IFU’s financing of UN’s SDGs and the new SDG fund
Bjerringbro - 29 August 2018
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IFU IN BRIEF
27-08-2018
Independent government-owned fund, operating on commercial terms
1967
investment countries
invested in share capital and loans
Provides risk capital and advicefor projects having a Danish interest 143
Total contracted investments of more than
20 bn DKK bn DKKEstablished in
Promotes economic and social progress in developing countries
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IFU’S INVESTMENT MODEL
Project company
Local investor
Share capital
Examples of Danish interest
• Danish investor
• Danish company supplying goods, technology, know-how, management or services
• Danish company sourcing products from the project company
• Use of state-of-the-art Danish technology in the project
Local bank
Loan
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Danish interestIFU
Share capital/loan
Sector-specific direct outcomes
Indirect contributions
General direct outcomes
Input and output
IFU CONTRIBUTES TO
THE 17 SUSTAINABLE
DEVELOPMENT GOALS
Jobs, taxes, female employment, youth employment, etc.
Limited CO2 emissions, number of assisted small farmers, etc.
Technology level, staff training, ESG assessment, etc.
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SDG EQUITY FUND
DANISH
EQUITY FUND
Total fund size - first close
DKK 4.1 billion
40% 60%
Private investors
Portfolioinvestments
Danish State
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SDG EQUITY FUND
30% - 40% renewable energy
20% - 30% agribusiness
20% - 30% infrastructure, water and sanitation
10% - 20% industry and service
0% - 10% financial sector
Regional focus Sector focus
30% - 40% Africa
30% - 40% Asia
10% - 20% Europe and MENA
10% - 20% LatinAmerica
IFU’S AFRICA ACTIVITIES
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> 7 5-73-421
• IFU has undertaken 250 investments in Africa in 37 African countries
• IFU currently has 68 investments across 16 countries
• DKK 1.9 billion currently invested in Africa
• New investments of DKK 353 m in 2017
• Significant sectors:
Number of active investments
Heavy Industries:Manufacturing:HospitalityAgribusiness:Infrastructure:Renewables:
Cement, Fertilizer plantsBreweries, industrial goodsHotelsCommercial farms, processingPort infrastructure, power plantsWind, solar
Countries
Size CountryNumber of projectAmount invest (DKKm)
7Kenya10286.90
12Ghana6150.40
30Benin1117.60
1Nigeria389.90
5South Africa689.30
39Liberia180.50
23Senegal167.40
17Cameroon232.90
6Tanzania632.20
13Mozambique226.80
16Angola123.00
2Ethiopia217.60
22Zambia214.40
9Uganda25.50
46Gambia15.00
24Zimbabwe11.20
14Cote D'Lvoire11.10
8Algeria00.00
43Botswana00.00
19Burkina Faso00.00
32Burundi00.00
54Cape Verde00.00
36Central African Republic00.00
25Chad00.00
52Comoros00.00
4Democratic Republic of the Congo00.00
50Djibouti00.00
3Egypt00.00
45Equatorial Guinea00.00
37Eritrea00.00
41Gabon00.00
26Guinea00.00
47Guinea-Bissau00.00
44Lesotho00.00
34Libya00.00
15Madagascar00.00
21Malawi00.00
20Mali00.00
40Mauritania00.00
48Mauritius00.00
55Mayotte (France)00.00
11Morocco00.00
42Namibia00.00
18Niger00.00
38Republic of the Congo00.00
51Reunion (France)00.00
28Rwanda00.00
58Saint Helena, Ascension and Tristan da Cunha (UK)00.00
56Sao Tome and Principe00.00
57Seychelles00.00
35Sierra Leone00.00
31Somalia00.00
29South Sudan00.00
10Sudan00.00
49Swaziland00.00
33Togo00.00
27Tunisia00.00
53Western Sahara00.00
Total activeTotal amount invested
481041.70
Design
200 <DKKm <> 7
100-200 DKKm 5-7
50-100DKKm 3-4
10-50DKKm 2
10 >DKKm 1
0DKKm 0
Misc
SEVEN GOOD REASONS TO INVEST IN AFRICA
The world's largest workforcein 2040 (1.1 bn.)
Population growth 1 bn. 2 bn. in 2030
A growing middle class300m 500m in 2030
High economic growth4 – 5 % on average
(2015 – 2020)Access to raw materials, semi-finished products
Increasing urbanization50 % live in cities by 2035
First mover advantagesLow competition
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SUB-SAHARAN AFRICA TEAM
27-08-2018
Henrik FrøsigRegional Director,
East Africa
Samuel Githinji WathonduInvestment
Director
Nairobi:
Copenhagen:
Nana YawKwakye
InvestmentDirector
Accra:
Henrik HenriksenRegional Director,
West Africa
Johnny Ohgrøn Hansen
Regional Director,Southern Africa
Pretoria:NAIROBI
ACCRA
PRETORIA
LAGOS
Lagos:
Seye BassirInvestment
Director
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Catherine I. CaxVice President,
Sub-Saharan Africa
Marcson Baker
Assistant Investment Manager
Njeri Mungai Ngaruiya
InvestmentDirector
IFU CRITERIA FOR PROJECT ENGAGEMENT
Reputable company or project partner with a positive track record
Ability of partner(s) to own and assume a reasonable level of project finance risk
Strong and experienced management and/or technical partner(s)
Project particulars backed/prepared by trustworthy agents (Big 6 – external audit, grade ‘A’ consultants – feasibility/business plans etc.)
