Maria Håkansson, Chief Executive Officer, Swedfund
The Swedish Development Finance Institution for Sustainable Investments in Developing Countries (Swedfund) is tasked with making a difference in the world’s least developed nations. Since its founding in 1979, it has made over 240 investments across 60 different countries. Consistent with its mandate to focus on emerging markets, more than 60% of Swedfund’s investments are made in countries in sub-Saharan Africa.
Sweden’s aid to Africa’s development dates back to the 1960s when many African states gained independence and there was widespread confidence in the continent’s capacity to rapidly progress.
As a government agency, Swedfund falls under the purview of the Ministry of Enterprise and Innovation. Foreign Affairs Ministry-managed capital injections and portfolio reflows both contribute to operating costs.
Swedfund, along with 14 other European counterparts, is a member of EDFI—the Association of European Development Finance Institutions, whose common strategy is to create economically, environmentally, and socially sustainable development in developing countries’ private sectors.
Swedfund’s Chief Executive Officer, Maria Hkansson, came to the company in March 2018, from Ericsson, where she served as Vice President, Internet of Things (IoT). Since her emergence in the saddle of Swedfund, she has further accelerated the organization’s efforts to raise private capital for Africa.
Maria Håkansson, Swedfund’s CEO, took on the position in March 2018, from Ericsson, where she was Vice President, Internet of Things (IoT). In the 4+ years, she’s been in the saddle of Swedfund, she has further accelerated Swedfund’s mobilization of private capital for Africa as well as driving the 2030 Agenda for Sustainable Development, which serves as a framework and foundation for Swedfund’s primary mission of poverty reduction (SDG 1).
In all of these, she tells Africa Executive that her zealous leadership of Swedfund is motivated by where the organization is heading rather than what she wants to achieve.
Could you give us any hints as to what prompted Swedfund to begin its operations in Africa?
Historically, Sweden as a country has had a strong focus on development aid to Africa. It has its background in the 1960s when many of Africa’s states became independent, and the decade was marked by development optimism and a belief in a rapidly improving future.
In Sweden, an important development assistance bill was adopted in 1962, which came to affect the focus of Swedish development assistance in the coming decades. In its introduction, the main goal of development assistance is described as being to “raise the standard of living of poor people”. It also talks about aid promoting economic growth, economic and social equality, economic and political independence, and democratization. The one percent target also became official policy. That is, the goal is that one percent of GNI should go to aid.
Swedfund was founded in January 1979 to promote manufacturing industries in developing countries and is the result of an investigation appointed by the then government: “Sweden’s development cooperation in the industrial field” and continued on this path. Swedfund has the same goals as Swedish development cooperation but uses different tools. We invest in equity, provide loans, and use funds to reach more companies and people.
According to our owner’s instructions, Swedfund’s remit is to operate in the least developed countries, where there is the greatest opportunity to make a difference. We have therefore opted to have a geographical focus on sub-Saharan Africa and the most vulnerable countries in Asia. More than 60 percent of Swedfund’s investments take place in sub-Saharan Africa.
As a state-owned development finance institution, can you tell us about how Swedfund’s vision fits into the African narrative?
Swedfund is the Swedish Development Institution with the mission to fight poverty through sustainable investments, and we have a long history of being present in Sub-Saharan Africa.
We invest to create jobs, address inequality and climate challenges, and increase access to critical products and services like electricity and healthcare. To advance sustainable development, a strong private sector with viable businesses is key.
Swedfund’s strong impact mission permeates everything we do, and we have a well-established business model where impact is our starting point.
Swedfund has a long history of investments in sub-Saharan Africa. As early as 1999, we established an office in Harare, which later closed due to unrest in Zimbabwe, and the local office in Nairobi was established in 2007 to continue the work in Africa.
An example of an early investment is in 1994 when the company MTC (Mobile Telecommunications Limited) in Namibia was started as a joint venture between Telia International, Swedfund, and the state-owned Namibia Post & Telecom Holdings (NPTH).
The investment made by Swedfund was assessed as very risky. When Swedfund in May 2004 divested its investment in MTC Namibia to the largest shareholder, NPTH, the company had developed enormously through investments. By the end of that year, base stations covered more than half of the country and it is now Namibia’s largest mobile operator.
What would you describe as Swedfund’s unique value-add in the African markets in which it operates?
