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FOOD SECURITY: A BUSINESS OPPORTUNITY Finance and Investment in - PowerPoint PPT Presentation

FOOD SECURITY: A BUSINESS OPPORTUNITY Finance and Investment in Agricultural Development Tough challenges for Investors in Agriculture and Agribusiness in Africa Broken Value Chain Market Low inefficiencies/ productivity/ Barriers to Low


  1. FOOD SECURITY: A BUSINESS OPPORTUNITY Finance and Investment in Agricultural Development

  2. Tough challenges for Investors in Agriculture and Agribusiness in Africa Broken Value Chain Market Low inefficiencies/ productivity/ Barriers to Low margin trade High Risk/Low Returns Perception: weakened access to finance Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  3. Pillars of intervention at the AfDB for 2011-2014  Our overall objective:  Increase agricultural productivity,  Enhance food security  Conserve natural resources  By increasing focus, selectivity and innovation both on public and private sector sides  Public sector focus on agricultural infrastructure and natural resource management  Private Sector focus on innovative mechanisms that support Impact investing across the value chain Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  4. AfDB Private Sector in Agriculture and Agribusiness  Drivers: Credit, Liquidity and Interest Rate  Transfer of Skills and technologies  AfDB provides capital (debt, equity, guarantees) and finance trade in two ways:  General Financial intermediaries: Lines of credit, partial credit guarantees schemes and generalist private equity funds.  Agriculture and Agribusiness focused projects and funds such as trade finance, debt finance, private equity funds. Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  5. Investing Capital in Agriculture : The case of African Agriculture Fund  An Equity Fund focused on agriculture and agribusiness which provides equity across the full agricultural value chain;  Size at first closing: USD 150 million in investments, with projected return at 12%, and USD 14 million in Technical Assistance to guarantee high development impact;  Innovative mechanism: first-loss taking mechanism achieved through a PPP. Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  6. AAF Structure

  7. Changing dynamics  In the past year, despite sector specific challenges, but encouraged by effective reforms, we have seen an increased number of request for financing from Agriculture and Agribusiness focused equity and guarantee funds that :  Are professionally managed;  Aim at investing in the whole value chain  Attract institutional investors with acceptable although lower projected returns but sizeable social returns. Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  8. The case of the Equity and Guarantee Fund of Funds  A Fund of Funds which aims at providing equity and debt financing to investment funds focused on Agriculture and Agribusiness  The target size is between 750 million USD to 1 billion USD aiming to provide financing or guarantee scheme to 10-15 sub-funds.  The geographical area comprises the 5 African Sub regions Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  9. The case of the Equity and Guarantee Fund of Funds (EGFAA)  Preference will be given to funds investing in agricultural infrastructure, or with a pipeline that covers the whole food value chain  The Fund of Funds will be managed by professional fund managers who will be selected based on their investment skills AND their proven track records in managing Technical Assistance program and SRI initiatives. Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  10. EGFAA Structure Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  11. In summary  Structural challenges (low productivity/low margin, dislocated value chain, market inefficiencies) have contributed to the high risk perception of potential investors in agriculture and agribusiness;  Despite these challenges, and in favor of effective private sector reforms, there is an increasing number of funds and projects focused in Agribusiness and Agriculture  We believe that the Fund of Funds for Agriculture and Agribusiness will ease access to investors and donors funding and help transform the challenges of financing agriculture in Africa into sustainable opportunities. Finance and Investment in Agricultural Development – Kampala – October 5, 2010

  12. Contacts Mouhamadou NIANG Manager Industries and Services Division Private Sector Department African Development Bank +216 7110 2662 M.Niang@afdb.org www.afdb.org Finance and Investment in Agricultural Development – Kampala – October 5, 2010

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