FAQs

       

What does AgDevCo do? 

AgDevCo identifies, develops and arranges financing for sustainable agricultural and agri-processing business opportunities in Africa. It also funds the development of agriculture-supporting infrastructure such as irrigation, feeder roads and bulk storage. Once businesses reach the stage of commercial viability, AgDevCo transfers them to primarily national ownership and re-invests proceeds in further early-stage agricultural development.

       

What is AgDevCo’s focus? 

The major focus is on the production and processing of food crops for delivery to national and regional markets. AgDevCo develops both greenfield and brownfield projects that have the potential to be commercially viable and where there are benefits for smallholder farmers and local communities.

       

Why is AgDevCo needed? 

There is enormous unexploited agricultural potential in Africa. Despite this potential, Sub-Saharan Africa (SSA) is a major net importer of food. It can and should be a net exporter. There are major impediments (market failures) to successful investment in early-stage agricultural development in sub-Saharan Africa. They include lack of infrastructure, high unit costs related to the small scale of production, lack of entrepreneurs, the limited pool of experienced managers and lack of finance. AgDevCo targets and removes these constraints creating sustainable businesses that can grow thereafter without further AgDevCo support. Unless the upfront costs and risks of developing new irrigated food crop production can be addressed, there is unlikely to be significant private investment into new irrigated food crop production in SSA.

       

Is AgDevCo a consulting company? 

No. AgDevCo is a project development company which invests its own capital into early-stage projects to get them to the point where they can attract third-party investment. AgDevCo is therefore operating on its own cost and risk and has strong incentives to ensure projects are successful.

       

Does AgDevCo compete with private agriculture investors? 

No, on the contrary, AgDevCo creates a pipeline of "bankable" agriculture investment opportunities for private investors, both domestic and foreign. AgDevCo itself is not a long-term investor will sell the majority of its shareholding as soon as the private sector is willing to invest and the sustainability of the project is assured. AgDevCo is already building relationships with a number of African agriculture investment banks and funds who are interested in investing in the AgDevCo portfolio.

       

How does AgDevCo fit with other African agricultural programmes and donor initiatives? 

AgDevCo enjoys wide support from African governments and public and private sector donors. Specifically, AgDevCo is funded by charitable contributions from the Rockefeller Foundation , the Hewlett Foundation and private individuals. AgDevCo is endorsed bu the Alliance for a Green Revolution in Africa (AGRA) and the Comprehensive Africa Agriculture Development Programme (CAADP).

       

Does AgDevCo seek to attract domestic or international private investment into the projects it develops? 

AgDevCo will seek to raise domestic capital where it is available, in particular from the domestic banking sector but also from domestic institutional investors (e.g. pension funds) who often have a shortage of investable project opportunities in their domestic markets. To facilitate raising domestic capital and reduce the cost of borrowing to the project company, AgDevCo will seek to secure credit enhancement including local currency credit guarantees. AgDevCo will also approach international investors and development finance institutions.

       

Does AgDevCo help smallholder farmers? 

Ensuring commercial agriculture projects benefit smallholders is central to AgDevCo's mandate. AgDevCo improves access to agriculture-supporting infrastructure, agricultural services and finance by smallholder farmers at an affordable cost. Development of commercial farm "nucleus" hubs is an effective means of extending services to smallholder farmers at low additional cost. Every single project in which AgDevCo is involved will have a smallholder farmer support programme.

       

How is AgDevCo different to other donor interventions in agriculture? 

AgDevCo absorbs the high costs and risks of early-stage development of agriculture. It also designs, finances nd builds agriculture-supporting infrastructure, such as irrigation services, and makes it available to commercial farmers and smallholders. The result is the creation of sustainable agricultural and agri-processing industries able to grow without further financial support. AgDevCo acts "on the ground" as principal (ie owner); it is therefore able to move swiftly and can coordinate the various investments along the supply chain necessary for each individual investment to be sustainable.

       

Does AgDevCo provide subsidies for large-scale commercial farmers? 

No. The subsidy element of finance provided to support early-stage agricultural enterprises is used for two purposes: i) to overcome legitimate “market failures”; and ii) to provide infrastructure services to smallholder farmers at reduced cost. Any large-scale commercial farmers who receive access to infrastructure services have to pay full cost-recovery rates.
Capital invested by AgDevCo in early-stage agricultural development will create value over time. Businesses will be sold on to investors at the market price, and any value created through AgDevCo’s activities will be paid to AgDevCo and reinvested in further agricultural development in sub-Saharan Africa. Therefore subsidies do not accrue to the commercial farmers. However, their entry costs and risks are reduced and therefore there will be a lot more private investment in the sector.

       

Does AgDevCo provide subsidies for smallholder farmers? 

Smallholder farmers will not always be able to afford to pay cost-recovery charges for the provision of agriculture-supporting infrastructure and other services provided by AgDevCo. Therefore explicit subsidies will be targeted on extending access to improve services by small farmers on a sustainable basis at affordable cost.

       

Is AgDevCo a for-profit business or a charity? 

AgDevCo is a not-for-profit company operating for public benefit. Any surplus generated through sale of businesses is reinvested in further agricultural development in sub-Saharan Africa. However, AgDevCo operates with strong commercial discipline and will be managed by experienced private sector developers.

       

How will AgDevCo finance itself? 

AgDevCo will be financed through a combination of grants, patient equity and debt from donor governments, private foundations, wealthy individuals and the public. AgDevCo will leverage its own investments by at least a multiple of x10 by raising debt and equity to finance African agricultural businesses from development finance institutions and the commercial markets.

       

How will AgDevCo achieve this financial leverage? 

The early-stage development capital invested by AgDevCo will mobilise commercial debt and equity into individual businesses in an amount not less than x10. The invested development capital and any value uplift will be paid to AgDevCo by incoming investors when they are sold. AgDevCo will create irrigation services businesses which will lease irrigation services to farmers. The patient capital invested by AgDevCo in these businesses is expected to mobilise at least x3 its own patient capital investment. Over time a significant re-flow to AgDevCo of early-stage development capital and patient capital and earnings on the capital will facilitate a continuing flow of new development activities.

       

What is the relationship between AgDevCo and InfraCo? 

AgDevCo draws inspiration from the successful InfraCo model. However, it is a parallel and separate initiative. Nevertheless, wherever there is a significant infrastructure component to an AgDevCo project, AgDevCo and InfraCo will actively consider collaboration for mutual benefit.

       

Why if InfraCo is doing Chanyanya do you need a new organisation; why cannot InfraCo do more? 

In some areas there is considerable overlap and strong complementarity between InfraCo and AgDevCo. The reasons that AgDevCo is needed as well as InfraCo are: InfraCo does not have the capacity to undertake many more agriculture-supporting infrastructure projects; AgDevCo requires specific agricultural expertise not available in InfraCo; InfraCo is restricted to operating in infrastructure, whereas AgDevCo will operate along the whole of the value chain; and it is anticipated that the funders of the two ventures, while overlapping, will have some differences. However, whenever it is of mutual benefit AgDevCo will work in collaboration with InfraCo, particularly in respect of the infrastructure components of the larger agricultural projects.