THEAFRICAN AGRICULTURE FUND

AFRICAN AGRICULTURE FUND

• The opportunity of an investment fund

• Investment strategy and targets

• Fund governance

• Fund structure

• Technical Assistance Facility

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)

• 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

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

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)

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 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)

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

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 financing

Investment strategy and targets (3)

• 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

• 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)

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

Sponsors

Funding

CommercialInvestorsFunding

AFRICAN AGRICULTURE

FUND

Category A/BCategory A/B Category CCategory C

ADVISORY BOARD

INVESTMENT COMMITTEESME Committee

T A F (Grants)

InvestmentsSmall-size Company Window

USD 150,000 – 4,000,000

InvestmentsMedium/Large-size Company Window

USD 15,000,000 on average

Fund Manager

Management Agreement

Technical Assistance Facility - TAFTechnical Assistance Facility - TAF

InstitutionalInvestors Funding

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 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 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

• 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

• 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

Thank you for your attention