USAID and Impact Investors Capitalize new Equity Fund for East African Agribusiness

September 28, 2011. A new fund has been set up by a group of impact investors and a US government agency to drive growth in East Africa’s troubled agricultural sector. Already, $25 million has been invested into the African Agricultural Capital Fund (AACF) by the US Agency for International Development (USAid) and impact investors, who include Bill &Melinda Gates Foundation, the Gatsby Charitable Foundation and the Rockefeller Foundation.

Pearl Capital Partners, a Kampala-based specialised African agricultural investment fund manager, will be responsible for investing the funds in at least 20 agriculture-related small and medium-sized enterprises in East Africa over the next five years.

“The AACF will catalyse the growth of small and medium agribusinesses in East Africa,” said Julie Sunderland, the director of programme-related investments at the Bill & Melinda Gates Foundation. She added that since they work with smallholder farmers across the agricultural value-chain, these businesses are important for the sector’s sustainable development.

However, according to the managing partner of PCP, Tom Adlam, a funding gap exists for small-cap agricultural businesses across East Africa, between large-scale commercial banks and microfinance institutions.

“This new fund will help to address this gap, providing long-term capital to entrepreneurs who are building businesses in the agriculture sector while delivering quality financial returns for investors,” Mr Adlam added.
In fact, there is optimism that the establishment of the fund could signal a change in fortunes for the businesses.
“We are optimistic that the success of AACF and the individual businesses within its portfolio will encourage additional capital investment in enterprises employing, purchasing from, and providing inputs and services to smallholders,” said Ms Sunderland.

The CEO of the Global Impact Investing Network, Luther Ragin, Jr, concurred that collaboration between the diverse investors would result in increased capital to the sustainable African agricultural sector.

Besides targeting positive financial returns, the fund is also interested in having significant social impact through provision of employment, secure markets and improved products for smallholder farmers across East Africa.