Study on Private Equity in Agribusiness in Southern Africa
The overall objective of this report is to identify potential interventions to enhance the capacity of newly created private equity funds in agriculture and/or agribusiness in Africa, especially the stimulation of technical assistance to agricultural value chains.
Through the application of specifically designed criteria, a total of ten funds out of a potential 110 investment vehicles were selected for this analysis. An analytical framework for analysis of the selected funds was constructed and applied to each of the ten funds. Where possible, case studies of specific investments were documented, reflecting obstacles, social impact, or social outreach. Given the extensive experience of one particular fund and its track record (Actis African Agribusiness Fund) the case study in that particular case reflects risks perceived and lessons learned by their management.
Findings emanating from this evaluation revealed firstly that Development Finance Institutions (DFIs) are new but also very crucial contributors to agricultural private equity funds. This welcome development is however complicated by different and more tedious funding procedures of DFIs compared to traditional private equity investors. A second finding revealed that, while technical assistance funding is desired by all the chosen funds, technical assistance is not an ingredient of fund offerings at this juncture. A third and final finding cited lengthy regulatory procedures involving governmental institutions as a stumbling block to funds which typically have a limited time span (usually 10 years or less).
Based on the findings the following are recommended:
1. Facilitate the timely private equity funding process by streamlining the DFI due diligence process and merging this process with that of traditional private equity investors;
2. CoordinatetechnicalassistancefundingandDFIfundingtoincreasetechnical assistance funds at the disposal of fund managers and also facilitate the process to obtain funds;
3. Increase technical assistance funds available to fund managers available to portfolio companies by funding a dedicated technical assistance or challenge fund; and,
4. Remove barriers preventing funds from achieving timelines by influencing government policies on acquiring rights and permits common to private equity agribusiness investments.