4U2, Life Fitness and Babyshop.
In addition to providing financial support, Swedfund has also set up a talent program, known as Women4Growth. This program promotes gender equality, helps women to be as competitive as their male counterparts at work, and gives them the training necessary to allow them to compete for senior positions in various companies. 

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Mario Nieto

[email protected]

https://www.linkedin.com/in/mario-nieto-98397b165

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