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The hardest nut to crack: AgDevCo leads $6m macadamia investment

The social impact investor invested $2m in debt into Tropha Estates while African Agricultural Capital Fund and Jacoma Estates, Tropha's sponsor, invested $2m in equity each.

Social impact agribusiness investment firm, AgDevCo, has led a $6 million round of financing for Tropha Estates, a Malawian macadamia producer and processor.

The organisation invested $2 million in debt while Pearl Capital Partners, an African agri investment firm, invested $2 million in equity through the African Agricultural Capital Fund (AACF), and Jacoma Estates, Tropha’s sponsor and parent company, also injected $2 million in equity.

Tropha is developing 518 hectares of irrigated macadamia estate and a 938 tonne per year processing plant to create “a hub farm”, in the words of Chris Isaac, executive director, business development at AgDevCo. The agribusiness will link over 1,000 smallholder macadamia farmers to markets in Europe and will also purchase chilies and paprika from local farmers and provide training to improve their practices.

“Tropha directly meets out mandate to support viable businesses that can grow and link increasing numbers of farmers into profit,” said Isaac.

Macadamia is a high value nut that has various byproducts such as oil and butter but is also the “hardest nut to crack” according to Isaac, making the processing plant, or cracking facility, of utmost importance. “These farmers have been sitting on a very valuable resource but have been unable to sell their nuts until now,” said Isaac.

Tropha’s work builds on aid given by various government agencies to help develop the macadamia industry in Malawi, according to Isaac. “It was a very well-intended programme but as is often the way, the focus was more on distributing the trees [to farmers] than on what happens in production and where the markets are,” he said. “We built on that to finish the job.”

The deal has been 18 months in the making as AgDevCo initially provided the company with working debt capital to develop some of its business ideas, according to Isaac.

“We deliberately commit working capital early on to get to know the sponsor, the project and the area while at the same time doing intensive due diligence – well it goes beyond due diligence because we actually work with them to build a business plan and model,” he said.

AgDevCo is a not-for-profit organisation that aims to make a return out of its investments to recycle into other projects.

The organisation can commit both equity and debt. In this case it decided to invest debt because there was equity available elsewhere. “We are flexible and always investing with a long-term horizon,” said Isaac. “We will often structure investments as debt so we have more certainty that we will get the cash out so we can recycle it; that’s part of our mission, to make the aid money we deploy work harder.”