Agri-Vie is a new US$100m private equity investment fund capitalising on investment opportunities associated with agribusiness in sub Saharan Africa. The fund was brought to the private equity market by SP-aktif, a Cape Town based alternative investment group in partnership with Sanlam Private Equity, one of the pre-eminent private equity investment houses in South Africa.
Agri-Vie is one of a growing family of global investment initiatives categorised as ‘impact investment vehicles’. These investment programs are targeting sectors and geographies with inherent investment potential while pushing the envelope in terms of socio-economic development and environmental impacts. Accordingly, the fund has attracted investors from a range of commercial and development finance institutions. The fund has concluded its first close at the halfway mark to its US$ 100m capitalization target and remains open to investors until May 2009.
Sub Saharan Africa has shown sustained growth and development over the past two decades. Annual economic growth in most countries has averaged 6-7 per cent over recent years, with the number of democracies rapidly increasing and domestic investment and productivity both improving. Until the recent tumultuous events in global markets, African stock markets outperformed most global indices. While African exports will undoubtedly suffer from a global slow-down, African economies are relatively insulated from the melt-down in global banking as domestic banks have generally not participated in the credit practices and securitization processes which are plaguing the global financial system at present.
Agribusiness, including farming and its inputs, processing, services, marketing and distribution, forms the backbone of most sub Saharan economies. Outside of South Africa with its more diversified economic base and other rich countries-resources, agribusiness constitutes 15-30 per cent of the economic product of these countries, 50 per cent of manufacturing value added and more than 40 per cent of service value added.
Apart from the significant role of the sector in local economies, several other factors contribute to a flow of investment opportunities in Sub-Saharan agribusiness:
Wide-spread deregulation and privatization are opening opportunities; Africa remains the only continent where food production could respond at scale to the growing global demand patterns;
African is urbanizing at a fast rate – the growing urban communities stimulate demand for processed food and fibre; emerging technologies in biofuels and food production have given rise to business and investment opportunities that unlocks significant value from sub Sahara’s natural agribusiness resources; several countries in the region have strong comparative advantages in the production of certain commodities such as coffee, maize, rice, fruit and flowers.
Companies from sub Saharan Africa’s economic powerhouses such as South Africa and Nigeria are expanding significantly into the region. Their expansion and associated corporate activity give rise to investment opportunities.
The pool of risk capital providers to agribusiness in Africa is small but expanding. Actis, emerging from the Commonwealth Development Corporation (CDC) launched an agribusiness fund from Nairobi in 2006. Emerging Capital Partners (ECP) has a number of food companies in the portfolios of its first and second funds. These funds have delivered solid returns to investors. In South Africa, an agribusiness investment vehicle, Zeder, was listed on the Johannesburg Stock Exchange in 2007.
Impact investors recognize the potential developmental role of a fund such as Agri-Vie, given the strategic role of agribusiness in the socio-economic development on the sub-continent. Growing, more competitive food companies improve quality and prices available to the urbanizing communities in the region. From an employment perspective, it is worth noting that more than 25 per cent of rural households’ income depends on agribusiness. Agribusiness has among the strongest employment multiplier effects in the rural economic context.
The Agri-Vie fund has two structures, one domiciled in Mauritius and one in South Africa. These two structures provide investors with optimum flexibility in terms of geographic exposure and tax planning.
As a ten year private equity fund, Agri-Vie aims to deliver to its investors risk adjusted returns exceeding the food indices of major stock markets. The fund is managed from South Africa and Mauritius by an experienced team from SP-aktif and Sanlam Private Equity. They teamed up with a business consortium, Makotulo, owned by a group of eminent business women and formed Agri-Vie Investment Advisors (Pty) Ltd.
Prior to the launch of the fund, SP-aktif established a successful track record in corporate advisory and investment services, with a specialist focus on agribusiness. Since the fund became operational in July of this year a first investment was made into an Ethiopian producer of tropical fruit juices for the European and Middle East markets. The facility is situated in a water rich, fertile part of Ethiopia that is climatologically well placed to compete with offerings from South America. In addition, the fund is currently evaluating more than thirty opportunities across the continent. These range from seed companies to food producers for local as well as export markets, millers, natural fibre products, logistical service providers and alternative energy projects.
