African Agricultural Capital

1. African Agricultural Capital Meeting the financing needs of businesses working with smallholder farmers in East Africa Patrick Ndagu Investment Manager

2. This presentation • AAC mission and targets • Investment parameters • Investment products • Progress to date • Challenges

3. AAC Mission & Targets • Mission • To be a leading provider of risk capital to East African SMEs operating in the agriculture value chain in ways which benefit smallholder farmers • Targets • To earn a minimum net return of 5% per annum on funds invested by shareholders • To mobilize increased investment capital into the East African agricultural sector • To achieve a demonstrable positive impact on rural development in the region through increased employment and market efficiency.

4. AAC investment parameters • Current investment parameters • Minimum 80% by investment number and value in the core region (Kenya, Uganda, Tanzania) • Up to 20% of capital may be invested in neighbouring countries (including Ethiopia, Rwanda, Zambia & Malawi) • Maximum AAC investment at 12% of AAC’s new capital base ($2m) • Minimum investment size of $100,000 • Portfolio diversification by sub-sector and value chain location • Expansion or growth capital to early & mid stage businesses

5. AAC Investment products • Appropriate instruments for investee businesses • Debt finance in functional currency at standard commercial rates to businesses which have positive cash flow and good potential DSCR • Quasi-equity instruments structured as loans but including a P&L based variable interest premium • Equity finance to higher risk businesses (eg start-up or early in business lifecycle with high reinvestment requirements) • Co-financing opportunities with investment partners active in the region • Leverage AAC capital • Risk-sharing

6. AAC – Progress (1) • Active investments • Western Seed company, Kenya (L & Q/E) AAC’s investment supporting a significant increase in expansion over a three year period • Real IPM Company, Thika, Kenya (L) AAC’s investment enabling the business to complete its development and move into full production of IPM products • Africert, Nairobi, Kenya (E & L) acquire shareholding and loan in east Africa’s first fully accredited certification business for horticulture, organics, fair trade certification, etc • Earthoil, Athi River, Kenya (Q/E) significant increase in production capacity for this fast-growing processor and exporter of cold-pressed seed oils (moringa, macadamia, starflower, papaya seed, etc)

7. AAC – Progress (2) • Active investments • Lachlan (Kenya) Nairobi, Kenya (Q/E) profit-participating loan to fast-growing supplier of agro-chemicals, including micro-nutrient fertilisers, to east African farmers – particular focus on repackaging generic products and development of smallholder sector • Sandstorm International, Nairobi, Kenya (E) Expansion finance to leather/canvas luxury goods manufacturer • NASECO, Uganda (Q/E) Finance to increase production capacity and seed storage and increase marketing and distribution spend.

8. AAC – Progress (3) • Active investments • Biyinzika Enterprises, Mukono, Uganda (L) Expansion finance to enable second largest producer of day-old chicks to move into large scale broiler production (NB, Company is also a major miller and producer of feeds) • Victoria Seed Company, Uganda (Q/E) Finance to enable expansion into production, packaging and distribution business • Coetzee Natural Products, Uganda (Q/E) producer and exporter of organic agricultural produce.

9. AAC – Progress (3) • Comments on deals • Debt and quasi-equity instruments preferred by Investees • Total invested funds are $5m • Average deal size is about $500,000 • Expected gross US$ return on current portfolio 12% +/- 1% • Bias towards Kenya, reflecting greater depth of private sector • Strong spread of investments throughout agriculture value chain

10. Challenges • Governance • Deal sourcing • Donor influence

11. Thank Youemail:patrick.ndagu@aac.co.kewww.aac.co.ke