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  2. 2. AFRICAN AGRICULTURE FUND <ul><li>The opportunity of an investment fund </li></ul><ul><li>Investment strategy and targets </li></ul><ul><li>Fund governance </li></ul><ul><li>Fund structure </li></ul><ul><li>Technical Assistance Facility </li></ul>
  3. 3. The opportunity of an Investment Fund (1) <ul><li>The rise in global food demand will require doubling food production by 2050 </li></ul><ul><li>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 </li></ul>
  4. 4. The opportunity of an Investment Fund (2) <ul><li>Growing opportunities in domestic and regional food markets / Investments giving priority to a regional market approach will reduce the vulnerability of African production </li></ul><ul><li>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 </li></ul><ul><li>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 </li></ul>
  5. 5. The « missing middle » in African agro-enterprises Source : Market Matters, New York,April 2009 for UNIDO and FAO
  6. 6. The opportunity of an investment fund (3) <ul><li>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 ) </li></ul><ul><li>South Africa-based Phatisa L.L.C. selected as Fund Manager. </li></ul><ul><li>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 </li></ul>
  7. 7. Investment strategy and targets (1) <ul><li>Targets / Business Partners </li></ul><ul><ul><li>Operate in food production industries or provide financial services to small agri-business operators and SMEs, cooperatives or farmers organisations </li></ul></ul><ul><ul><li>Have a clear business plan focusing on developing and/or diversifying their products/services and/or sectoral integration     </li></ul></ul><ul><ul><li>Ability to grow their markets within the region levels or to develop export opportunities       </li></ul></ul><ul><ul><li>Ability to maintain satisfactory payment terms to suppliers especially smallholder farmers </li></ul></ul><ul><ul><li>Implement measures to protect and continuously mitigate their impact on the environment   ( social and environmental standards) </li></ul></ul><ul><ul><li>Ability to invest in the value chain to reduce transaction costs of the producers/processors / storages/marketing interfaces </li></ul></ul>
  8. 8. Investment strategy and targets (2) <ul><li>Main Investment sectors </li></ul><ul><ul><li>Cereals production (rice, maize & wheat)   </li></ul></ul><ul><ul><li>Roots and tubers   (Cassava …)  </li></ul></ul><ul><ul><li>Livestock and diary products     </li></ul></ul><ul><ul><li>Fruit products </li></ul></ul><ul><li>Seeds production and fertilizers </li></ul><ul><ul><li>        </li></ul></ul><ul><li>Fats and oils </li></ul><ul><ul><li>Rural domestic credit and insurance institutions </li></ul></ul>
  9. 9. <ul><li>Investment financing </li></ul>Investment strategy and targets (3) <ul><li>Equity and quasi equity products </li></ul><ul><li>Technical Assistance Facility (TAF) </li></ul><ul><li>Two windows of financing enterprises: </li></ul><ul><ul><li>A small-medium size company financing window offering investment between US$ 0.15 M and US $4M </li></ul></ul><ul><ul><li>A large company financing window for investment up to US$15M </li></ul></ul><ul><ul><li>The fund will invest a minimum of 20% of the Final Closing in SMEs and micro-finance sectors </li></ul></ul>
  10. 10. Investment strategy and targets (4) <ul><li>Investment strategy </li></ul><ul><li>Investment in a company’s own funds will not exceed 20% </li></ul><ul><ul><li>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) </li></ul></ul><ul><ul><ul><li>Investment in a sector will not exceed 25 % of its total commitments and will not participate in any hostile transaction. </li></ul></ul></ul>
  11. 11. Investment strategy and targets (5) <ul><li>Fund term and exit strategy </li></ul><ul><li>Five year commitment period </li></ul><ul><ul><li>Seven/ten year investment maturity </li></ul></ul><ul><ul><ul><li>Exit strategy shall be, as the case may be, to provide for the option </li></ul></ul></ul><ul><ul><ul><li> for local agricultural producers to acquire interests in the targets </li></ul></ul></ul><ul><ul><ul><li>Average IRR per target shall be around the mid-teens </li></ul></ul></ul>
  12. 12. Fund structure Sponsors Funding Commercial Investors Funding AFRICAN AGRICULTURE FUND Category A/B Category C ADVISORY BOARD INVESTMENT COMMITTEE SME Committee T A F (Grants) Investments Small-size Company Window USD 150,000 – 4,000,000 Investments Medium/Large-size Company Window USD 15,000,000 on average Fund Manager Management Agreement Technical Assistance Facility - TAF Institutional Investors Funding
  13. 13. Fund Governance <ul><li>Fund Manager . Responsible for the overall financial and administrative management for the fund Deal sourcing . </li></ul><ul><li>All diligences required further to targets investments; </li></ul><ul><li>Representation of the Fund with respect to target’s board of directors or equivalent board or committee; </li></ul><ul><li>Definition of exit strategy </li></ul><ul><li>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 </li></ul><ul><li>Guidance on the implementation of the Fund’s investment strategy </li></ul><ul><li>Ensuring adherence of the Fund to its investment charter. </li></ul><ul><li>Resolving conflict of interests </li></ul><ul><li>Investment Committee. Comprising representatives of the Fund. promoters or investors. </li></ul><ul><li>All investment decisions of the Fund, on the basis of reports of evaluations and due diligence performed by the manager </li></ul><ul><li>Post-investment monitoring, </li></ul><ul><li>Reviewing progress of the Fund’s portfolio and Fund manager performance </li></ul>
  14. 14. Main Objectives of the TAF <ul><li>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 </li></ul><ul><li>To further develop the capacities of the agricultural financial sector ( to provide efficient services to SMEs) </li></ul>
  15. 15. Type of technical assistance <ul><li>Development of outgrowers and/or contract farming schemes </li></ul><ul><li>Business plans for expansion of SMEs </li></ul><ul><li>Capacity-building for managers in areas such as basic business principles, financial and risk management, human resource management, information systems and marketing, entrepreneurial coaching </li></ul><ul><li>Agronomical training and contract work for affiliated smallholders farmers/producers associations </li></ul><ul><li>Market research and surveys and market linkages between SMEs and various actors of value chains, including technology and knowledge transfer </li></ul><ul><li>Assistance with quality certifications, </li></ul><ul><li>Training for microfinance organizations staff and microfinance product development and research to agrobusinesses and SMEs </li></ul>
  16. 16. <ul><li>Thank you for your attention </li></ul>