THE AFRICAN AGRICULTURE FUND

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THEAFRICAN AGRICULTURE FUND
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AFRICAN AGRICULTURE FUND

• The opportunity of an investment fund

• Investment strategy and targets

• Fund structure

• Fund governance

• Technical Assistance Facility

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The opportunity of an Investment Fund (1)

• The rise in global food demand will require
  doubling food production by 2050

• Private initiatives to increase agricultural
  production will be boosted by continued high
  market prices ( risk of volatility) in the
  medium-term and by more supportive and effective
  public policies

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The opportunity of an Investment Fund (2)

• Growing opportunities in domestic and regional
  food markets / Investments giving priority to a
  regional market approach will reduce the
  vulnerability of African production

• The implementation of this type of investment
  requires FOs, producers organizations and
  enterprises financially sound with sufficient
  management skills and capacities, capital to
  mobilize financing resources

• New and coordinated mobilization of the
  international community (FAO Summit, Doha
  Conference, EU Food Facility, G 8 L Aquila)
  within the framework of a Global Partnership for
  Food Security and Agriculture

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The  missing middle  in African
agro-enterprises
Source Market Matters, New York,April 2009 for
UNIDO and FAO
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The opportunity of an investment fund (3)

• AGRA, AfDB, AGRA, BOAD, IFAD and AFD have
  consequently decided to promote the African
  Agriculture Fund to boost Africas agriculture
  and agro-industry (Letter of Intent )
• South Africa-based Phatisa L.L.C. selected as
  Fund Manager.
• The Fund has an initial target size of US150M to
  become operational (November 2009) and expects to
  raise additional commitments up to an aggregate
  capital amount of US 500M

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Investment strategy and targets (1)

• Targets / Business Partners

• Operate in food production industries or provide
  financial services to small agri-business
  operators and SMEs, cooperatives or farmers
  organisations

• Have a clear business plan focusing on developing
  and/or diversifying their products/services
  and/or sectoral integration    

• Ability to invest in the value chain to reduce
  transaction costs of the producers/processors /
  storages/marketing interfaces

• Ability to grow their markets within the region
  levels or to develop export opportunities      

• Ability to maintain satisfactory payment terms
  to suppliers especially smallholder farmers

• Implement measures to protect and continuously
  mitigate their impact on the environment   (
  social and environmental standards)

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Investment strategy and targets (2)

• Main Investment sectors

• Cereals production (rice, maize wheat)  

• Roots and tubers   (Cassava ) 

• Livestock and diary products   

• Fruit products

• Seeds production and fertilizers
•        

• Fats and oils

• Rural domestic credit and insurance institutions

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Investment strategy and targets (3)

• Investment financing

• Equity and quasi equity products

• Technical Assistance Facility (TAF)

• Two windows of financing enterprises
• A small-medium size company financing window
  offering investment between US 0.15 M and US 4M
• A large company financing window for investment
  up to US15M
• The fund will invest a minimum of 20 of the
  Final Closing in SMEs and micro-finance sectors

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Investment strategy and targets (4)

• Investment strategy

• Investment in a companys own funds will not
  exceed 20

• The Fund will invest no more than 30 and no less
  than 20 of its total commitment in any single
  region (Southern, Eastern, West and Central,
  North and Eastern Mediterranean)

• Investment in a sector will not exceed 25 of
  its total commitments and will not participate in
  any hostile transaction.

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Investment strategy and targets (5)

• Fund term and exit strategy

• Five year commitment period

• Seven/ten year investment maturity

• Exit strategy shall be, as the case may be,
  to provide for the option
• for local agricultural producers to acquire
  interests in the targets

• Average IRR per target shall be around the
  mid-teens

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Fund structure
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Fund Governance

• Fund Manager. Responsible for the overall
  financial and administrative management for the
  fund Deal sourcing .
• All diligences required further to targets
  investments
• Representation of the Fund with respect to
  targets board of directors or equivalent board
  or committee
• Definition of exit strategy
• Advisory Board Composed of independent members
  and representatives of investors The Fund
  manager is entitled to participate in the
  deliberations, but will not be a voting member
• Guidance on the implementation of the Funds
  investment strategy
• Ensuring adherence of the Fund to its investment
  charter.
• Resolving conflict of interests
• Investment Committee. Comprising representatives
  of the Fund. promoters or investors.
• All investment decisions of the Fund, on the
  basis of reports of evaluations and due
  diligence performed by the manager
• Post-investment monitoring,
• Reviewing progress of the Funds portfolio and
  Fund manager performance

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Main Objectives of the TAF

• To strengthen the management and the technical
  capacities of small scale farmers and SMEs to
  access to the resources of the AAF and of the
  business development financing
• To further develop the capacities of the
  agricultural financial sector ( to provide
  efficient services to SMEs)

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Type of technical assistance

• Development of outgrowers and/or contract farming
  schemes
• Business plans for expansion of SMEs
• Capacity-building for managers in areas such as
  basic business principles, financial and risk
  management, human resource management,
  information systems and marketing,
  entrepreneurial coaching
• Agronomical training and contract work for
  affiliated smallholders farmers/producers
  associations
• Market research and surveys and market linkages
  between SMEs and various actors of value chains,
  including technology and knowledge transfer
• Assistance with quality certifications,
• Training for microfinance organizations staff and
  microfinance product development and research to
  agrobusinesses and SMEs

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• Thank you for your attention