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THE AFRICAN AGRICULTURE FUND

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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THE AFRICAN AGRICULTURE FUND

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  1. THEAFRICAN AGRICULTURE FUND

  2. AFRICAN AGRICULTURE FUND • The opportunity of an investment fund • Investment strategy and targets • Fund structure • Fund governance • Technical Assistance Facility

  3. 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

  4. 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

  5. The « missing middle » in African agro-enterprises Source : Market Matters, New York,April 2009 for UNIDO and FAO

  6. 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

  7. 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)

  8. 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

  9. 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

  10. 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.

  11. 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

  12. 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)

  13. 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

  14. 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)

  15. 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

  16. Thank you for your attention

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