Phatisa Food Fund 2 gets AfDB backing, targets 22% net returns

As the South African-based manager progresses towards its $300m target, we zoom in on the fund’s terms.

Phatisa has collected a $10 million investment pledge from the African Development Bank for Food Fund 2, a follow-on to its debut pan-African vehicle focused on agriculture and food production.

The fund, which the Mauritius-based private equity firm hopes to close on $300 million, had already received a $75 million commitment by the Overseas Private Investment Corporation earlier this year. The African Agriculture fund, PFF2’s predecessor, reached its final close on $246 million in September 2013.

The Phatisa team, which oversees about $285 million in total, also manages the Pan African Housing Fund, closed on $41.95 million in Q3 2014.

PFF2 follows a classic private equity structure, being a 10-year closed-end fund with a five-year investment period, according to a Q4 2017 fund presentation seen by Agri Investor. Phatisa charges an annual 2 percent management fee, plus a 20 percent carried interest once the 8 percent hurdle rate is reached.

The manager itself is committing 1 percent to the fund, with the firm’s partners pledging another 0.5 percent. Co-investment opportunities will be offered to LPs, according to the document, which also states that PFF2 targets net returns of 23 percent.

As of Q4, the fund had an investment pipeline totaling $277 million, with transactions spanning Mozambique, Kenya, Cameroon, Ghana, Cote d’Ivoire, Zimbabwe, Zambia, Malawi, Mauritius, South Africa, Senegal and Nigeria.

Sectors covered include agri inputs, processing, manufacturing, trading, distribution and retail. Equity tickets range from $10 million to $25 million. The firm is hoping to reach a first close this quarter.

Phatisa, which has a foothold in South Africa, Kenya, Zambia, Mauritius and London, is set to open a new office in Cote d’Ivoire upon first close of PFF2.