The Agri-Vie fund manager applies a certain investment philosophy, honed by SP-aktif during its role in many different investment and operational contexts in sub Saharan Africa: They follow a value approach, capitalizing on growth potential, under-performance and restructuring opportunities;
The investment portfolio is targeting strategic diversification, avoiding over-exposure to single segments of the agribusiness sector. As a long term investor, the fund manager is fulfilling its role as equity partner into companies invested through working side by side with the incumbent management teams, avoiding quick fixes. Investment teams are active investors, assuming a board role in companies invested as a minimum, while also becoming more interventionist when company performance is dipping. The fund manager sees itself as a partner for its investors and entrepreneurs. As such it is prepared to stick with companies through the inevitable ups and downs of business cycles.
In order to secure sufficient deal flow, Agri-Vie has established a network of business partners across the continent, while the investment team works closely with these partners to proactively identify deal opportunities.
The fund typically invests between US$ 3m and US$ 10m per transaction into mid-market companies and is able to mobilize larger investments through co-investment structures. It typically acquires an equity stake of 25 per cent or more in invested companies and exits after 6-8 years. It follows a rigorous investment process involving thorough appraisal and due diligence by an experienced investment team as well as scrutiny by an investment committee independent of the investment team.
In order to fulfil its role as impact investor, the fund is structuring its investments for maximum impact in terms of job creation, stimulation of local entrepreneurship, introduction of appropriate technologies and standards of corporate governance in its invested companies. Particular attention is paid to involving emerging producers such as smallholder farmers in out grower schemes. For these early stage enterprises, the fund’s investments represent off-take opportunities as well as participation as shareholder through collective shareholding structures. They also benefit from the introduction of advanced farming practices.
The fund’s development impact mandate emphasizes the promotion of women’s participation in agribusiness. To this end, the fund manager has combined forces with the Makotulo Women Consortium whose knowledge and networks the investment team draws in to meet their gender objective.
Marais makes the point that Agri-Vie’s value proposition is unique in the market; “This fund brings a unique combination of risk capital and corporate know-how to agribusiness enterprises. We often find entrepreneurial companies with strong growth potential but who lack capital and the corporate know-how to structure the business for the next growth stage. This is where Agri-Vie can make a difference through making its capital available as well as corporate guidance from its seasoned investment team.”
Agri-Vie has committed to stringent standards in terms of managing the environmental impacts of its investment program. Each investment is scrutinized in terms of its potential sustainability impacts and risk mitigation measures, which are built into the investment agreements. The fund manager actively monitors these impacts on an ongoing basis. The fund’s investments also look to benefit from carbon trading activity.
Agribusiness has traditionally been excluded from private equity investment mandates. This was because fund managers did not generally have the specialist skills on board to manage such investments. In addition, the risks involved have often been equated with the uncontrollable risks associated with farming, such as risks related to climate factors and pests. However, Herman Marais points out that Agri-Vie’s investment team includes professionals with many years of agribusiness experience who are well acquainted with the risks to manage. More importantly, the fund’s investment program is focusing on the value added part of the value chain, away from primary production. “The further one progresses along the value chain, the more the risk profile becomes similar to most other businesses.”
Agr-Vie’s investors incorporated two niche extensions into the core agribusiness mandate of the fund. Firstly, the fund is able to invest into ecotourism projects such as safari lodges and other ecotourism ventures. Secondly, the fund is exploring opportunities in the cultural crafts segment in which lucrative export opportunities exist. These two niche areas form integral parts of the rural economy alongside the production of food and fiber.
The fund’s slogan aptly captures its positioning: “Doing good while doing well”. It provides ready access to lucrative agribusiness investment opportunities for long term investors while making a difference to the agribusiness sector by bringing a unique combination of risk capital and corporate know-how to the market.
PULL OUTS
Agribusiness, including farming and its inputs, processing, services, marketing and distribution, forms the backbone of most sub Saharan economies.
