agri. capital
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Transcript agri. capital
African Agricultural
Capital
Meeting the financing needs of businesses working
with
smallholder farmers in East Africa
Patrick Ndagu
Investment Manager
This presentation
AAC mission and targets
Investment parameters
Investment products
Progress to date
Challenges
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AAC Mission & Targets
Mission
To be a leading provider of risk capital to East African SMEs operating in
the agriculture value chain in ways which benefit smallholder farmers
Targets
To earn a minimum net return of 5% per annum on funds invested by
shareholders
To mobilize increased investment capital into the East African agricultural
sector
To achieve a demonstrable positive impact on rural development in the
region through increased employment and market efficiency.
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AAC investment parameters
Current investment parameters
Minimum 80% by investment number and value in the core
region (Kenya, Uganda, Tanzania)
Up to 20% of capital may be invested in neighbouring
countries (including Ethiopia, Rwanda, Zambia & Malawi)
Maximum AAC investment at 12% of AAC’s new capital
base ($2m)
Minimum investment size of $100,000
Portfolio diversification by sub-sector and value chain
location
Expansion or growth capital to early & mid stage
businesses
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AAC Investment products
Appropriate instruments for investee businesses
Debt finance in functional currency at standard commercial rates to
businesses which have positive cash flow and good potential DSCR
Quasi-equity instruments structured as loans but including a P&L based
variable interest premium
Equity finance to higher risk businesses (eg start-up or early in business
lifecycle with high reinvestment requirements)
Co-financing opportunities with investment partners active in
the region
Leverage AAC capital
Risk-sharing
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AAC – Progress (1)
Active investments
Western Seed company, Kenya
(L & Q/E)
AAC’s investment supporting a significant increase in expansion
over a three year period
Real IPM Company, Thika, Kenya
(L)
AAC’s investment enabling the business to complete its development and move into
full production of IPM products
Africert, Nairobi, Kenya
(E & L)
acquire shareholding and loan in east Africa’s first fully accredited certification
business for horticulture, organics, fair trade certification, etc
Earthoil, Athi River, Kenya
(Q/E)
significant increase in production capacity for this fast-growing processor and
exporter of cold-pressed seed oils (moringa, macadamia, starflower,
papaya seed, etc)
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AAC – Progress (2)
Active investments
Lachlan (Kenya) Nairobi, Kenya
(Q/E)
profit-participating loan to fast-growing supplier of agro-chemicals, including micronutrient fertilisers, to east African farmers – particular focus on repackaging generic
products and development of smallholder sector
Sandstorm International, Nairobi, Kenya
(E)
Expansion finance to leather/canvas luxury goods manufacturer
NASECO, Uganda
(Q/E)
Finance to increase production capacity and seed storage and increase marketing and
distribution spend.
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AAC – Progress (3)
Active investments
Biyinzika Enterprises, Mukono, Uganda
(L)
Expansion finance to enable second largest producer of day-old chicks to
move into large scale broiler production (NB, Company is also a major
miller and producer of feeds)
Victoria Seed Company, Uganda
(Q/E)
Finance to enable expansion into production, packaging and distribution
business
Coetzee Natural Products, Uganda
(Q/E)
producer and exporter of organic agricultural produce.
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AAC – Progress (3)
Comments on deals
Debt and quasi-equity instruments preferred by Investees
Total invested funds are $5m
Average deal size is about $500,000
Expected gross US$ return on current portfolio 12% +/- 1%
Bias towards Kenya, reflecting greater depth of private sector
Strong spread of investments throughout agriculture
value chain
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Challenges
Governance
Deal sourcing
Donor influence
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Thank You
email: [email protected]
www.aac.co.ke
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