African Development Bank backs PE fund with $15m commitment

The African Development Bank has approved a $15 million commitment to the Africa Food Security Fund, a vehicle managed by South African private equity firm Zebu Investment Partners.

The fund is targeting $100 million for a strategy designed to enhance food security through the support of small and medium-sized food production and processing businesses that it says are often ignored by larger private equity firm and commercial banks.

The strategy calls for the use of both debt and equity, with investments expected to range from $2 million to $8 million and designed to encourage job creation. Regionally, the vehicle will concentrate on sub-Saharan Africa, with Senegal, Mali and Rwanda of particular focus.

“It is envisioned that the fund will create at least 20 direct jobs for each $1 million invested, benefit over 14,000 smallholder farmers with women taking at least 40 percent of jobs created,” according to the African Development Bank.

Named for a large, humped ox used as a symbol of wisdom, wealth and sustainability in Madagascar, Zebu is headquartered in South Africa and maintains offices in Ghana and Mauritius.

Previously, Zebu participated in a $36 million SME-focused fund established as part of the first iteration of Phatisa’s $300 million African Agriculture Fund. Investments from that vehicle included integrated Zimbabwean citrus processor Interfresh, Nigerian bakery Top Crust and Guanomad, an organic fertilizer producer in Madagascar.

In May, Phatisa hired former Bridgepoint Capital director Robert Jenkins to serve as senior partner and acting chief investment officer.

Ag on the move

Leading investment promotion agencies active in Africa see agriculture as the sector most likely to attract foreign investment, according to a study of the linkages between economic development and migration published this month by the United Nations Conference on Trade and Development.

“Africa has great potential in many sectors, including a global competitive advantage in agriculture and its value chains,” the report’s authors wrote. “Despite ongoing emphasis on its potential and amid concerns with regard to land acquisition in the order of hundreds of millions of hectares of arable land by large investors in some countries, agriculture continues to suffer from under-investment.”

Despite such challenges, the UN wrote that ag continues to offer significant potential for job creation and even, over the long-term, an absorption of foreign labor. The report notes that several regional governments have launched programs explicitly designed to support the creation of agricultural job opportunities, highlighting an effort undertaken in Nigeria to create 3.5 million jobs in the sector between 2012 and 2015.

Another example of a program linking agriculture to job creation mentioned in the report was in Senegal, where the government launched a Return to Agriculture Plan in 2006 that aimed to reduce food insecurity, unemployment and rural exodus through job training and investment.