The African Development Bank’s recent €10 million investment in agroforestry private equity vehicle the Moringa Fund takes it to 70 percent of its €100 million target. The fund is going to close during the first quarter of 2015 whether the target is reached or not, according to partner Martin Poulsen.
Moringa is also nearing completion of its first investment, which is going to be in Latin America, he added. The fund held a first close on €50 million in August 2013.
The fund’s investor base is made up of development finance institutions, private investors and family offices. It is predominantly European, although there are investors from the firm’s target regions of Latin America and Africa, which are “important to have”, Poulsen told Agri Investor.
While Moringa has spoken to a good number of pension funds that embrace sustainability principles, the average commitment of between €5 million and €7 million is too small for many. “Many say they would be interested in any second fund we launch,” he said.
Moringa has two investment compartments, one into Africa and one into Latin America and some investors, such as AfDB, have decided to invest only into projects in one region. Others are committed across both regions. The commitment to each region is fairly even, according to Poulsen.
Moringa does not use a placement agent but has had some informal conversations with intermediaries to attract investment along with using its network.
Moringa invests into existing agroforestry businesses that need expansion capital and prefers to invest where the technical risk – the risk that a certain tree or crop is able to grow in a given location – is taken out. It will work to establish new agroforestry assets on land that is already being exploited or is lying fallow, however.
“We are not at all averse to starting with currently unproductive land but we would tend to invest to expand plantations that are already being run by a successful small business,” said Poulsen. “We look to achieve additional scale by associating substantial numbers of smallholders with our businesses.”
Poulsen does not see agroforestry as an approach to replace traditional forestry and agriculture systems overnight, but as an approach with “lots of merit in terms of addressing some issues associated with monocropping and in promoting sustainability in agriculture”.
“Agroforestry makes projects more robust from environmental and social perspectives and reduces dependence on external inputs,” he said. “It also diversifies revenues because agroforestry produces a variety of different products for sale, mainly timber, biomass and agricultural products.”
Moringa is managed by The Moringa Partnership which has offices in Paris and Geneva and representative offices in Colombia, Peru, Chile, Brazil, Cameroon, Gabon and Democratic Republic of Congo. Alongside the investment vehicle, a grant-based Technical Assistance (TA) programme will contribute to project preparation, capacity building, technical strengthening and dissemination of Moringa’s innovations and achievements, according to the website.
French investment firm La Compagnie Benjamin de Rothschild (CBR) and ONF International, a subsidiary of the French Office National des Forêts, are both co-founders and ongoing partners for fund management and forestry investment, respectively.
CBR, FISEA, a French DFI for Sub-Saharan Africa, FISEA, the Latin American DFI, Finnfund, the Finnish Fund for Industrial Cooperation, the Fund for Development Promotion of the Spanish Cooperation (FONPRODE), The Colruyt family office and FMO, the Dutch DFI are all investors in the fund.
Poulsen would not disclose the fund’s targeted return or fee structure.