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THE AFRICAN AGRICULTURE FUND. AFRICAN AGRICULTURE FUND. The opportunity of an investment fund. Investment strategy and targets. Fund structure . Fund governance. Technical Assistance Facility . The opportunity of an Investment Fund (1).

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african agriculture fund
AFRICAN AGRICULTURE FUND
  • The opportunity of an investment fund
  • Investment strategy and targets
  • Fund structure
  • Fund governance
  • Technical Assistance Facility
the opportunity of an investment fund 1
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
the opportunity of an investment fund 2
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
the missing middle in african agro enterprises
The « missing middle » in African agro-enterprises

Source : Market Matters, New York,April 2009 for UNIDO and FAO

the opportunity of an investment fund 3
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 Africa’s 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 US$150M to become operational (November 2009) and expects to raise additional commitments up to an aggregate capital amount of US$ 500M
investment strategy and targets 1
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)
investment strategy and targets 2
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
investment strategy and targets 3
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 US$15M
    • The fund will invest a minimum of 20% of the Final Closing in SMEs and micro-finance sectors
investment strategy and targets 4
Investment strategy and targets (4)

Investment strategy

  • Investment in a company’s 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.
investment strategy and targets 5
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
fund structure
Fund structure

Institutional

Investors

Category A/B

Category C

Commercial

Investors

Funding

Funding

Technical Assistance Facility - TAF

Fund Manager

AFRICAN AGRICULTURE FUND

Sponsors

Management

Agreement

Funding

ADVISORY BOARD

INVESTMENT

COMMITTEE

SME Committee

Investments

Small-size Company Window

USD 150,000 – 4,000,000

Investments

Medium/Large-size Company Window

USD 15,000,000 on average

T A F

(Grants)

fund governance
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 target’s board of directors or equivalent board or committee;
  • Definition of exit strategy

Advisory BoardComposed 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 Fund’s 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 Fund’s portfolio and Fund manager performance
main objectives of the taf
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)
type of technical assistance
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