A renown agricultural ‘venture capital’ firm said last week it was considering the Rwandan market if it is to realise its targets.
Tom Adlam the chief executive of African Agricultural Capital (AAC) told delegates during the investment forum that, for his firm is to realise the ambitious target of reaching 200,000 small households in East Africa by 2015, each with an income benefit of at least $100 per annum, his firm has to consolidate the market in Rwanda.
AAC is a leading agribusiness-focused investment manager in Africa that delivers positive financial returns to its investors through a process usually referred to as ‘venture capital.’
Venture Capital is basically a type of equity provided for an early-stage, high-potential growth company, with an interest of generating a return through an event such as an offering on a capital market. Venture capital investments are generally made in cash in exchange for shares in the invested company.
”AAC recognizes that the transition from subsistence agriculture to market oriented and high value commercial agriculture is critical for the survival and development of sustained economic opportunities for small farmers and agro-processors in Rwanda and the rest of East Africa,” Adlam told over 100 delegates at the Serena meet.
”We support our shareholders through the provision of affordable and flexible capital and has a high social and development impact on smallholder farmers and rural economies, thereby encouraging greater investment in the agriculture sector,” he added.
Adlam also said that in Rwanda and the East African region AAC is interested in providing affordable and flexible risk capital to enterprises which encourage agro-diversification and improve access to the market.
The company has set up an ‘African Seed Investment Fund’ with an objective of providing affordable and flexible risk capital to seed companies operating in Ethiopia, Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda and Zambia.
The fund according to Adlam is also tasked with the provision of a business development support to build healthy long term viable businesses able to attract additional capital to the seed sector.
” We expect to earn a minimum gross return of 12 percent per annum on funds invested and also mobilize increased investment capital of at least an additional $5 million into the East African agricultural sector through partnerships with other investor,” Adlam said.
Rwanda’s economy is heavily agro-based. While the country’s economic growth declined significantly, from 11.2 percent in 2008, to 5.5 percent in 2009, owing to the global economic recession, the agriculture well performed well with a growth of 10.4 percent.
This according to the National Bank of Rwanda was boosted by favorable weather conditions and government’s green revolution program implemented in the same year.
The country increased its investment in agriculture by 30 percent from 2007 to 2009 and recently reported that its agricultural production was up 15 percent.
“Given the growing levels of food insecurity and reduced margins for the African farmers, farmers must be given opportunities to diversify and increase their income levels. This is pivotal to the poverty reduction strategies of all countries in Sub-Saharan Africa,” Adlam said.
AAC is already fully operational in Kenya, Uganda and Tanzania. In Kenya the supports provides hybrid maize seed, integrated pest management and exports for organic vegetable markets. In Uganda it supports poultry and feeds, maize and rice seeds and a regional market for honey.
The average deal size for any potential investor according to Adlam, is worth about $500,000 with expected gross of return on current portfolio of 10 percent.
About 12 investment project were showcased at Serena, during the investment forum with was co-hosted with the Commonwealth Business Council.