German impact fund supports African agriculture

The $140 million Africa Agriculture Trade Investment Fund (AATIF), the German public-private impact fund, has injected $25 million into a Sub-Saharan Africa agribusiness loan facility. The loans will be issued by BancABC, the South African bank, which will share the risk with AATIF but will not commit any capital.

The loans will be extended to agriculture workers across the value chain from primary farmers to processing operations, according to Dana Botha, group head of corporate banking at BancABC.

“The loans can be extended to a full range of customers and AATIF has some conditions on the minimum number of loans that must be issued in order to get a wide reach and benefit as much of the sector in Sub-Saharan Africa as possible,” he told Agri Investor.

AATIF will take 55 percent of the risk and BancABC will take the remainder. AATIF will be compensated for taking the extra risk but Botha would not disclose the exact risk premium the fund would receive.

The deal came about after BancABC’s correspondent banks were alerted to AATIF’s African agri remit by Deutsche Bank, one of the fund’s managers, according to Botha. There is a huge demand for capital in the sector but assessing risk has always been problematic, he added.

“Both the risk sharing and the capital injection were attractive in this deal,” he said. “And both and make it a lot easier for us to build an agribusiness portfolio. Liquidity in sub-Saharan Africa is always a challenge for small to medium sized businesses environment and the risk sharing was always a primary objective.”

AATIF was established by German agency KfW on behalf of the German Federal Ministry for Economic Corporation and Development (BMZ). KfW and BMZ have committed $88 million in total while Deutsche Bank has $26 million committed to the fund and another $25 million was committed by private investors. There is also a €6 million technical assistance facility attached to the fund to help investees handle any investment.

In December 2013, AATIF entered into a $1 million revolving trade finance agreement with Balmed, a Sierra Leone cocoa and coffee trading company and in October is invested $20 million into Wienco, a Ghanian intermediary company that provides fertilizers, agrochemicals and training to smallholder farms through a senior debt loan.

AATIF is a public-private partnership dedicated to improving agriculture sector in Africa. The end goal is to benefit the poor through improving food security, creating employment and creating income for farmers, entrepreneurs and labourers in the agri sector, according to its website.

AATIF did not respond to requests for comment.