The private sector window of the African Development Bank (AfDB) Group received, on 19 May 2010, board approval for a USD 40 million equity investment in 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 and staple export bans.
The increased support to AAF, whose total target size is USD 300 million, is part of a coordinated response to prevent the crises from reversing decades of progress, growth, and investment in Africa.
A result of a collective effort of the Bank and its partners, the French development agency (AFD), the International Fund for Agricultural Development (IFAD) and the West African Development Bank (BOAD), the Fund features two specific instruments aimed at lowering the risk perception typically associated with investments in agriculture and agribusiness.
First, an innovative distribution mechanism will provide private sector investors with an accelerated return. Second, a technical assistance facility of $14 million will supply business development services and business linkages services to a range of large companies and SMEs.
The Fund's main focus will be African agribusiness companies operating in food production, processing, packaging, cold storage, distribution, and marketing. Investments will aim at supporting the whole food production value chain by providing both capital and advisory services to a wide range of agri-companies operating on the continent.
The Fund will also operate according to a Socially Responsible Investment (SRI) Manual that features an environmental and social risk management system, guidelines for an optimal use of the technical assistance facility and, for the first time in the area on Agribusiness private equity, a Code of Conduct for Land Acquisition and Land Use in Agricultural and Agribusiness Projects to prevent unsustainable practices in land acquisition and land use.
The Agribusiness team of the Bank's Private sector department aims at investing in private equity funds focused on agriculture, supporting trade finance in agricultural commodities and partnering with key agribusiness groups to attract private sector operators to invest in agriculture in Africa.
AAF will be the Bank's second investment in a private equity fund targeting the agribusiness sector, after AgriVie. It will also follow a series of agribusiness investments in palm plantations, edible oil refinery and commodity trade finance. In the past three years, the private sector department has approved 16 equity funds for an amount in excess of USD 300 million in infrastructure, health as well as in generalist funds.
The AfDB Group seeks to sustained continued growth of its member countries through better infrastructure, stronger private sector, more robust institutions and greater economic integration.
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Onike Nicol-Houra
