Bain & Co coalition seeking up to $100m for African ag intermediaries

Partner Chris Mitchell says the response to challenges presented by covid-19 could help determine the pace and focus of regional ag sectors’ further development.

A Bain & Company-facilitated coalition is seeking between $50 million and $100 million to support intermediaries in the African agricultural supply chain that are struggling in the wake of covid-19.

“Speed is of the essence,” Bain & Co partner Chris Mitchell told Agri Investor. “The goal is really to make sure that these intermediaries have access to the types of capital that are required, not only to get through this period, but actually get through it in a way that makes sense given the changes that we are seeing in terms of labor, material and particularly demand.”

Mitchell said that in addition to philanthropies already active in ag, such as the Bill and Melinda Gates and Rockefeller Foundations, the Response, Recovery, Resilience and Transformation (R3T) coalition, his firm leads hopes to draw capital from DFIs like USAID, DFID and CDC, as well as multilateral institutions like the World Bank and the African Development Bank.

Mitchell said the capital will be deployed to support what Bain & Co labels as Farmer-Allied Intermediaries (FAIs): co-operatives, processors and vertically-integrated brands that connect Africa’s smallholder farmers to consumers.

During the weeks immediately following covid-19-related shutdowns, said Mitchell, organizations within the R3T Coalition heard from FAIs in Africa encountering challenges accessing capital, labor and material goods. A survey conducted by TechnoServe, one of the coalition members, in early April found 62 percent of processor respondents across seven African countries did not feel adequately prepared to manage through the covid-19 crisis.

The program envisioned by the R3T Coalition would offer support of different sizes and structures depending on the organization and purpose of any particular investment, he said.

While smaller grants and instruments extended by coalition will be designed to help FAIs recover from initial shocks related to covid-19, Mitchell said, larger instruments will support businesses make investments necessary to meet changes in demand. For example, the coalition would look to finance dairy processors adding capacity to boost production of long-life milk, which has experienced surging demand as a result of the virus.

Companies in need of up to $50,000, he said, would likely be offered grants, whereas FAIs receiving between $80,000 and $150,000 would be provided with recoverable grants. Larger businesses in need of between $250,000 and $1.5 million, said Mitchell, would be offered soft debt in the form of blended finance instruments typically used by DFIs.

“We don’t want to corrupt the capital structure or overall debt market,” Mitchell explained. “These are the businesses that we want to make sure are able to have the resources – both financial and feasibility – to weather this storm and come out on the other side with stronger foundations.”

Nairobi, Kenya-based Mitchell said the trajectory set for African agriculture in the wake of covid-19 could help determine the pace at which the region’s ag sectors develop from established positions in commodity crop markets like tea, cacao and coffee towards higher-value, export-oriented crops.

“We’re already facing a significant deficit in terms of investment, it will be a game of catch up,” said Mitchell. “What covid-19 has done is accentuate and elevate the importance of agriculture as a driver of political, economic and social stability and beyond stability – the real growth opportunity for the future.”

Bain & Co’s work leading the R3T Coalition is part of the firm’s 2015 commitment to invest $1 billion in pro bono consulting work over 10 years. Other members of the group – which Mitchell said is designed to exist for at least five years – include non-profit TechnoServe, Land O’ Lakes Venture37, impact investment fund Acumen, Root Capital and Partners in Food Solutions (itself a consortium including General Mills, Cargill and Hershey, among others.)