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.

11 June 2013

UK invests £50 million in AgDevCo to support smallholder farmers and tackle malnutrition

The UK Government will provide £50 million to help the Agricultural Development Company (AgDevCo) set up a new fund which will invest in agricultural SMEs, smallholder farms and new agribusiness ventures. This will benefit 650,000 people across Africa with jobs and better incomes, as well as help smallholder farmers grow more food to combat food shortages and malnutrition.

A non-profit social impact investor, AgDevCo specialises in investing in African agricultural companies that are at their earliest stages, turning them into commercially-viable businesses that can then find support through private investors and ploughing its profits back into future investments. The UK’s funding will be redeployable, allowing AgDevCo to reinvest in new opportunities as its investments mature and develop.

Investments made over the next five years are predicted to attract over £7 in private sector investment for every £1 invested by AgDevCo.

Africa has more unexploited potential for food production than anywhere else in the world, holding 50% of the world’s uncultivated fertile land, yet its commercial agriculture sector attracts relatively little investment. The new UK-backed fund will:

 - Develop or expand 45 agribusinesses, 30 of which will be SMEs. AgDevCo predict this could increase the turnover in these countries by £60 million by 2018
- Create 27,000 additional jobs and help 90,000 people to benefit from an average additional income of over $1000 per year over the next decade.
- Improve irrigation and processing for commercial agribusiness for 49,000 farmers. By 2018, up to 30,000 additional hectares will be under irrigation.

Three new AgDevCo SMEs Catalytic Funds in Malawi, Zambia and Ghana will receive £10 million each from the Department for International Development (DFID), while £20 million will be invested into a new Regional Innovation Investment Fund to boost production and cross-border trade across Africa.

International Development Secretary Justine Greening said:
“Part of the solution to hunger in Africa is for Africa's farmers and agricultural sector to be able to produce the food it needs for itself.

“Smart UK investment like this will help thousands of farmers develop their businesses to grow food for millions, whilst generating revenues that can be reinvested back into Africa's agricultural sector.
“This sort of innovative, self-sustaining, job-creating investment which generates a return that can be itself reinvested will become an increasingly important part of DFID’s development approach.”

Dr Keith Palmer OBE, AgDevCo Chairman and founder, said:

“Investment in agriculture is the most effective way of stimulating inclusive economic growth, reducing poverty and tackling malnutrition. With UK government support, AgDevCo will support many more African SME agribusinesses and link thousands of smallholder farmers with markets”. 

Examples of businesses AgDevCo is already investing in include:

So Soja – a Mozambican SME soy milk and yoghurt processing business which supplies hospitals and primary schools with highly nutritious milk drinks and yoghurts throughout the country. AgDevCo’s investment will allow So Soja to build a modern processing facility, scaling up its production and helping it to meet international food safety standards. 
Sao Hill – A Tanzanian production and processing firm producing seed maize, soya and horticulture. AgDevCo’s investment will help it to raise incomes, reduce poverty-levels and improve nutrition for 3,200 farmer households.

Eastern Province Farmers – a groundnuts farming and processing operation in Zambia which is already working with 3,500 smallholder farmers to eliminate aflatoxin, a mould and a poison, from the food chain. This will have health benefits for consumers in local and regional markets and allow smallholder farmers to sell premium grade nuts into higher value export markets.