Impact Fund Denmark, the country’s development finance institution, has partnered with the Danish Ministry of Foreign Affairs to launch a DKK 350m ($54.6m) “Africa Facility”. The new fund aims to significantly increase the low level of Danish private investment in Africa by financing Danish companies expanding into the continent, as well as co-investing in local African companies and venture capital funds.

The facility, which will run from 2025 to 2028, is a core component of the Danish government’s 2024 Africa strategy. It seeks to address a stark imbalance: despite Africa housing some of the world’s fastest-growing economies, only 1.5% of Denmark’s foreign investments are directed to the continent, and African imports account for less than 1% of the Danish total.

The fund is designed to act as a bridge, offering more flexible financing and technical support to encourage Danish businesses to enter or scale within Africa’s 54 markets.

“It is in our own interest, and will at the same time benefit local African communities,” said Denmark’s Minister of Foreign Affairs, Lars Løkke Rasmussen. “The new Africa Facility is a good example of how we bring the private sector more into play.”

A Hybrid Model: Targeting VCs and Direct Investment

Unlike traditional development funds that focus solely on direct investments, the Africa Facility has a broader mandate. A key part of its strategy is to partner with local African investment funds to gain deeper market access and support portfolio companies that have commercial links to Denmark.

The fund will deploy capital through several partnership models:

• Direct to Danish Companies: Financing for Danish businesses looking to establish or expand operations in Africa.
• Local Companies with Danish Partners: Investments in African companies that are established, managed, or co-financed by Danish partners.
• Local Companies with Danish Commercial Ties: Supporting African companies that use Danish technology or services, act as suppliers to Danish firms, or are part of a joint distribution network.
• African Investment Partners: Co-investing with African financial institutions, development banks, or venture capital funds that back local companies with commercial connections to Denmark.

This approach acknowledges the importance of local expertise and aims to leverage the existing infrastructure of the African venture ecosystem.

Lowering the Barrier to Entry

To incentivise engagement, the Africa Facility is adjusting its standard investment criteria to be more accommodating for ventures focused on the continent.

“All our investments within the framework of the Africa Facility must be both commercially sustainable and create positive societal impact,” said Lars Bo Bertram, CEO of Impact Fund Denmark.

Key changes from the fund’s usual terms include:

• Smaller Ticket Sizes: The minimum investment size has been lowered to DKK 15m ($2.2m) for early-stage ventures and DKK 25m ($3.9m) for more mature companies, a significant reduction from the standard DKK 75m ($11.6m) minimum.
• Adjusted Risk Appetite: The facility will offer more flexibility on return requirements, particularly for investments in markets with high or uncertain country risk.
• Broader Sector Focus: While the fund’s core sectors are green energy, financial services, health, and food systems, it is open to applications from other industries where it has relevant expertise.
• Enhanced Technical Assistance: Increased support will be available for high-potential projects, covering areas like ESG compliance and initial due diligence.

While offering flexibility, all investments must still demonstrate a clear potential for measurable development impact, adhere to high sustainability standards, present a robust business model, and have a viable exit strategy.

Impact Fund Denmark, founded in 1967, has a long history of investing in emerging economies, with approximately 1,350 investments made to date. This new facility represents a dedicated push to channel its experience, and fresh capital, towards bridging the commercial gap between Denmark and Africa.

Discover more exclusive details about these new funds, available only to us, in our database HERE.