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October 17, 2011

Pleiad Foundation looks to fund profitable small, emerging farming markets


One of the key challenges facing small and emerging farmers in South Africa is the lack of structured funding to meet the requirements of these farming entities. In order to overcome this funding need, the Pleiad Foundation is establishing an enterprise development fund that will invest directly into small and emerging farmers and rural food businesses.


The Pleiad Foundation, which launched its Limpopo pilot project (South Afria), based in the Mopani district, in January 2011 has supported a group of more than 50 emerging and smallholder farmers.

The Foundation is a not-for-profit organisation that seeks to alleviate rural poverty through the development of sustainable rural agri-business. The programme has the support of the United Nation’s International Fund for Agricultural Development (IFAD), SEDA, Limpopo Department of Agriculture and a broad range of major food retailers and food processors

Pleiad Project Manager Siphamandla Ndawonde said, “Through our innovative model of support, the Foundation is delivering a range of essential skills and services, including: linking farmers to food retailers and fresh produce markets, developing and facilitating supply chain partnerships to ensure cost effective market access, assessing farm potential and developing bankable business cases, providing investment management support (pre and post investment), delivering technical and on-farm management support, and providing training and capacity building.”

The tangible signs of success are shown in numerous case studies. In the first case, Maruleng Farmers developed a business to produce 10 hectares of tomatoes on behalf of a major South African retailer.

On the strength of the plan, the Pleiad Foundation assisted in securing a production loan of R1.25m from a major South African retailer in order to fund the input costs.

Said Ndawonde: “The project has had a positive impact on employment in the area, with 48 jobs created and generating approximately R4million in revenue for the farmers. For 2012 a business plan has already been drafted to extend the project by 37 hectares producing five different vegetable crops.”

Richard Parker, Project Director and Trustee of the Pleiad Foundation, said, “We have already had interest from potential funders for this project and we will be following it up in order to secure the most effective financing for the project in 2012.”

A Stakeholders Investors Forum, which was hosted by the Pleiad Foundation recently, generated significant interest and was attended by more than 80 senior participants from around South Africa

Pleiad’s Enterprise Development Fund seeks to raise R200 million from local and international investor partners to capitalise the Agriculture Enterprise Development Fund to help develop sustainable small-scale farming in the Tzaneen area. Loans granted under the auspices of the Pleiad Foundation range from small loans of less than R400 000, to entrepreneurship loans ranging from R400 000 to R4m, and business loans of R4 million and above. The development fund aims to repay monies after 10 years with net return, create 8 700 direct new jobs, and achieve this with minimum environmental betterment.

Participants at the Forum heard about the challenges and successes of capacity building in an area where farm management skills are highly variable, with an often low level of understanding of the nature of production, supply-chain, and investment requirements stunts the impetus to grow primary agricultural outputs thereby alleviating poverty.

Parker said, “The case studies and plans for the pilot project going forward in Limpopo demonstrate the importance of sustainable and accountable investment in small farming and development of critical areas such as supply-chain management. In order to alleviate poverty and stem the tide of climate change support for farming, and protecting food security is essential.”
Fund Facts

Domicile
South Africa
Target Cap
R200 million
Fund type
Close-ended
Focus
SME expansion and turnaround
Target return
7%
Management Fee
25% excluding VAT
Performance Hurdle
12%
Commitment
7 years
Fund life
10 – 15 years
Minimum investment
R5 million

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