A new fund has been set up by a group of impact investors and a US
government agency to drive growth in East Africa’s troubled agricultural
sector.
Already, $25 million has been invested into the African Agricultural
Capital Fund (AACF) by the US Agency for International Development
(USAid) and impact investors, who include Bill & Melinda Gates
Foundation, the Gatsby Charitable Foundation and the Rockefeller
Foundation.
Pearl Capital Partners, a Kampala-based specialised African agricultural
investment fund manager, will be responsible for investing the funds in
at least 20 agriculture-related small and medium-sized enterprises in
East Africa over the next five years.
“The AACF will catalyse the growth of small and medium agribusinesses in
East Africa,” said Julie Sunderland, the director of programme-related
investments at the Bill & Melinda Gates Foundation.
She added that since they work with smallholder farmers across the
agricultural value-chain, these businesses are important for the
sector’s sustainable development.
However, according to the managing partner of PCP, Tom Adlam, a funding
gap exists for small-cap agricultural businesses across East Africa,
between large-scale commercial banks and microfinance institutions.
“This new fund will help to address this gap, providing long-term
capital to entrepreneurs who are building businesses in the agriculture
sector while delivering quality financial returns for investors,” Mr
Adlam added.
In fact, there is optimism that the establishment of the fund could signal a change in fortunes for the businesses.
“We are optimistic that the success of AACF and the individual
businesses within its portfolio will encourage additional capital
investment in enterprises employing, purchasing from, and providing
inputs and services to smallholders,” said Ms Sunderland.
The CEO of the Global Impact Investing Network, Luther Ragin, Jr,
concurred that collaboration between the diverse investors would result
in increased capital to the sustainable African agricultural sector.
Besides targeting positive financial returns, the fund is also
interested in having significant social impact through provision of
employment, secure markets and improved products for smallholder farmers
across East Africa.
“New investments will need to demonstrate that they benefit large
numbers of farmers and have an environmentally benign footprint,” a
statement announcing the new fund said, adding that this is targeted at
“infusing equity and expertise” into the sector, and “paving the way for
raising the productivity and incomes of at least a quarter of a million
households.”
It added that the fund manager, would focus on building the skills of
local management teams rather than introducing management expertise from
abroad, making it a sustainable approach to investing on the continent.
Pearl Capital Partner has received investment from the Gatsby Foundation in the past.
“The success of our original investment in PCP since 2005 demonstrated
the viability of achieving both commercial returns and strong
developmental impact in agriculture by targeting companies that play
strategic roles in markets,” said Lord David Sainsbury of the Gatsby
Foundation.
He added: “We are delighted that this has now attracted a wide range of
public, private and foundation investors to scale up the concept and
strengthen agriculture in the region”.
The co-investors in the fund are all members of the investors’ council
of the Global Impact Investing Network, a nonprofit organisation
dedicated to increasing the scale and effectiveness of impact
investments and whose main funders are JP Morgan, the Rockefeller
Foundation and USAID.
Through the council, the co-investors collaborated to identify
complementary social, environmental, and financial goals for the
project.
Besides $17 million in equity investment from the Bill & Melinda
Gates Foundation, the Gatsby Charitable Foundation, and the Rockefeller
Foundation; AACF has also received an $8 million commercial loan from JP
Morgan’s Social Finance Unit, 50 per cent of which is guaranteed by
USAID’s Development Credit Authority.
The guarantee is meant to attract investors to East Africa’s agribusinesses.
The East African
October 17, 2011
$25m Fund set up to finance ‘small cap’ agribusiness in East Africa
Categories finance