Transcript African Agricultural Capital

The SACAU-CTA Policy Briefing on Financing Agriculture
Lilongwe, Malawi,
25-26 October 2010
Increasing private sector financing in the agricultural
sector : challenges, opportunities and key requirements
Presented By:
Patrick Oketa
Chief Investment Officer
Introduction to AAC
1. Established in 2005 by Gatsby Charitable Foundation,
Rockefeller Foundation and Volksvermogen NV
2. 16 investments in agriculture-related SMEs in Kenya,
Tanzania and Uganda with a committed value of $9 million
3. Managing the Africa Seed Investment Fund ($12 million)
3. Based in Kampala, Uganda
4. www.aac.co.ke
Mission
 Mission:
To invest risk capital into agricultural supply chains in
East Africa in order to support small holder farmers
and leverage additional financial and human capital
into the agricultural sector in the region, while
achieving competitive financial returns
 Objectives: To Provide affordable and flexible risk capital to
companies operating in East & Southern Africa
(Ethiopia, Kenya, Malawi, Mozambique, Rwanda,
Tanzania, Uganda and Zambia)
To provide Business Development Support to build
healthy long term viable businesses able to attract
additional capital to Agribusinesses
Investment products

Secured debt finance in functional currency at sub-commercial
rates to businesses which have positive cash flow and good
potential Debt Service Coverage Ratio

Subordinated loans at low fixed interest rates, but including a
P&L based variable interest premium

Equity finance to higher risk businesses (eg early in business
lifecycle with high reinvestment requirements)

Co-financing with investment partners active in the region to
leverage ASIF capital and risk sharing
Agribusiness Challenges in Africa

Changing weather patterns

Low productivity

Low margins

Broken value chain

Market inefficiencies and distortions

Barriers to regional and international trade

Low modern technology adoption rate

Insufficient and high costs of capital

Land regimes and tenure systems
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Value Add Proposition
intervention
Sector
growth
A
A
C
Businesses
with significant
market share
Empowered
businesses with
tools for growth
Promising agribusiness
companies
lacking finance
Robust
profitable
agribusinesses
AAC investment & capacity building
commercial banking sector
Time
Addressing the missing middle
Case for Financial Solution to Agribusiness
Most Agribusiness do not have sufficient equity and collateral to
establish growth-oriented businesses and access bank financing
For financial institutions to develop an appetite for agribusiness risk,
the sector must address the following credit analysis issues:

Viable business model in a profitable and growing sub-sector

Sound and focused management

Effective corporate governance

Demonstrable financial management systems and capabilities

Focused cost structure, financing plan and cash flow management
Value Creation

Leverage regional contacts with banks, vendors, and regulators to help businesses grow

Leverage on our network for cost effective market intelligence, and BDS to our investees

Able to invest
instruments which best
suit the business

Leverage contacts with
lenders and equity
investors

Credible partner for
future exits like IPO
Growth
Finance

Reputation for transparency &
integrity/business principles

Introduce high standards of
corporate governance and financial
management

Maximize shareholder and exit
values

Strategic direction

Facilitate development of appropriate
systems

Operational improvements
Strategy 
AAC

Appoint industry experts
to the Board
Participate in building
effective strategy
Recruitment
Governance

Access to network of managers:
assist in recruitment
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Contact:
Contact:
Patrick Oketa
Chief Investment Officer
+256-772513487
[email protected]
www.aac.co.ke