The African Agriculture Fund (AAF), a private equity fund designed to respond to the food crisis that severely impacted the continent in 2008 in the wake of escalating food prices, reached its first closing at USD 135 Million in November 2010.
AAF investment thesis primarily lies in food production, processing and distribution in cereals, livestock farming, dairy, fruits and vegetables, crop protection, logistics, fertilizers, seeds, edible oils, small-holders and agri-services. To achieve optimal diversification within the sector, the fund will invest across the value chain from primary production to processing and tertiary services and across the continent.
The Fund will make investments of up to USD 20 Million per portfolio company, targeting entities with robust management and growth prospects. The fund aims to support private sector companies that implement strategies to enhance and diversify food production and distribution in Africa by providing equity funding including strengthening the management and modernization of the agricultural sector on the continent.
To enhance its impact on development, the fund has deployed two powerful instruments: a dedicated SME sub-fund of a target size of USD 60 Million (initially USD 30 Million) and a Technical Assistance Facility (TAF) of EUR 10 Million, to support out-grower schemes in large companies and business development services in SMEs.
The support to AAF, whose total target size is USD 300 Million, is part of a coordinated response of a pool of European DFIs, with the Agence Française de Développement (AFD), the Spanish Agency for International Development Cooperation (AECID), Promotion et Participation pour la Coopération économique (Proparco) and International Fund for Agricultural Development (IFAD), and a number of African DFIs, including the African Development Bank (AfDB), the Development Bank of Southern Africa (DBSA), the West African Development Bank (BOAD) and the ECOWAS Bank of Investment and Development (EBID), as limited liability partner investors.
The International Fund for Agricultural Development (IFAD) will manage the Technical Assistance Facility for which core funding has been committed by the European Commission with the contribution of the Alliance for a Green Revolution in Africa (AGRA) and the Italian Cooperation.
To fight African agri-business and agriculture’s chronic under-capitalization, the fund is equipped with an innovative mechanism designed to attract private sector capital. Lead investors such as AFD and AECID together with BOAD and EBID have pooled their shares into a first loss risk taking mechanism that will provide private investors into AAF with an accelerated return.
Fund managers Phatisa have a team of seasoned professionals with a depth of experience in private equity, fund management and the agricultural sector across Africa. Phatisa is led by Duncan Owen and Stuart Bradley, with Valentine Chitalu as its Chairman. The group has offices in Mauritius, Zambia, Kenya, South Africa, and is in the process of establishing a presence in West Africa.
The fund will operate according to a Socially Responsible Investment (SRI) Manual that features an environmental and social risk management system, guidelines for an optimal use of the technical assistance facility and, for the first time in agri-business private equity, a Code of Conduct for Land Acquisition and Land Use in agricultural and agri-business projects to prevent unsustainable practices.
“With food security such a crucial issue across Africa, the AAF will make equity finance available for African agricultural companies,” says Valentine Chitalu, Chairman of Phatisa Group. “We welcome all the investors’ significant contributions to Africa’s economic development and long-term prosperity.”
During the first closing procedures, Duncan stressed that “the commercial success of this new African food fund is critical for both the fund’s international investors and for the future of agriculture as a whole in Africa”.
AAF Promoters were advised by a legal team led by Gide Loyrette Nouel, Stéphane Puel, partner, and Julien Vandenbussche, comprising Africa Legal, Lance Roderick, partner, and Louise Campion, and Muhammad Uteem Chambers.
AAF plans a second close for the fourth quarter of 2011, with anticipated total commitments rising to US $ 300 Million.
About Phatisa
The Phatisa Group is a private equity fund management, corporate finance and advisory company, servicing a range of sectors in a number of sub-Saharan African countries, with offices in Mauritius, Kenya, Zambia, South Africa, and West Africa in the near future. For more information, visit www.phatisa.co.za.
Source: AAF Press Release dated November 29, 2010.