We have great knowledge of the region with more than 60% of our investments in Sub-Sahara Africa combined with strong sector expertise in Energy & Climate, Financial Inclusion, and Sustainable Enterprises. We have a well-proven business model, and we have a well-developed approach to sustainability, and an established way of measuring results. This gives us a broad range of excellent opportunities to contribute to sustainable businesses in developing countries.
Swedfund assesses additionality from three perspectives: financial; sustainability; and the impact on society that an investment generates. That we contribute in all three dimensions is a prerequisite for us to go ahead with a new investment. In addition to capital, it may be a question of providing competence to help companies develop in the right direction. We often use technical assistance (TA) for quality-enhancing initiatives amongst portfolio companies and to increase the overall development effects that the business generates.
Creating inclusive growth, tax income, and job opportunities are some of Swedfunds’ objectives. What stands out for you as a key driver and how has Swedfund leveraged this to scale in its investments in Africa?
One of the key drivers is the role of SMEs that account for more than 80% of all jobs – to provide access to capital for entrepreneurial SMEs and to ensure environmentally, socially, and ethically sustainable ways of working.
Digitalization is another important driver and can be an accelerator to sustainable and inclusive growth. To realize this, we invest in infrastructure, electricity, and connectivity, as well as in sustainable business models based on local needs.
How does Swedfund ensure its strategies are aligned with the current business operating environment in Africa?
We spend significant time understanding and monitoring the business context in which we invest—it is part of our analysis during the due diligence phase but also during active ownership. We have a local presence through our regional office in Nairobi, and we are establishing a new office in Abidjan. We have a broad network with investors, partners, other DFI’s, embassies, NGOs, and others with whom we have a continuous dialog. We also have an internal function that specializes in following trends and development in a number of areas, including political, macroeconomic, contextual risk, and human rights, as well as specific development in our investment sectors.
Now, let’s look at the term “combat poverty”. What does that mean to you? Is it simply about ‘investing in and developing sustainable business in the world’s most challenging markets, or is there more to it than that?
As a DFI, we have a deep understanding of the complexity of our mission, and we are constantly working to ensure that we are not only creating financially viable companies. Instead, we are taking our starting point in impact and our mission, which includes the following goals, that all in all lead to combatting poverty.
According to Swedfund’s owner’s instructions, the work of the organization must contribute to the attainment of the goal of Sweden’s Policy for Global Development (PGD). Swedfund’s overarching mission is to contribute to poverty reduction by making sustainable investments in developing countries. In cooperation with our strategic partners, we will contribute to financially, environmentally, and socially sustainable investments that create better living conditions for people living in poverty and oppression.
Our business model is centered on generating results within three pillars: impact on society; sustainability; and financial viability. These pillars permeate every stage of the investment process—right from the initial assessment during the investment phase, through the active ownership phase and all monitoring of performance, and finally exit from the investment.
We are also using technical assistance (TA) to support companies to advance their agenda on gender, climate, and environment, jobs with decent working conditions, etc. If we don’t have the competence ourselves, we establish partnerships to learn from others (Kvinna till kvinna – model to detect gender-based violence in our mission). We do not operate in a vacuum; we thoroughly analyze human rights and work to assist our portfolio companies in developing competence in the responsibilities that adhere to the United Nations Guiding Principles on Business and Human Rights.
What are some of the most effective ways in which Swedfund has promoted gender equality in its portfolio companies? How successful have they proved to be?
The 2X Challenge is a G7 initiative that aims to boost gender-lens investments to promote women’s economic empowerment. Swedfund has adopted different approaches in our work relating to issues concerning women’s economic empowerment and gender equality, including through an educational program for our funds which has given them the knowledge and tools they need to work on these issues on their way to meeting the 2X criteria.
The 2X Challenge is a G7 initiative that aims to boost gender-lens investments to promote women’s economic empowerment. Our mission objectives include requiring 60 percent of the companies in our portfolio to meet the 2X criteria. Data from 2020 indicates that systematic work produces results, as 60 percent of our investments are considered to fulfill at least one of the 2X Challenge criteria.
We can also use TA-funds for initiatives aimed at systematizing and improving the portfolio companies through the implementation of management systems, Gender Action Plans, and training initiatives relating to human rights and gender equality. We have developed our own implementation of the Women4Growth talent program to strengthen the work to combat gender-based violence in the portfolio.
