Norway fund mulls W. Africa expansion with Ghana investments

The Norwegian Investment Fund for Developing Countries is considering investments in financial-services and clean-energy businesses in Ghana as the institution extends its scope to West Africa.

Norfund, as the state-owned company is known, had 47 percent of its about $1.5 billion portfolio invested in Africa, focused in the southern and eastern parts of the continent, by the end of 2014, according to Deepak Malik, 58, the head of the 19-year-old fund’s Johannesburg office. Those include stakes in the continent’s biggest wind farm and Kenya’s largest bank. Norfund prefers to make equity investments in companies and projects rather than providing loans, Malik said.

“We’ve reached a stage of maturity where we can expand into other parts of Africa,” starting in Ghana, Malik said by phone on Feb. 2. “More than likely it will be the financial sector where we would make our first investment.”

More than half of Norfund’s investments were in clean energy, based on the most recent available data, and the fund added natural gas last year with the acquisition of a 30 percent stake in London-based Globeleq, which produces power in Africa. The emphasis is on investments in companies or projects that will boost development, said Malik, who also oversees the fund’s financial-services investments. Only profitable ventures will be considered, he said.

Ghana Office

Norfund started looking at opportunities in West Africa during the second half of last year and is considering opening an office in Ghana, which would be its fourth on the continent after Johannesburg, Maputo and Nairobi, Malik said. It’s looking at both financial-services and energy opportunities in the country and would also consider agricultural projects, he said.

The fund may also consider expanding its scope to include Nigeria, he said.

“Because we are small in focus we want to go step by step,” Malik said. “We are more familiar with English speaking west Africa so we have initially decided to start with Ghana and maybe go on to Nigeria.”

Norfund’s biggest investment in the financial industry was its purchase last year of a stake in Kenya’s Equity Group Holdings Ltd., of which it holds more than 11 percent. Malik sits on the board of the bank, which has 10 million customers and expanded last year into the Democratic Republic of Congo.

Norfund’s other holdings include stakes in banks in Uganda and Zimbabwe, and the fund’s backing has helped those companies get access to more capital, Malik

“We want to provide capital where people struggle to raise money,” he said.

In the energy sector, Norfund’s investments range from a solar park in Rwanda to biogas generation in South Africa and a 12.5 percent holding in Kenya’s Lake Turkana wind project, which will be the largest on the continent. It’s also invested in agriculture businesses and small and medium enterprise funds.

While economic weakness and currency volatility in many African countries have to be taken into account when assessing risk, that doesn’t prevent the fund from making investments, Malik said.

“Macro economic situations do come into play,” he said. “The risk assessments change, valuations change but it doesn’t stop us investing.”

 – Bloomberg