Whether for profit or social motives - and often both - an increasing number of investors are targeting opportunities in African agriculture. At the same time innovative approaches for deploying aid to support farming businesses linked to smallholders are emerging. This blog provides a snapshot of who is doing what, where and how.

6 December 2010

Smallhodler farmer entrepreneurs will transform Africa's agricultural productivity

Two new publications make the case for promoting entrepreneurship in the African agriculture sector - as an exit strategy for aid.

The first, a report by the Harvard academic Calestous Juma with the backing of several African presidents, argues that Africa faces three major opportunities that can transform its agriculture into a force for economic growth: advances in science and technology; the creation of regional markets; and the emergence of a new crop of entrepreneurial leaders dedicated to the continent's economic improvement.

The need to promote a class of entrepreneurial farmers by linking them to commercial farm hubs is powerfully made by Harvey Leard in a report from the Brenthouse Foundation. Leard points out that the small-scale farming sector in Africa remains marginalised. Donor and non-governmental organisation (NGO) assistance along with government subsidies appear to alleviate the symptoms at times but never the root cause.

Leard endorses the view that smallholder farmers need to be linked to modern supply chains. Doing so will provide farmers with access to knowledge, technology and markets, allowing them to earn higher incomes. Making this happen is not easy but successful examples of commercial farm hubs and outgrower schemes exist in crops such as sugar, rice and vegetables.

As argued by AgDevCo, new types of smart aid (e.g. patient capital) can be used to catalyse more private investment in enterprises incorporating smallholder farmers. Conditions attached to that aid can ensure investment is socially and environmentally responsible, with equitable benefit sharing arrangements with smallholder farmers.

Neither Juma or Leard is arguing for an end to "traditional" support to the agriculture sector, such as publicly-funded research and development or voucher schemes for seeds and fertiliser. But they do point towards an increased role for private enterprise as a means of creating a new generation of entrepreneurial smallholder farmers.

The challenge for donor community is to find ways of deploying aid to attract  investment which provides opportunties for smallholder farmer entrepreneurs to thrive.  If that can be done African agriculture can be a force for economic growth and development and, over 10 or 20 years, the exit strategy for aid.

1 December 2010

African Agriculture Fund reaches first closing at $135 million

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 US$135 million in November 2010.

AAF investment primarily lies in food production, processing and distribution in cereals, livestock farming, dairy, fruit and vegetables, crop protection, logistics, fertilisers, seeds, edible oils, smallholder and agri services.

To achieve optimal diversification within the sector, AAF will invest across the value chain, from primary production to processing and tertiary services. The fund will make investments of up to US$20 million per portfolio company, targeting entities with robust management and growth prospects.

AAF aims to support private sector companies that implement strategies to enhance and diversify food production and distribution in Africa by providing equity funding, as well as strengthening the management and modernisation of the agricultural sector on the continent.

To enhance its impact on development, AAF has deployed two powerful instruments: a dedicated SME sub-fund of a target size of $60 million (initially US$30 million) and a technical assistance facility (TAF) of €10 million, to support outgrower schemes in large companies and business development services in SMEs.

Full article from News Day