In driving your investments in the region, what forms of strategic partnerships have proved to be fruitful?
We work with local partners, funds, and financial institutions. In our role as a DFI, we also benefit from collaborating with other development finance institutions.
Swedfund also works in partnership with other organizations, including civil society organizations, development organizations, as well as traditional aid organizations.
What would you say is the single most influential factor in determining your investments in Africa?
We really want to be involved in creating more jobs in a sustainable way. And therefore, perhaps the most important factor for success is to find projects where we can make a difference through our additional role and that can be developed in the right way.
How big (and small) in financing terms are the projects Swedfund supports?
Our typical investment amount is in the range of USD 5–25, and we always seek to co-invest with other like-minded partners. As a result, we tend not to invest directly in smaller projects. However, one of the reasons for providing financing to, for example, banks as well as investing in funds, is that this provides us with an opportunity to, indirectly, reach smaller projects.
Tell us something about your participation In Africa’s power transmission line projects and collaboration with the AFDB
Effective transmission is very important to a stable and sustainable energy supply, and frequently, countries in the region suffer substantial losses due to problems in their network. Generally, we, therefore, focus on projects to improve energy efficiency and renewable energy sources. In addition, an important objective for us is to support the project owner’s strategy to increase connectivity in their countries, which is vital to economic growth and poverty reduction.
To give you a few examples – in collaboration with AfDB, we support Mozambique in the development of the new National Control Center for the grid. AfDB and other partners have committed to funding this crucial investment for the country’s energy development strategy. Swedfund is also supporting the development of interconnectors between Zambia and Malawi, as well as Angola and Namibia, in collaboration with the Southern Africa Power Pool and the African Development Bank. In these projects, we focus on environmental and social impact assessments. Furthermore, Swedfund and AfDB are jointly working on a project to develop a model for increased private investments in transmission infrastructure in the region.
What are some of the most significant projects in which Swedfund has been involved in Africa?
I am, of course, very proud of our entire portfolio and the projects we have invested in, but if I’m going to give two examples, they’re Kasha and African River. Kasha’s platform in Rwanda and Kenya enables access, education, and confidential distribution of women’s contraceptives, menstrual, and health products, primarily to underserved women. The African River fund will be investing in small and medium-sized companies in Uganda, DRC (Democratic Republic of Congo), and Angola. And Serengeti Energy is an independent power producer focused on greenfield investments in the renewable energy sector across Sub-Saharan Africa.
Looking back on your extensive career in telecommunications, what do you consider to be the most significant difference between working for a development-finance institution?
The main difference is the business model, where the focus at Swedfund is to find the balance between impact, sustainability, and financial viability. It is not about maximizing profitability, but growth and financial returns are prerequisites to ensure a viable business that can generate strong impact results in a sustainable way.
The other difference between my role at Swedfund and at Ericsson is how to view risks.
Taking risks is a pivotal part of Swedfunds’ mission and business. By taking risks and highlighting the opportunities, we are catalytic and aim to act as a bridge to private capital and boost private investment in developing countries. The goal of risk management work is to optimize risks based on mission goals and a business model, not to reduce risks as much as possible.
As a telecommunications senior executive, what attracted you to the development finance industry?
The mission is to fight poverty and to be able to use my experience in finance, investments, sales, digitalization, and new business models in a different context.
I also find it very rewarding to work with a business model that includes and gives the same weight to sustainability and impact as it does to financial viability.
You certainly must have been setting out lots of different ambitions. What is the one goal above all others that you hope the Swedfund will have achieved by the end of 2022? And why is it so important?
We have an ambitious business plan with a target of growth — so for 2022, the most important thing is to achieve our targets of a growing portfolio while maintaining our very strong results in impact and sustainability. I also wish for the continued strong development of our portfolio companies in a very challenging environment.
As CEO of Swedfund, what’s the biggest challenge that you hope to accomplish before the end of your tenure?
We have a polycrisis that puts pressure on the possibility to achieve Agenda 2030. We have seen that development has stalled or even gone backward as a result of the effects of the COVID-19 pandemic, Russia’s invasion of Ukraine, and the accelerating threat of climate change. In this context, the relevance of DFI’s has increased.
It’s not so much about what I, as CEO, want to accomplish but about where our organization is headed. We have both grown and developed and received a larger capital injection in recent years, and I want us to continue to grow and deliver on our mission. I have a great job and want to continue for a long time.
