IFC in AgribusinessFinancing for Agri Food GrowthAgribusiness Forum, October 2011Saleem KarimjeeSenior Manager, Southern Africa Regionskarimjee@ifc.orgIFC Johannesburg14 Fricker Road, Illovo 2196 T. +27 11 731 3015
Overview of IFC IFC Fiscal Year June 2011 Highlights• Largest multilateral source of Committed Investments : $18.7 billion loan/equity financing for the emerging markets’ private sector Commitment for own acct:` $12.2 billion Mobilization: $6.5 billion• AAA rated by S&P and Moody’s # of new Projects: 518• Profitable every year # of Countries Invested: 102 Committed Portfolio by Industry Committed Portfolio by Region• 3,300+ staff Subnatio• In-house syndications department Private nal Finance; Agri 6% Global; Equity; South Sub- 2% 1% working with over 200 banks 5% Manufact uring & Asia; 11% Saharan Africa; Services; 13%• Preferred creditor status 17%• Advice on environmental and Health & East Asia and social issues. Financial Pacific; Latin Markets; Educatio 14% America; 37% n; 3% 25%• IFC E&S Performance Standards adopted through the Equator Infrastruc ture; 16% Principles by over 50 global Europe institutions and Middle Oil, Gas, Central East and Mining & Asia; North ICT; 4% Chemical 25% Africa; s; 9% 11% 2
IFC has reach in 100+ country and regional advisory services offices worldwideDrawing on our experience and lessons-learned, we share sector best practices to the benefit of ourclients IFC’s Global Reach Moscow Almaty Washington Istanbul Cairo New Delhi Mexico City Hong Kong Dakar Port-of-Spain Bogota Nairobi São Paulo Johannesburg Buenos Aires IFC HQ/Hub Offices IFC Operational Centers IFC Country Offices 3
IFC’s Strategic Thrust in AgribusinessIncreasing rural incomes, improving food security, and diversifying exports throughcompetitive commercial agriculture Challenges Focus on 3 Business Models • Poor competitiveness, logistics & infrastructure Inclusiveness: broad-based supply chains • Low productivity • Investment Climate/policy/sector issues • Protection and limited market sizes • Smallholder capacity building • Resource constraints: water, land, energy, • Engagement with Commodity Roundtables biodiversity • Finance through FI’s MFI’s; GAFSP • Weak investment conditions, policy environment, corporate governance, sponsor quality Wholesaling: leveraging large traders, • Fragmented supply chains aggregators, and commercial banks Approach • Direct finance with Advisory Services • E&S engagement through supply chain Integrated Investment and Advisory approaches: Processing, large scale agriculture: project/ corporate finance • Address investment climate/policy constraints • South-South focus • Upgrade supply chains with finance and production expertise through commercial • Collaboration with WB on large scale farming intermediaries • Co-investment with private equity funds • Expand mechanisms for crop finance, risk management 4
IFC’s Annual Commitments in Agribusiness 2.0 bn 2.0 bn 2.000 Agri-Wholesaling Rural and Trade Finance 1.800 Fertilizers 1.600 Food Retail 1.4 bn Agri Infrastructure 1.3 bn 1.400 Equity Funds 1.200$ Millions Agribusiness Production & Processing 1.000 848 m 800 546 m 600 483 m 406 m 347 m 400 304 m 200 120 m 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 5
IFC Africa Agribusiness – General Investment Criteria A project must be commercially and economically viable and offer IFC the potential for a commercial return while also providing development impact A project and its supply chain must be environmentally and socially sustainable IFC typically finances expansion projects of an existing company, rather than green field projects (i.e. start-up). However, IFC can support a green field projects if its sponsor has significant relevant industry experience (farming, food processing etc.) and financial strength A project sponsor is expected to inject 40-50% equity of the total project cost Security and support – mortgage on land/equipment, project completion from sponsor, etc. Integrity/ethics of sponsor and company IFC cannot finance more than 50% of a project’s total cost and IFC’s exposure shall not exceed 25% of a company’s total capitalization (term loans plus shareholders’ equity) based on post project completion. 7
ProductsIFC offers a wide range of products based on client needs: Direct Investments Wholesale Finance Advisory Services Corporate Loans Credit facilities for Investment Project Finance – on-lending Climate Senior Expansion, Greenfield (only Risk Sharing Access to Finance Debt w/ sponsors with financial Facility (guarantee Sustainable capability & experience) on portfolio) Business Advisory Short-term Finance Partial Credit (Environment, Guarantee Linkages, IFC Subordinated loans Against AIDS, Investment inMezzanine Income participating loans Private Equity Corporate / Quasi- Funds Governance) Convertibles Equity Infrastructure Other hybrid products Structured Finance Advisory Up to 20% shareholding Equity Long term investment horizon 8
