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THE AFRICAN AGRICULTURE FUND. AFRICAN AGRICULTURE FUND. The opportunity of an investment fund. Investment strategy and targets. Fund structure. Fund governance. Technical Assistance Facility. The opportunity of an Investment Fund (1). - PowerPoint PPT Presentation
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THEAFRICAN AGRICULTURE FUND
AFRICAN AGRICULTURE FUND
• The opportunity of an investment fund
• Investment strategy and targets
• Fund governance
• Fund structure
• Technical Assistance Facility
The opportunity of an Investment Fund (1)
• The rise in global food demand will require doubling food production by 2050
• Private initiatives to increase agricultural production will be boosted by continued high market prices ( risk of volatility) in the medium-term and by more supportive and effective public policies
The opportunity of an Investment Fund (2)
• Growing opportunities in domestic and regional food markets / Investments giving priority to a regional market approach will reduce the vulnerability of African production
• The implementation of this type of investment requires FOs, producers organizations and enterprises financially sound with sufficient management skills and capacities, capital to mobilize financing resources
• New and coordinated mobilization of the international community (FAO Summit, Doha Conference, EU Food Facility, G 8 L Aquila) within the framework of a Global Partnership for Food Security and Agriculture
The « missing middle » in African agro-enterprises
Source : Market Matters, New York,April 2009 for UNIDO and FAO
The opportunity of an investment fund (3)
• AGRA, AfDB, AGRA, BOAD, IFAD and AFD have consequently decided to promote the African Agriculture Fund to boost Africa’s agriculture and agro-industry (Letter of Intent )
• South Africa-based Phatisa L.L.C. selected as Fund Manager.
• The Fund has an initial target size of US$150M to become operational (November 2009) and expects to raise additional commitments up to an aggregate capital amount of US$ 500M
Investment strategy and targets (1)
Targets / Business Partners• Operate in food production industries or provide financial services
to small agri-business operators and SMEs, cooperatives or farmers organisations• Have a clear business plan focusing on developing and/or diversifying their products/services and/or sectoral integration
• Ability to grow their markets within the region levels or to develop export opportunities
• Ability to maintain satisfactory payment terms to suppliers especially smallholder farmers
• Implement measures to protect and continuously mitigate their impact on the environment ( social and environmental standards)
• Ability to invest in the value chain to reduce transaction costs of the producers/processors / storages/marketing interfaces
Investment strategy and targets (2)
Main Investment sectors
• Cereals production (rice, maize & wheat)
• Roots and tubers (Cassava …)
• Livestock and diary products
• Fruit products
• Seeds production and fertilizers
• Fats and oils
• Rural domestic credit and insurance institutions
Investment financing
Investment strategy and targets (3)
• Equity and quasi equity products
• Technical Assistance Facility (TAF)
• Two windows of financing enterprises:– A small-medium size company financing window offering investment
between US$ 0.15 M and US $4M– A large company financing window for investment up to US$15M
The fund will invest a minimum of 20% of the Final Closing in SMEs and micro-finance sectors
Investment strategy and targets (4)
Investment strategy
• Investment in a company’s own funds will not exceed 20%
• The Fund will invest no more than 30% and no less than 20% of its total commitment in any single region (Southern, Eastern, West and Central, North and Eastern Mediterranean)
• Investment in a sector will not exceed 25 % of its total commitments and will not participate in any hostile transaction.
Investment strategy and targets (5)
Fund term and exit strategy
• Five year commitment period
• Seven/ten year investment maturity
• Exit strategy shall be, as the case may be, to provide for the option for local agricultural producers to acquire interests in the targets
• Average IRR per target shall be around the mid-teens
Fund structure
Sponsors
Funding
CommercialInvestorsFunding
AFRICAN AGRICULTURE
FUND
Category A/BCategory A/B Category CCategory C
ADVISORY BOARD
INVESTMENT COMMITTEESME Committee
T A F (Grants)
InvestmentsSmall-size Company Window
USD 150,000 – 4,000,000
InvestmentsMedium/Large-size Company Window
USD 15,000,000 on average
Fund Manager
Management Agreement
Technical Assistance Facility - TAFTechnical Assistance Facility - TAF
InstitutionalInvestors Funding
Fund Governance
Fund Manager. Responsible for the overall financial and administrative management for the fund Deal sourcing .
• All diligences required further to targets investments; • Representation of the Fund with respect to target’s board of directors or
equivalent board or committee; • Definition of exit strategy Advisory Board Composed of independent members and representatives of
investors The Fund manager is entitled to participate in the deliberations, but will not be a voting member
• Guidance on the implementation of the Fund’s investment strategy • Ensuring adherence of the Fund to its investment charter. • Resolving conflict of interests
Investment Committee. Comprising representatives of the Fund. promoters or investors.
• All investment decisions of the Fund, on the basis of reports of evaluations and due diligence performed by the manager
• Post-investment monitoring, • Reviewing progress of the Fund’s portfolio and Fund manager performance
Main Objectives of the TAF
• To strengthen the management and the technical capacities of small scale farmers and SMEs to access to the resources of the AAF and of the business development financing
• To further develop the capacities of the agricultural financial sector ( to provide efficient services to SMEs)
Type of technical assistance
• Development of outgrowers and/or contract farming schemes
• Business plans for expansion of SMEs• Capacity-building for managers in areas such as basic
business principles, financial and risk management, human resource management, information systems and marketing, entrepreneurial coaching
• Agronomical training and contract work for affiliated smallholders farmers/producers associations
• Market research and surveys and market linkages between SMEs and various actors of value chains, including technology and knowledge transfer
• Assistance with quality certifications,• Training for microfinance organizations staff and
microfinance product development and research to agrobusinesses and SMEs
Thank you for your attention
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