Deal size ranging USD 5 million – USD 25 million. IFU ownership stake of 15% – 40%
Clear exit defined upfront
Willingness and ability to comply with international sustainability and corporate governance best practice principles
Potential for Danish commercial involvement a positive factor
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IFU’S SME FACILITY
Preparation phase Implementation phase
An SME has:• Less than 250 employees and• A turnover less than EUR 50m or a balance less than EUR 43m
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• Improve business plans/feasibility studies
• Eliminate/reduce risks/uncertainties• Definition of must-win battles• Check of important assumptions/
conditions
Max. support DKK 750,000 (50 % of cost)
• Recruitment of professionals and management support
• Implementation of training plans, know-how transfer
• Introduction of procedures for monitoring, reporting, board work
• Implementation of sustainability initiatives
Max. support DKK 750,000 (50 % of cost)
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Case study from TanzaniaKEY FACTSProject type Egg production Country TanzaniaStatus In operation IFU participation DKK 3 mTotal investment DKK 9.2 m
BUSINESS CONCEPT• Large-scale egg production in Tanzania. The project
has 30,000 hens in modern production facilities
• Targets low-to-medium income consumer segment having a demand for protein
Challenges• Building a capable operational management team.• Legal issues concerning land rights locally in Tanzania.
IFU’s Value Proposition• Practical guidance on setting up business
• Local footprint: IFU’s East-African team actively assisted the management team for 3 months during the early execution
• Grant assistance provided to strengthen the business plan and early execution
• Political insurance. The Trade Council at the DK embassy in Kenya and IFU assisted with securing land rights in Tanzania
Contribution to SDGs
Support the goal to substantially reduce the proportion of youth not in employment, education and training. Youth employment in project at 50 %.
Support the goal to protect labor rights.
Support the goal to increase incomes of small-scale food producers, particularly women. Female employment at 40 % in project.
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Case study from KenyaKEY FACTSProject type Production facilityCountry KenyaStatus In productionIFU participation USD 4mTotal investment USD 20m
BUSINESS CONCEPT• Local production of high energy food for malnourished
people
• Value creation locally rather than imported finished product
Challenges
• Handling complexity of multiple suppliers and production technologies.
• Recruiting and building skilled operational teams.• Sufficient financing to handle greenfield risk and working capital
needs
IFU’s Value Proposition• Provide hard currency at competitive rate
• Assess to other financing partners: Brought in the IFC through a syndicated loan
• Gave the local partner promoter international political legitimacy vis-à-vis international off-take partners, e.g. UNICEF supply
• Long-term patient partner: Willingness to look at expansion in multiple countries
Contribution to SDGs
Support the goal to reduce the global maternal mortality to less than 70 per 100,000 live birth
Support the goal to end all form of malnutrition,
Support the goal to end hunger and ensure access for infants to safe and nutritious food.
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Case study from MaliKEY FACTSProject type HFO power plant Country Mali Status Under constructionIFU participation DKK 70 mTotal investment DKK 915 m
BUSINESS CONCEPT• 81.5 MW HFO power plant in Kayes in South Western Mali.
• The plant will produce 12% of Mali’s electricity capacity and will play a critical role in supporting economic development.
Challenges
• Complex financing structure with four equity shareholders and five regional lenders, incl. Islamic lending
• First IPP in Mali, unchartered territory – extensive development period
IFU’s Value Proposition• Ability to bring in co-investors: IFU’s role as
a DFI provided reassurance to a regional development finance entity which was bought in late on to close a funding gap
• DFI participation: IFU’s participation supported the political goodwill provided by the Malian government
• Risk capital: IFU’s investment allowed the Danish EPC contractor to reduce its own financial risk
Contribution to SDGs
Support the goal to facilitate infrastructure through enhanced financial, technological and technical support to African countries.
Support the goal to promote public procurement practices in accordance with national priorities and policies.
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Questions?
Please contact
Henrik Henriksen, Regional Director West Africa
[email protected], telephone +45 3363 7579, +45 2173 3693
www.ifu.dk
Tel: +45 33 63 75 00
mailto:[email protected]://www.ifu.dk/
Slide Number 1IFU IN BRIEFIFU’S INVESTMENT MODELIFU CONTRIBUTES TO THE 17 SUSTAINABLE DEVELOPMENT GOALSSlide Number 5Slide Number 6IFU’S AFRICA ACTIVITIESSEVEN GOOD REASONS TO INVEST IN AFRICASUB-SAHARAN AFRICA TEAM IFU CRITERIA FOR PROJECT ENGAGEMENTIFU’S SME FACILITYSlide Number 12Slide Number 13Slide Number 14Slide Number 15