The investment portfolio is targeting strategic diversification, avoiding over-exposure to single segments of the agribusiness sector.
The fund’s slogan aptly captures its positioning: “Doing good while doing well”.
Agri-Vie is one of a growing family of global investment initiatives categorised as ‘impact investment vehicles’. These investment programs are targeting sectors and geographies with inherent investment potential while pushing the envelope in terms of socio-economic development and environmental impacts. Accordingly, the fund has attracted investors from a range of commercial and development finance institutions. The fund has concluded its first close at the halfway mark to its US$ 100m capitalization target and remains open to investors until May 2009.
Sub Saharan Africa has shown sustained growth and development over the past two decades. Annual economic growth in most countries has averaged 6-7 per cent over recent years, with the number of democracies rapidly increasing and domestic investment and productivity both improving. Until the recent tumultuous events in global markets, African stock markets outperformed most global indices. While African exports will undoubtedly suffer from a global slow-down, African economies are relatively insulated from the melt-down in global banking as domestic banks have generally not participated in the credit practices and securitization processes which are plaguing the global financial system at present.
Agribusiness, including farming and its inputs, processing, services, marketing and distribution, forms the backbone of most sub Saharan economies. Outside of South Africa with its more diversified economic base and other rich countries-resources, agribusiness constitutes 15-30 per cent of the economic product of these countries, 50 per cent of manufacturing value added and more than 40 per cent of service value added.
Apart from the significant role of the sector in local economies, several other factors contribute to a flow of investment opportunities in Sub-Saharan agribusiness:
Wide-spread deregulation and privatization are opening opportunities; Africa remains the only continent where food production could respond at scale to the growing global demand patterns;
African is urbanizing at a fast rate – the growing urban communities stimulate demand for processed food and fibre; emerging technologies in biofuels and food production have given rise to business and investment opportunities that unlocks significant value from sub Sahara’s natural agribusiness resources; several countries in the region have strong comparative advantages in the production of certain commodities such as coffee, maize, rice, fruit and flowers.
Companies from sub Saharan Africa’s economic powerhouses such as South Africa and Nigeria are expanding significantly into the region. Their expansion and associated corporate activity give rise to investment opportunities.
The pool of risk capital providers to agribusiness in Africa is small but expanding. Actis, emerging from the Commonwealth Development Corporation (CDC) launched an agribusiness fund from Nairobi in 2006. Emerging Capital Partners (ECP) has a number of food companies in the portfolios of its first and second funds. These funds have delivered solid returns to investors. In South Africa, an agribusiness investment vehicle, Zeder, was listed on the Johannesburg Stock Exchange in 2007.
Impact investors recognize the potential developmental role of a fund such as Agri-Vie, given the strategic role of agribusiness in the socio-economic development on the sub-continent. Growing, more competitive food companies improve quality and prices available to the urbanizing communities in the region. From an employment perspective, it is worth noting that more than 25 per cent of rural households’ income depends on agribusiness. Agribusiness has among the strongest employment multiplier effects in the rural economic context.
The Agri-Vie fund has two structures, one domiciled in Mauritius and one in South Africa. These two structures provide investors with optimum flexibility in terms of geographic exposure and tax planning.
As a ten year private equity fund, Agri-Vie aims to deliver to its investors risk adjusted returns exceeding the food indices of major stock markets. The fund is managed from South Africa and Mauritius by an experienced team from SP-aktif and Sanlam Private Equity. They teamed up with a business consortium, Makotulo, owned by a group of eminent business women and formed Agri-Vie Investment Advisors (Pty) Ltd.
Prior to the launch of the fund, SP-aktif established a successful track record in corporate advisory and investment services, with a specialist focus on agribusiness. Since the fund became operational in July of this year a first investment was made into an Ethiopian producer of tropical fruit juices for the European and Middle East markets. The facility is situated in a water rich, fertile part of Ethiopia that is climatologically well placed to compete with offerings from South America. In addition, the fund is currently evaluating more than thirty opportunities across the continent. These range from seed companies to food producers for local as well as export markets, millers, natural fibre products, logistical service providers and alternative energy projects.
