AgDevCo adds $90m in DFI capital

The firm’s early-stage ag investments could expand from Sub-Saharan countries without upper middle-income status into other regions of Africa, says chief executive Daniel Hulls.

African Agriculture Development Company has raised $90 million from three developmental finance institutions in the first funding round for the permanent capital structure since it was establishment through a UK government grant in 2009.

AgDevCo secured $50 million in equity from the UK’s CDC Group, $20 million in equity from Norwegian DFI Norfund and $20 million in debt from the US International Development Finance Corporation, which operated as the Overseas Private Investment Corporation until a 2020 reorganization.

The $90 million raised is in addition to $5.4 million in supplementary funding from CDC Group and will be used to support investments in African agribusinesses that provide jobs, income and food to local populations.

AgDevCo chief investment officer Chris Isaac told Agri Investor that the close marks a milestone for the London-headquartered impact firm, which focuses on early-stage agribusiness investments of between $2 million and $10 million in Sub-Saharan countries without upper middle-income status. The firm has invested in more than 80 agribusinesses active in subsectors that include tree nuts, avocadoes, poultry and others.

“We have used the experience and the endowment to create an equity cushion that has now allowed us to secure DFI capital, both equity and debt,” said Isaac. “It equips us to grow that balance sheet and grow the investments that we can make on the continent.”

In January, AgDevCo sold a portion of its investment in an integrated farming hub in Ghana to a local agribusiness as part of an effort, which West Africa commercial director Erik Wiersma told Agri Investor aims to support broader industry maturation.

Isaac highlighted South African pension fund Old Mutual Investment Group’s 2020 investment into Malawian macadamia producer Jacoma Estates as an example of the type of development AgDevCo’s investments aim to catalyze.

“That is a fantastic result for us: seeing genuine institutional money coming to agriculture in countries where that just hasn’t happened in the past,” he added.

Chief executive Daniel Hulls explained that AgDevCo began with a focus on the most challenging part of the market with very limited access to capital. About five years ago the firm moved to integrate an additional focus on larger agribusinesses, he told Agri Investor.

Whereas most investments before 2017 were in the $2 million to $5 million range, he explained, AgDevCo has since increased its investments in large and established agribusinesses with between $20 million and $40 million in annual turnover that are already profitable. Hulls said that at the small end the market, there is virtually no capital for thousands of entrepreneurs, while there is actually quite a lot of capital chasing a small number of companies at the larger end of the market.

“Where we play is in the middle and the returns are in the middle too. We’ll do better than capital recovery, but we are not going to be delivering the sort of 15 percent net commercial returns that any institutional investor would be seeking,” he explained. “Our role, if we’re successful, is to grow the next generation of large firms that can deliver those sorts of returns. That’s the contribution we make.”

AgDevCo’s current mandate has a specific focus on Ghana, Côte D’Ivoire, Kenya, Tanzania, Uganda, Zambia, Malawi and Mozambique that Hulls said could expand with recent DFI support.

“We’ll be cautious in moving outside of those markets that we know well, but we will add some additional countries in time,” he said. “Ones that are on our radar where we are not currently invested today would include Nigeria and Ethiopia.”