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Getting into the weeds of African agriculture investing

ImpactAlpha, August 19 – Globally, agrifood tech ventures raised $21.6 billion sector last year. Yet in an entire decade, 242 known agriculture-related deals in Africa raised only $616 million, according to “Mapping Agriculture Investing in Africa” from Village Capital.

Agriculture accounts for 40% of Africa’s GDP and employs 70% of its workforce. Under-investment and under-development of the sector means that Africa remains a net importer of many staples that could be produced locally. The report finds that high-level government interventions haven’t yielded “granular solutions,” particularly around access to finance, including savings, credit, investment or insurance products, and that banks, private investors and philanthropic institutions must play a bigger role.

Africa’s farmers and agribusinesses need creative solutions like value-chain finance, “where a fertilizer company sells inputs and the farmer only pays after selling their harvest, or a microcredit bank covers the costs of purchasing fertilizer for a farmer,” the report states.

Direct investing

Of the $616 million in investments counted in the report, 44% went to East African ventures, with Kenya taking the lion’s share. Fewer than 15% of known investors are African-founded funds; most of the capital for direct agribusiness deals in Africa is from foreign-domiciled funds and international development finance institutions.

Pandemic dealmaking

Investments are generally small and early-stage, but checks are getting cut. ImpactAlpha’s own tally since March: VestedWorld invested in Rwanda’s GET IT. Agri-Business Capital Fund made a loan to Ghana’s Dragon Farming. Pearl Capital invested in Uganda’s Naseco. AgDevCo backed grain storage tech company Pee Pee Tanzania. Goodwell invested in Nigeria’s Tomato Jos and backed Tanzania’s East Africa Fruits. Off-grid cold chain tech company InspiraFarms closed its Series B. The U.S. International Development Finance Corp. gave Twiga Foods a loan. And the Gates Foundation backed Enko Chem to make eco-pesticides available to African farmers.

Catalyzing agri-capital

Africa’s Trade and Development Bank and the African Guarantee Fund committed $1 million to Grassroots Business Fund in July to finance agribusiness SMEs in East Africa. Vital Capital and USAID’s Kenya Investment Mechanism are partnering to unlock $400 million for African businesses impacted by COVID, including agribusinesses. Societe Generale and CDC are increasing lending to West African banks.

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