Actis Africa Agribusiness Fund

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Actis Africa Agribusiness Fund
October 2007
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Who is Actis?
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Leading Emerging Markets Private Equity Firm with
a Focus on Africa

• Who is Actis?
• 60 years experience in investing in emerging
  markets
• Over US3bn funds under management and an
  additional US1.4bn of new funds committed
• Focus on
• Africa, Asia and Latin America
• Expansion capital, buyouts and privatisations
• Actis in Africa
• Managing a new African fund of US550m
• Single investments US10m-75m
• Can syndicate equity to co-investors for large
  transactions
• Use of leverage enables access to large
  transactions
• Property Fund of US100m
• Agribusiness Fund of US100m
• Empowerment Fund of US50m
• To finance participation of African entrepreneurs
  in transactions

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Investment Criteria/Strategy

• Actis generally targets established firms in
  growth sectors
• Agriculture, Consumer goods, Telecommunication,
  Financial Services, Mining Industrials
• Specialised infrastructure funds Property,
  Transport, Power and Agribusiness
• Strong management team track record and business
  principles
• Clear and realistic exit route with investment
  horizon of 3-7 years
• Align interests of all major stakeholders (other
  shareholders, management, regulators, etc.)
• Investment range, US10m to US75m and stakes
  from 25 to 100
• Focus of risk capital provision
• Expansion capital (organic/MA)
• Change of control transactions (MBOs, MBIs, P2P,
  strategic alliances)
• Privatisations (generally under-capitalised
  requiring modernisation)
• Appropriate combination of equity, mezzanine
  finance and debt

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Actis value-add approach

• Leverage global contacts with Operators, vendors,
  government and regulators to help business grow
• Leverage office network for cost effective market
  intelligence, and business development

• Able to make follow on Investments
• Leverage contacts with lenders and equity
  investors

• Appoint industry experts to the Board
• Participate in building effective strategy

• Reputation for transparency integrity/business
  principles
• Introduce high standards of corporate governance
  and financial management
• Maximise shareholder and exit values

• Access to network of managers assist in
  recruitment
• Able to second staff if needed

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Agribusiness Fund
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Overview and Investment Strategy
Agribusiness Fund Agribusiness Fund Agribusiness Fund
92 million fund with CDC as Sole Investor Established in January 2006 92 million fund with CDC as Sole Investor Established in January 2006 92 million fund with CDC as Sole Investor Established in January 2006
Sample Portfolio Companies Sample Portfolio Companies Sample Portfolio Companies
Company Sector Country
Cavally Rubber Cote d'Ivoire
Mpongwe Dev't Arable Farming Zambia
Kilombero Valley Teak Forestry Uganda/Tanzania
Tanganyika Wattle Forestry Tanzania
Nanga Farm Sugar Zambia
Tanzania Tea Packers Tea Tanzania
Equatoria Teak Forestry Uganda/Sudan
Grain Bulk Handling Agri-infrastructure Kenya
Cavally Rubber Cote d'Ivoire

• To invest in equity and quasi-equity in the
  African Agribusiness sector
• comprises activities related to production and
  processing of, and services related to (i.e.
  inputs, logistics, distribution and marketing)
  biological products, plant or animal, whether for
  food or non-food purposes
• Investment type
• mainly expansion capital in both new and existing
  investments
• includes rehabilitation and buy-and-build
• Control
• Control preferred but not exclusively
• New investment focus
• Low capital intensity, participation across value
  chain
• No greenfield start ups
• Deal size will be US4m to US15m
• Follow-on investments
• From US1m
• Exposure
• Country Max 50 Sector - Max 33

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Critical Success Factors

• Back first class, local, aligned and experienced
  business management teams and sponsors
• Take control positions or, exceptionally,
  minority positions with significant influence
• Invest in value add, market led, established
  businesses in free markets
• Experienced sector specific and focussed
  management team at fund level
• Access to well established Africa wide Actis
  presence and deal sourcing
• Rigorous application of the Actis investment and
  decision making process

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Lessons Learned from Past

• Importance of management
• First class, local, aligned management and
  sponsor
• Markets
• Growth potential free not adversely controlled
  markets
• Maximise competitive advantage
• Agricultural production where climate and soils
  are word class locate labour intensive
  industries where labour is readily available
• Production of basic commodity crops not
  normally attractive
• Price controls subsistence farmer competition
  land / political issues
• Agribusiness risk mitigation
• Location competitive production advantage
  invest in added-value operations outgrower model
• Investment type
• Expansion capital preferred no greenfield start
  ups
• Infrastructure limitations
• Leads to excessive capital cost acquire
  developed assets at discount to cost
• Exit
• Achievable, but timescale can be longer,
  mitigated by yield-based return
• Long term view
• Agribusiness and forestry not wholly suited to
  closed end fund structure

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New Investment Criteria - Deal

• Fully commercial return on capital
• Attractive value/entry price proposition
• Must have alignment with management,
  shareholders and other stakeholders
• Must have influence for value add, exit etc
  (control / strong shareholder rights)
• Clear route to exit, with Actis ability to
  control
• Proprietary deal flow preferable
• Enhances CDCs reputation as a responsible
  investor

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Challenges for Private Equity in Africa

• Management skills
• Limited entrepreneurial/managerial talent with
  successful track record
• Information availability
• Requires rigorous due diligence, often using
  external firms industry experts
• Pricing risk
• use of external experts to address, limited
  comparables
• Debt availability
• Depth of financial markets and cost of debt
• Exit risk
• Capital redemption mechanisms and strategic buyer
  screening to assess exit prospects
• Legal and regulatory framework
• Ability to exercise legal agreements

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Contact Details
Paul Kavuma Investment Principal
Michael Turner Partner
Norfolk Towers, Kijabe Street, 1st Floor P O Box
43233-00100 Nairobi, Kenya Tel [phone]
952 Mob 254 (0) 734 770978 Fax [phone]
Norfolk Towers, Kijabe Street, 1st Floor P O Box
43233-00100 Nairobi, Kenya Tel [phone]
952 Mob 254 (0) 734 770978 Fax [phone]