Selected Agribusiness Transactions in Africa Salala Rubber Ethiopian Coffee Liberia GRIMAS Ethiopia Coca Cola SABCO Loan: $10 million Mali, Cote d’Iovire, Senegal Guarantee Facility: Up to $10 Africa Region Rehabilitation & expansion of Loan €14 million million Loan: $57 million existing rubber plantation, Expansion of operations of A 3-year, up to $10 million revolving Expansion and modernization ofrenovation of processing facilities & carbonated soft drinks, plastic guarantee facility on the selected operations in South and East Africa. provision of working capital. packaging and carbon dioxide banks’ portfolio of loans to coffee Expansion into Asia. farmer cooperatives Committed: 2010 Committed: 2010 Committed: 2006, 2002 Committed: 2008 Bakhresa Grain GOPDC Milling Ghana Mozambique and Rwanda Loan: $12.5 million Loan : $10.5 million Diversification oil palm plantation Construction of a new mill in and processing company in Ghana Mozambique and purchase of into refined oil business. transportation equipments in Rwanda. Committed: 2007 Committed: 2010 Tantalizers Food Concepts Bonite Bottlers Limited Nigeria Nigeria Tanzania Loan and Equity: $8.5 million Loan and Equity: $20 million Loan: $10 million Expansion of restaurant chain to Expansion of restaurant chain, Modernization and expansion of supply convenient, affordable bakery capacity, and backward existing plant in Moshi.packaged food for urban populations integration into poultry farm Committed: 2005 Committed: 2010 Committed: 2011 Kongoni River Farms Merec Karsten Farms Zambeef Kenya Mozambique South Africa Zambia Loan: $2 million Loan $7 million Loan: $7.2 million Loan $10 million Expansion and modernization of Expansion & optimization of mill Expansion of farming operations & Expansion of livestock and retailing operations in Zambia and Nigeria. existing horticulture and flower operations in Maputo, including establishment of fruit trading, logistics production in Timau. investment in a new pasta plant. and handling services in South Africa. Committed: 2010 Committed: 2005 Committed: 2008 Committed: 2006 9
Highlight on ChallengesFood Security • Key facts World population expected to grow by 50 per cent by 2050. Food production will need to rise 50% by 2030 to meet growing demand. Today 500 million small farms in developing countries support 2 billion people – one third of humanity. In December 2008 FAO’s Food Price Index was 28 per cent higher than in 2005. Domestic food prices remain very high in several developing countries affecting access to food of low-income population groups. Government spending on agriculture in the world’s poorest countries averages 4 per cent of public expenditure. Development aid to agriculture was 4.6 per cent in 2007, compared with 18 per cent in 1979. • Source: UN Food and Agriculture Organization 10
Highlight on Global Agriculture and Food Security Program Global Agriculture and Food Security Program (GAFSP) is a multilateral mechanism set up in response to a request from the G20 in Pittsburgh in 2009. GAFSP addresses underfunding of country and regional agriculture, and food security investment plans being developed in countries by governments, donors and other stakeholders. Channels multiple sources of donor financing through a common mechanism, reduces recipient costs for aid, aligns country programs. GAFSP has a Public and a Private Sector window to support food security.• The public sector window assists country-led or regional programs. It is under the external governance of a steering committee composed of representatives from: the Trustee, UN agencies, Supervising Entities (MDBs, World Bank, IFAD), and civil society organisations.• GAFSP Public Sector Window so far awarded agricultural programs of12 countries: Bangladesh, Cambodia, Ethiopia, Haiti, Liberia, Mongolia, Nepal, Niger, Rwanda, Sierra Leone, Tajikistan, Togo. 11
Private Sector Window of GAFSP IFC manages Private Sector Window of GAFSP: designed to provide long and short term loans, credit guarantees and equity to support private sector activities for food security. IFC nominated by G-20 to be the sole implementing entity of the PSW. The private sector window deploys instruments and partnerships to increase agricultural Sustainable Agriculture productivity, improve market access of SMEs/MSMEs, support innovation in financing and technology, improve access to capital byImproved InnovationAccess to & small holders/companies in the agribusiness sector Capital Improved Technology = increase the commercial potential of SMEs Food Security and farmers in low-income countries. Improved IFC aims to raise $1 billion: $700 million for Improved Market Productivity Access investments, $200 million for concessional financing, $100 million for technical assistance. 12
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