Phatisa AAF 75% deployed – exclusive

The $246m sub-Saharan focused African Agriculture Fund has bought a stake in an agricultural equipment manufacturer.

African private equity firm Phatisa has now deployed about 75 percent of its $246 million sub-Saharan focused African Agriculture Fund, after buying 40 percent of shares in pan-African equipment distributor Torre Equipment Africa.

The investment will come as a $10 million first tranche cash investment in June, followed by further investment of $4.8 million by the end of August. The AAF will also subscribe to the same percentages of shares in another Torre Group subsidiary, Kanu Equipment, as part of the deal.

A further five percent of shares was bought by an unknown management company, so TEA has raised $15.7 million from the transaction

“We were attracted to the opportunity to invest into TEA as the business has strong growth prospects and we were impressed by the experienced management team,” Joseph Bergin, senior partner at Phatisa, told Agri Investor .

“We were particularly excited by the opportunity to assist TEA to expand its sales to the agricultural sector where we have deep knowledge and specialists in palm oil, cocoa and the sugar industries.”

A Phatisa spokeswoman told Agri Investor the investment would work well with another AA Fund investment, Farming and Engineering Services, a Malawi-based agricultural engineering and equipment distribution company it bought in 2013.

The fund has a minimum investment requirement of $5 million and will invest a maximum of $24 million in any business, according to its website. It closed in September 2013, with an investor base including The African Development Bank and Development Bank of Southern Africa, the government agencies of Spain, the US and France, a fund of funds, a large South African commercial bank and private investors from America and Europe.

Other AAF portfolio companies include Feronia, a palm oil plantations and mills project in which it is co-invested alongside development finance institution CDC, and Meridian Group, a business specialising in the manufacture and distribution of specialised fertiliser blends, processing and storage of agricultural products.

Financing agricultural infrastructure and inputs is crucial to developing the sector in Africa.

“Particular difficulties facing investors in Africa are lack of infrastructure, limited fertiliser use and poor seed quality in addition to wider developing market problems like corrupt bureaucracy and uneducated local labour,” wrote Norton Rose Fullbright associate Jeuraj Neuwirth in Agri Investor earlier this year.

Dalberg partner Aly Khan Jamal, who consults for the African Development Bank, said at the Agrique Africa Investment Summit in London on Thursday, the bank was focusing on building up infrastructure such as cold chains, mechanisation capabilities and the availability of fertilisers.