The Agri-Vie fund manager applies a certain investment philosophy, honed by SP-aktif during its role in many different investment and operational contexts in sub Saharan Africa: They follow a value approach, capitalizing on growth potential, under-performance and restructuring opportunities;
The investment portfolio is targeting strategic diversification, avoiding over-exposure to single segments of the agribusiness sector. As a long term investor, the fund manager is fulfilling its role as equity partner into companies invested through working side by side with the incumbent management teams, avoiding quick fixes. Investment teams are active investors, assuming a board role in companies invested as a minimum, while also becoming more interventionist when company performance is dipping. The fund manager sees itself as a partner for its investors and entrepreneurs. As such it is prepared to stick with companies through the inevitable ups and downs of business cycles.
In order to secure sufficient deal flow, Agri-Vie has established a network of business partners across the continent, while the investment team works closely with these partners to proactively identify deal opportunities.
The fund typically invests between US$ 3m and US$ 10m per transaction into mid-market companies and is able to mobilize larger investments through co-investment structures. It typically acquires an equity stake of 25 per cent or more in invested companies and exits after 6-8 years. It follows a rigorous investment process involving thorough appraisal and due diligence by an experienced investment team as well as scrutiny by an investment committee independent of the investment team.
In order to fulfil its role as impact investor, the fund is structuring its investments for maximum impact in terms of job creation, stimulation of local entrepreneurship, introduction of appropriate technologies and standards of corporate governance in its invested companies. Particular attention is paid to involving emerging producers such as smallholder farmers in out grower schemes. For these early stage enterprises, the fund’s investments represent off-take opportunities as well as participation as shareholder through collective shareholding structures. They also benefit from the introduction of advanced farming practices.
The fund’s development impact mandate emphasizes the promotion of women’s participation in agribusiness. To this end, the fund manager has combined forces with the Makotulo Women Consortium whose knowledge and networks the investment team draws in to meet their gender objective.
Marais makes the point that Agri-Vie’s value proposition is unique in the market; “This fund brings a unique combination of risk capital and corporate know-how to agribusiness enterprises. We often find entrepreneurial companies with strong growth potential but who lack capital and the corporate know-how to structure the business for the next growth stage. This is where Agri-Vie can make a difference through making its capital available as well as corporate guidance from its seasoned investment team.”
Agri-Vie has committed to stringent standards in terms of managing the environmental impacts of its investment program. Each investment is scrutinized in terms of its potential sustainability impacts and risk mitigation measures, which are built into the investment agreements. The fund manager actively monitors these impacts on an ongoing basis. The fund’s investments also look to benefit from carbon trading activity.
Agribusiness has traditionally been excluded from private equity investment mandates. This was because fund managers did not generally have the specialist skills on board to manage such investments. In addition, the risks involved have often been equated with the uncontrollable risks associated with farming, such as risks related to climate factors and pests. However, Herman Marais points out that Agri-Vie’s investment team includes professionals with many years of agribusiness experience who are well acquainted with the risks to manage. More importantly, the fund’s investment program is focusing on the value added part of the value chain, away from primary production. “The further one progresses along the value chain, the more the risk profile becomes similar to most other businesses.”
Agr-Vie’s investors incorporated two niche extensions into the core agribusiness mandate of the fund. Firstly, the fund is able to invest into ecotourism projects such as safari lodges and other ecotourism ventures. Secondly, the fund is exploring opportunities in the cultural crafts segment in which lucrative export opportunities exist. These two niche areas form integral parts of the rural economy alongside the production of food and fiber.
The fund’s slogan aptly captures its positioning: “Doing good while doing well”. It provides ready access to lucrative agribusiness investment opportunities for long term investors while making a difference to the agribusiness sector by bringing a unique combination of risk capital and corporate know-how to the market.
PULL OUTS
Agribusiness, including farming and its inputs, processing, services, marketing and distribution, forms the backbone of most sub Saharan economies.
The investment portfolio is targeting strategic diversification, avoiding over-exposure to single segments of the agribusiness sector.
The fund’s slogan aptly captures its positioning: “Doing good while doing well”.
