African Agricultural
Capital
Meeting the financing needs of businesses working
with
smallholder farmers in East Africa
Patrick Ndagu
Investment Manager
This presentation
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AAC mission and targets
Investment parameters
Investment products
Progress to date
Challenges
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AAC Mission & Targets
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Mission
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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
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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
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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
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Expansion or growth capital to early & mid stage
businesses
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AAC Investment products
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Appropriate instruments for investee businesses
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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
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Leverage AAC capital
Risk-sharing
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AAC – Progress (1)
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Active investments
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Western Seed company, Kenya
(L & Q/E)
AAC’s investment supporting a significant increase in expansion
over a three year period
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Real IPM Company, Thika, Kenya
(L)
AAC’s investment enabling the business to complete its development and move into
full production of IPM products
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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
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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)
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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
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Sandstorm International, Nairobi, Kenya
(E)
Expansion finance to leather/canvas luxury goods manufacturer
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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)
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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)
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Victoria Seed Company, Uganda
(Q/E)
Finance to enable expansion into production, packaging and distribution
business
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Coetzee Natural Products, Uganda
(Q/E)
producer and exporter of organic agricultural produce.
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AAC – Progress (3)
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Comments on deals
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Debt and quasi-equity instruments preferred by Investees
Total invested funds are $5m
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Average deal size is about $500,000
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Expected gross US$ return on current portfolio 12% +/- 1%
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Bias towards Kenya, reflecting greater depth of private sector
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Strong spread of investments throughout agriculture
value chain
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Challenges
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Governance
Deal sourcing
Donor influence
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Thank You
email: patrick.ndagu@aac.co.ke
www.aac.co.ke
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