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

Finance and Investment in Agricultural Development

FOOD SECURITY:

A BUSINESS OPPORTUNITY

Tough challenges for Investors in Agriculture and Agribusiness in Africa

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

High Risk/Low Returns Perception: weakened access to finance

Low productivity/ Low margin Broken Value Chain Market inefficiencies/ Barriers to trade

Pillars of intervention at the AfDB for 2011-2014

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 Our overall objective:

 Increase agricultural productivity,  Enhance food security  Conserve natural resources

 By increasing focus, selectivity and innovation both

• n 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

AfDB Private Sector in Agriculture and Agribusiness

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 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.

Investing Capital in Agriculture : The case of African Agriculture Fund

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 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.

AAF Structure

Changing dynamics

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 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.

The case of the Equity and Guarantee Fund

• f Funds

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 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

The case of the Equity and Guarantee Fund

• f Funds (EGFAA)

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 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.

EGFAA Structure

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

In summary

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

 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.

Contacts

Finance and Investment in Agricultural Development – Kampala – October 5, 2010

Mouhamadou NIANG

Manager Industries and Services Division Private Sector Department African Development Bank

+216 7110 2662 M.Niang@afdb.org www.afdb.org