The SACAU-CTA Policy Briefing on Financing Agriculture Lilongwe, Malawi, October 2010 Increasing private sector financing in the agricultural sector : challenges, opportunities and key requirements Presented By: Patrick Oketa Chief Investment Officer

Introduction to AAC 1.Established in 2005 by Gatsby Charitable Foundation, Rockefeller Foundation and Volksvermogen NV 2.16 investments in agriculture-related SMEs in Kenya, Tanzania and Uganda with a committed value of $9 million 3.Managing the Africa Seed Investment Fund ($12 million) 3.Based in Kampala, Uganda 4.

 Mission:To invest risk capital into agricultural supply chains in East Africa in order to support small holder farmers and leverage additional financial and human capital into the agricultural sector in the region, while achieving competitive financial returns  Objectives:To Provide affordable and flexible risk capital to companies operating in East & Southern Africa (Ethiopia, Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda and Zambia) To provide Business Development Support to build healthy long term viable businesses able to attract additional capital to Agribusinesses Mission

Investment products  Secured debt finance in functional currency at sub-commercial rates to businesses which have positive cash flow and good potential Debt Service Coverage Ratio  Subordinated loans at low fixed interest rates, but including a P&L based variable interest premium  Equity finance to higher risk businesses (eg early in business lifecycle with high reinvestment requirements)  Co-financing with investment partners active in the region to leverage ASIF capital and risk sharing

Agribusiness Challenges in Africa 5  Changing weather patterns  Low productivity  Low margins  Broken value chain  Market inefficiencies and distortions  Barriers to regional and international trade  Low modern technology adoption rate  Insufficient and high costs of capital  Land regimes and tenure systems

Value Add Proposition Promising agribusiness companies lacking finance Empowered businesses with tools for growth commercial banking sector AAC investment & capacity building Sector growth AACAAC intervention Robust profitable agribusinesses Businesses with significant market share Addressing the missing middle Time

Case for Financial Solution to Agribusiness Most Agribusiness do not have sufficient equity and collateral to establish growth-oriented businesses and access bank financing For financial institutions to develop an appetite for agribusiness risk, the sector must address the following credit analysis issues:  Viable business model in a profitable and growing sub-sector  Sound and focused management  Effective corporate governance  Demonstrable financial management systems and capabilities  Focused cost structure, financing plan and cash flow management

Value Creation Finance Governance Growth AAC  Strategic direction  Facilitate development of appropriate systems  Operational improvements 8  Leverage regional contacts with banks, vendors, and regulators to help businesses grow  Leverage on our network for cost effective market intelligence, and BDS to our investees  Access to network of managers: assist in recruitment  Appoint industry experts to the Board  Participate in building effective strategy  Able to invest instruments which best suit the business  Leverage contacts with lenders and equity investors  Credible partner for future exits like IPO  Reputation for transparency & integrity/business principles  Introduce high standards of corporate governance and financial management  Maximize shareholder and exit values Strategy Recruitment

Contact: Patrick Oketa Chief Investment Officer Contact: