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October 10, 2010

Investment funds raising capital for African agriculture

Funds that have recently raised or are raising capital for agriculture investment in Africa, or which have agriculture and agribusiness as focus sectors include:

SilverStreet Capital, the investment management firm that focuses on Africa and the agricultural sector, is raising capital for the Silverlands Fund, a private equity fund that will invest in African agricultural businesses across the value chain around a core of farmland businesses in Southern and Central Africa. The fund will be Luxembourg domiciled and have a life of 10 years, with an option to extend for a further two years. Targeted fund size is $350 million and target return is 20-25 percent per annum. Silver Street was set up in 2007 by Gary Vaughan-Smith, former head of alternative investments at ABN AMRO.

Phatisa Group, the South African private equity and corporate finance advisory firm, is managing the African Agriculture Fund (AAF), which held its first close in mid-July at 200 million euros and is targeting a final close of 500 million euros. Founder sponsors were IFAD, the African Development Bank (AfDB), Agence Française de Développement (the French development agency), AGRA and the West African Development Bank. AAF will back private-sector companies that implement strategies to increase and diversify food production and distribution in Africa. It will invest in agro-industrial companies, and agricultural co-operatives that support small-scale farmers and respect the environment.

 South Africa's Sanlam Private Equity and SP Aktif raised $100 million for Agri-Vie Fund and are already planning a second $300 million fund, to be launched in a couple of years to feed investor demand. The first fund invests in agricultural projects in South Africa, Botswana, Kenya, Tanzania, Uganda, Ghana and Nigeria.

Backed by Development Bank of Southern Africa, Industrial Development Corp (the South African DFI using money from the EU-funded Risk Capital Facility that is co-managed with the EIB), and the WK Kellogg Foundation, the fund will invest in entrepreneurs in the agribusiness value chain, rather than directly in the farming industry. Agri-vie plans to invest up to $25 million in five projects in 2010. The fund invests equity and quasi-equity with a preferred position of 25-75 percent. It can arrange debt funding and is open to syndication and co-investment.

Global Environment Fund (GEF), the U.S.-based private equity firm, raised an initial $84 million for the GEF Africa Sustainable Forestry Fund (GASFF) and is targeting $150 million. The fund is focused on sustainable forestry in sub-Saharan Africa and is the first of its kind. It is a 12-year closed-end private equity fund dedicated to investments in forestlands or forestry-related companies and projects in Eastern and Southern Africa, together with two countries in West Africa.

The first close saw commitments principally from development finance institutions; CDC was a cornerstone investor, with $50 million; the IFC committed $20 million. Private investors are expected to invest alongside the DFIs to get the fund to its target size.

GASFF will target commercial returns and is expected to invest in and develop between five and 10 forestry businesses across sub-Saharan Africa. The forestry businesses will grow process and market timber products to meet growing global demand from industries including construction, energy, furniture and biofuel. The fund will start to make investments immediately, with an investment size typically between $15 million and $30 million. Focus countries will include Mozambique, Tanzania, Swaziland, South Africa, Uganda, Ghana, Malawi and Zambia.

African Agricultural Capital (AAC) started raising capital earlier this year for the AAC Fund, an East African agricultural investment fund. The Uganda-based venture capital firm, set up by the Rockefeller Foundation, the Gatsby Charitable Foundation and Belgian investment company Volksvermogen sent out its private placement memorandum earlier this year.

The $25 million Mauritius-domiciled closed-end fund is focused on providing capital to small growing businesses (SGBs) operating in the agriculture value chain in East Africa. The fund will invest between $200,000 and $2 million in each business, using a range of equity and quasi-equity instruments. AAC says its success criteria are to earn a minimum gross return of 12 percent per annum on funds invested, and to mobilise increased investment capital of at least an additional $5 million into the East African agricultural sector through partnerships with other investors.

Private equity funds Sierra Leone Investment Fund and ManoCap Soros Fund are raising capital to invest in small companies in Sierra Leone, primarily in agribusiness and related services. Both have signed contracts with MIGA.

Beltone Private Equity, a unit of the MENA-focused investment bank Beltone Financial, signed a partnership agreement with Kenana Sugar Company in Sudan with the aim of deploying up to $1 billion in large-scale agriculture projects across Egypt and Sudan. Beltone will provide investment management, corporate finance and strategic capabilities, while Kenana will add technical know-how and operational expertise.

Emerging Capital Partners, the Washington DC-based Africa-focused private equity firm, raised $613 million for ECP Africa Fund III at its final close in July. Over $450 million came from the AfDB, IFC, OPIC and CDC. The remainder came from new investors such as South Suez, the pan-African fund-of-funds manager.

The fund's mission is to generate above-market returns by taking controlling stakes or influential minority positions in high-growth companies through equity and quasi-equity investments such as convertible debt. The fund will focus on companies pursuing regional strategies and will invest across various sectors, including agriculture, natural resources, telecoms, financial services, transportation, and utilities.

Advanced Finance and Investment Group, the private equity group based in Senegal, held the first closes of the Atlantic Coast Regional Fund (ACRF) at $84 million last year and is building towards its $150 million target. ACRF is focusing on mid-size, strong growth companies with a regional scope.

Core investment countries will be Nigeria, Senegal, Côte d'Ivoire, Ghana, Cameroon, Gabon, DRC and Angola, but the scope of the fund's investments will cover the Economic Community of West African States (ECOWAS), the Economic Community of Central African States (ECCAS), as well as Morocco, Mauritania, Uganda and Rwanda.

Main investors in the fund are AfDB, CDC, EIB, FinnFund, and IFC as well as international investors such as Africa Re. The fund will make investments ranging between $3 million and $15 million. The sector focus will be agribusiness, transportation and logistics, financial services, telecoms, mining and natural resources and manufacturing companies.

Nairobi-based venture capital firm Amani Capital hooked up with the Norwegian Investment Fund for Developing Countries (Norfund) to establish the Luxembourg-based Fanisi Venture Capital Fund. The fund will target high growth start-up and established small and medium enterprises (SMEs). Fanisi expects to close at $55 million and will invest in high-growth businesses in Kenya, Rwanda, Tanzania and Uganda.

The fund will invest widely across a range of sectors, including agribusiness, ICT, retail, financial services, real estate, health and tourism. The fund's first close investors were Proparco (the DFI majority owned by the French government) and Finnfund, the Finnish government's development finance agency. Other investors were the IFC, the Soros Economic Development Fund and the Barry Segal Foundation.

Africinvest Capital Partners reached the fourth close of Africinvest II with commitments of 137 million euros, and is planning for a final close of 150 million euros. The Mauritius-based pan-African SME fund has the backing of a whole host of European DFIs as well as the IFC, AfDB and EIB.


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