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July 26, 2010

West African seed investment fund launched

The West Africa Agricultural Investment Fund (“WAAIF”) and Injaro Investments Limited (“Injaro”) recently announced the closing of the first ever West African fund focused on investing in indigenous seed production companies.

The initial investors in the fund are The Alliance for a Green Revolution in Africa (AGRA) and the Lundin For Africa Society, a Vancouver-based foundation. The launch of the fund will provide capital that is desperately needed by West Africa’s critical but nascent seed production industry.

“The sole purpose of WAAIF is to provide high quality seeds to smallholder farmers in West Africa, thereby improving income and quality of life,” said Dr. Namanga Ngongi, President of AGRA. “Direct investment in local seed companies will allow West African enterprises, working with local public crop breeders and local farmers, to act as a catalyst for prosperity amongst smallholder farmers.”

A joint statement by the partners said WAAIF is the first fund of its kind in West Africa: targeted specifically at promoting the growth of small- and medium-sized African seed companies through long-term loans provided at reasonable rates. WAAIF will thus fill a critical funding gap in West African agricultural development—financing for its seriously underdeveloped and undercapitalized seed sector.

Across West Africa there are around 20 small-to-medium sized seed companies, compared to over 50 in East and Southern Africa and the hundreds that operate in Europe or in the United States. To help fill this gap, WAAIF will initially operate in five countries—Burkina Faso, Ghana, Mali, Niger, and Nigeria.

“Africa’s plant breeders have begun developing high yielding, locally-adapted seed that would enable farmers to double or triple their yields,” said Joseph DeVries, director of AGRA’s Seeds Programme. “We now need a vibrant seed sector that gets these varieties to farmers. WAAIF will enable this--it is venture capital for West Africa’s seed entrepreneurs.”

The lack of a robust African seed industry has left smallholder farmers with few choices. Smallholder farmers—who grow most of the food consumed in Africa—can neither afford nor access high-yielding quality seed varieties of their staple food crops. Whereas improved seed has been responsible for more than half of global yield increases, African smallholder farmers must rely on saved seed whose quality has deteriorated over time, producing the world’s lowest cereal yields and ensuring chronic hunger and malnutrition.

The AGRA-Lundin-Injaro partnership aims to jumpstart a well-capitalised, competitive and efficient regional seed industry; with commercial incentive to produce, distribute and market improved seed varieties that meet farmers’ demands.

"WAAIF will invest in, and partner with, seed companies, with a view to supporting their transition to viable commercial entities that provide high quality seed to smallholder farmers at a reasonable price, said Jerry Parkes, Managing Principal of Injaro. The average investment size will be around US$250,000 and the fund will seek an overall net return of 3% on its investments.

In addition to capital investment, Injaro and AGRA will provide business development services, including continual advice on issues like seed production, storage, and distribution and seed company management. Distributors will also be trained on the appropriate use of seeds and other inputs such as fertilizer, to ensure the most efficient, safe and environmentally sound use of all.

WAAIF will seek to actively involve women as entrepreneurs, workers, and smallholder farmers. Women make up the majority of Africa’s smallholder farmers and have the greatest impact on the livelihood of their families, yet face many impediments to education, training and access to finance.

To qualify, companies will need to meet investment criteria in the following areas: corporate governance, output of improved seed, financial performance, and a range of development criteria. The latter includes measures such as overall job creation, skills development in rural communities, and an environmentally benign footprint.

“Until recently, only well-off, large-scale farmers bought improved seed,” DeVries said. “The seed market is evolving to recognize that the real market is at the bottom of the pyramid, among millions of smallholder farmers. The prices, crops and varieties marketed need to reflect that.

“African farmers need improved varieties of maize more than any other farmers in the world. Their livelihoods—their very survival—depends on it.” DeVries added.

And while maize will be an important crop for the program, it will not be the only one. Companies producing seed for such staple crops as beans, cowpea, rice, sorghum, soya bean, millet and others will be encouraged to apply.

“Rather than having to chose between poor quality low-yielding seed or high-cost hybrid seed marketed by multinationals, African farmers will have another choice,” Ngongi said. “We can foresee the day when dozens, if not hundreds, of small- and medium-sized African seed companies are working across the region with local, public sector breeders to get low-cost, high-quality seed to farmers across the West African sub-region.

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