N3F: the Impact Fund Tapping Into African SMEs to Address Pressing Food Needs
The African continent is rich with natural resources and an ancient farming tradition, and yet, today, 80% of Africans cannot afford a healthy diet. Undernutrition, as well as higher risk of chronic food-related illnesses such as diabetes, impact millions of people, particularly in Sub-Saharan Africa. Only 50% of the fruit and vegetable volumes needed to meet dietary recommendations are available on the continent, let alone accessible to consumers. African countries are also some of the most vulnerable to climate change; by 2050, under a 3°C warming trajectory, the number of undernourished Africans is expected to rise from 282 million to over 350 million people.
The Nutritious Foods Financing Facility (N3F), led by the Global Alliance for Improved Nutrition and Incofin Investment Management, was conceived in 2017 as a source of innovative financing for agrifood small- and medium-sized enterprises (SMEs) through an impact fund. It officially launched in December 2023, focusing on agrifood SMEs in Sub-Saharan Africa, including Tanzania, Kenya, Mozambique, Nigeria, Rwanda, Burkina Faso, Ivory Coast, Niger, Senegal, Benin, Uganda, Mali, and Ghana (which jointly cover 54% of Africa’s population). SMEs comprise the vast majority of African food business and are an untapped resource for promoting sustainability and accessibility of nutritious food. Nutrition is arguably the development sector with the biggest imbalance between potential impact and level of investment: fewer than 1% of donor investments in development are in nutrition, but 22% of adult deaths are attributable to dietary risks, with an even greater share of child deaths attributable to undernutrition. N3F thus supports African agrifood SMEs to increase the local supply of safe, high-quality, nutritious foods (thereby improving food accessibility); to reduce environmental impact (including through decreased food losses and lower greenhouse gas emissions); and to develop climate change adaptation strategies.
The initiative consists of three main pillars. Firstly, N3F aims to be the first open-ended impact fund with consumer nutrition at its core, delivering mid to long-term financing to SMEs that provide safe and nutritious foods to local consumers in the region. Through a blended finance structure, the fund allows organizations with different objectives to invest alongside each other while achieving their own impact and return goals. N3F believes this structuring approach will reduce the overall investment risk for senior-tranche investors to attract more private capital in the fund.
Second, targeted technical assistance will be provided to investee SMEs to support their business performance, enhance the quality of their products (including nutritional value), strengthen their supply chain, improve their contribution to gender equality, and reduce their environment impact — also increasing SMEs’ ability to serve domestic markets. Finally, a monitoring, evaluation, and learning component will help to track companies’ performance and social impact, while developing metrics and approaches that can be used by others interested in nutrition-sensitive investment.
N3F has developed and tested a framework and tools for sustainable nutrition investing, including an initial screening to assess potential investee SMEs according to the foods they produce as well as an audit tool to assess each SME according to five dimensions: nutrition, environment, supply chain, gender, and job creation. According to the initiative, to date they have obtained $11.5 million from donors and foundations in investments. N3F aims to prove that nutrition is investable and to share tools and lessons learned, with a global goal of influencing others to invest in nutrition in an environmentally conscious way.
Environmental sustainability has been fully integrated into N3F’s design as one of five impact areas to be assessed throughout the investment cycle. For instance, N3F will assess its investees’ plans or processes to reduce natural resource use; reduce carbon footprint; expand renewable energy practices and recycling programs; address food waste/food loss; and reduce plastic packaging pollution, among others. Each SME engaged with the N3F will have its climate and environmental contributions assessed at two stages in the process, first at the investment decision point and later during the monitoring and reporting on the impact of the fund. These assessments will also be used by the technical assistance arm of the N3F to ensure that SMEs have a sound climate agenda.
Learn more about N3F.