African Agricultural Capital (AAC)

African Agricultural Capital (AAC)

In response to the absence of an investment facility which focuses on the development of private initiative in the agriculture sector in East Africa, the Rockefeller Foundation, the Gatsby Charitable Foundation and Volksvermogen NV have established African Agricultural Capital (AAC), a venture capital investment fund specifically created to invest in small and medium-sized agriculture-related businesses in East Africa.

Information For Investees

Investment is restricted to small and medium sized companies which require risk capital to expand or to introduce new technology or production systems. Investments are made where physical conditions and/or market access create national, regional or international competitive advantage, depending on the nature of competition within the sub-sector.

AAC places particular value on the quality of the entrepreneur and management team in assessing whether or not to pursue investment opportunities. AAC looks for entrepreneurs who want to build businesses (and management teams) rather those who are motivated by an immediate desire for financial rewards and social status.

Sponsors will also need to demonstrate:
Expert market knowledge
A previous track record
Leadership skills
Good reputation

Investment Parameters
AAC's investment locations are currently limited to Kenya, Uganda & Tanzania. In future, AAC will also invest in Rwanda and Burundi, subject to expanding its capital base.
AAC aims for a broad portfolio diversification by agricultural sub-sector and agriculture value chain distribution.
No more than 15% of AAC's committed capital, i.e. US$1,000,000, is invested in any single portfolio company.
AAC does not set a minimum investment size, but it is unlikely that AAC will actively seek investments below $100,000 due to fixed costs per investment.

Investment Criteria

In order to qualify for investment consideration, investee companies are required (save under exceptional circumstances) to satisfy AAC's four principal investment evaluation criteria, as follows:-

Business Environment Criteria
No state marketing interventions in the sub-sector
Absence of domestic price controls on agricultural products
No unduly restrictive regulatory burdens on the sub-sector

Enterprise Criteria
Segment and market growth:
Growth trend shown in historic and forecast demand volume.
Competitive Advantage:
Regionally competitive cost of production.
Product quality matching or exceeding regional industry standards.
Stable prices: Increasing or stable forecast product prices.

Performance Criteria
Track record:
Minimum one year audited financial record.
Positive reputation with banks, suppliers and customers.
Management team:
Professional and technical skills present in management team.
Continuity; low management and workforce turnover.
Team approach; not excessively reliant on one or two individuals.
Growth plan:
Well-researched and realistic marketing plan.
Defensible business assumptions.
Appropriate risk-sharing financial structure.
Achievable implementation plan.

Developmental criteria
Social impact:
Overall job creation resulting from growth plan.
Skills development in rural communities.
Equal opportunities by age, gender and health status.
Economic impact:
Benefits from economic growth accruing to rural communities.
Environmental impact:
No apparent adverse environmental impact.

A typical investment could be made up of all or any of:
Sufficient equity to demonstrate a meaningful ownership partnership and to enable AAC to play a role in Board decisions. This will usually be approximately 25% of the company?s equity but could be less depending on the pre-investment ownership structure.
Loan capital over a 3-7 year term, priced at commercial rates of return adjusted for business risk.
Option to convert loans into equity at a pre-agreed strike price.
Guarantee provided to a commercial lender.
Participation in co-financed deals that meet AAC's investment criteria

For further information please contact info@aac.co.ke

Investee Requirements

Businesses seeking investment and who meet AAC's investment criteria need to provide the following information:
A brief description of the business, including its history and the estimated financial assistance required.
Details of the business's owners and managers, including an organization chart and brief CVs of key management personnel
A description of the business's current products, markets and distribution arrangements, including details of your customer profile and supply chain (major customers and suppliers, distribution/agency arrangements, etc)
A business plan going forward, which clearly sets out the financing requirement and key assumptions and which presents financial forecasts for at least five years
Copies of the business's audited financial statements for at least the preceding year, plus up to date management accounts, and a description of current financing structure, borrowing facilities, etc
A broad description of business' impact on smallholder farmers and rural communities in its home country and elsewhere in East Africa, including, if possible, and indication of the numbers of farmers involved, the extent of your producer network, etc

For further information contact info@aac.co.ke