SUNO Works Limited

Step One
We believe that it is important that the Osun State Government (OSG) has some continued involvement
in the planned new leasing entity; it is crucial that the state agricultural development policy and existing
relationships are aligned and considered at all times; in order for the business to achieve sustained
growth.

Suno Group Limited would purchase its inventory of agricultural equipment and heavy plant from the
Osun State Government via a sale and leaseback solution allows the user (OSG) to transfer the risk of
ownership to Suno Group Limited in exchange for the use of the plants and machinery with fixed
monthly operating costs.
 

Step Two
The newly OSG would then farm out the operation under a Full Maintenance Lease (FML) agreement to
Suno Junior Limited.

Suno Junior Limited a newly formed plant equipment leasing company. take over the;
Leasing and delivery
Operating and management
Service and Maintenance
Training and education
Procurement

Of all Osun state government owned agricultural plant, i.e. tractors, ploughs, harvesters, etc.,
plus storage facilities.

In return Suno Junior Limited will provide the OSUN State government with a 20% of the
revenue after costs and taxes.

We will offer finance and operating leases with a flexible rental structure to suit needs. This will
enable us to refinance existing assets, rent out and manage plant/assets efficiently.

Due to our unique relationship with four partner banks, we guarantee a financer for the lease and
procurement current and future plants and machinery in any brand, make or model required.

This will help us provide a state wide platform which allows us to build and manage existing and new
plant and machinery resource with ease and in accordance with our operational needs.

We aim to do this through our provision of a complementary operating lease through the handling
of the following responsibilities:

v  Efficient and Effective Fleet Operations

 We ensure that the exisiting service suffers little or no downtime as we will offer a seamless service
that guarantees both efficiency and optimal effectiveness.

v  Full Maintenance Fleeting

Our plan is to develop a Full Maintenance services which is designed to keep plants and machinery
running safely and on time; this is crucial to the ongoing success of the service – a major cost saver.

Our plan is to provide superior preventive and diagnostic maintenance, all designed to optimize
performance, track assets and minimize downtime.

v  Sourcing, Purchasing and Delivery

Whatever brand, make or model of the plants and machinery we acquire, we will develop business
relationships with all the leading brand names and dealerships to obtain exactly what it is we want.
We will handle all that is involved in the purchasing as well, regardless of the future volumes
required.

Benefits
The benefits of a sales and leaseback agreement include: 
 Releasing the capital tied up in plans/machinery and providing the OSG with cash for core
activities
 Removing the OSG’s plant and equipment inventory from the balance sheet
 Eliminating the risks of depreciation and resale
 Fixing monthly payments, which can includes amongst other asset management services,
replacement of parts), maintenance and servicing. This facilitates easy and accurate budgeting.

PLANNED DEVELOPMENT PROJECTS

Brazil, Malaysia and Limpopo (BBE Scheme)

Land Expansion Plan –

Introduction
Aim to increase the levels of agricultural production in Osun state by increasing the total acreage
farmed.

At present farmers are farming as low as 20% of their allocated land due to capacity limitations, namely;
 Cost of land clearance
 Cost of increased arable crop yield – Fertiliser, improved seeds, agrochemicals and mechanized
tools

Cost plus the allied risks are major obstacles that hinder the increased arable crop yield amongst the
bulk of Osun state farmers.
Summary
Suno Junior Limited or X10ion Limited a specially created entity would obtain a bank facility/loan which
enables the company to clear in its first year up to 2500 hectares of land – 5 hectares x 500 farmers.

Farmers would sign up to the scheme which would involve them agreeing to;
1. repayment of the land clearance costs an agreed monthly payments after a set moratorium
2. Planting of a pre contracted crop.

The land subsequently undergoes a preparation process involving clearage, fallow period, tillage, etc.

The contracted crop is grown and harvested.

The terms of the Extension Plan provide farmers with increased access to credit and inputs; which will
result in a higher crop yield and income.

Facts
Fertiliser, improved seeds, agrochemicals and tools over 93% of Osun farmers would benefit from such
resources –

Malaysia’s
Since the 1960’s the nine National Agricultural Plans have phase by phase helped to develop the size of
farms/plantations and the size of crop yields of specific crops by over 700%.

Thailand’s
The Eleventh Plan has adhered to the Philosophy of Sufficiency Economy and that it should be applied to
all parties at all levels..

Development guidelines include:-

5.3.1 Reinforce natural resources as the foundation for agricultural production base.
Moreover, land management mechanism will be improved.

5.3.2 Increase agricultural productivity. Imported chemical fertilizers and pesticides will be controlled
and their farm uses will be inspected to meet clear standards.

Agricultural practices for preserving biodiversity will be encouraged to be suitable for the climate and
the environment.

5.3.3 Increase value of agricultural commodities along supply chains.

Local products and services will be supported to create added value including in agricultural products,
food and energy. Markets and future markets for agricultural commodities will be strengthened.

5.3.4 Create job and income security for farmers. An income insurance system together with crop
insurance will be developed to cover all farmers. Fairness for farmers and stakeholders in the contract
farming system should be encouraged.
 South Africa
Market Led Smallholder Agricultural Development Programme
Programme objectives: The overall goal of the Programme is for the poverty of targeted rural
households to be sustainably reduced. The objective is to create a viable smallholder agricultural sector
with improved backward and forward linkages. 
Programme description: The goal and objective would be pursued through three Programme
components, each with its own expected outcome.

 Community Empowerment.
 Agricultural Support Services.

 Smallholder Financial Services.

Important features: This Project would be the first IFAD-supported rural poverty reduction initiative
in South Africa. The Programme has been designed in response to a request from the Government
for IFAD assistance to deal with the issue of persistently high levels of rural poverty in South Africa,
despite solid economic progress since the end of apartheid in 1994 and the country’s upper middle
income status. Since there is no country strategy for South Africa, the Government of South Africa-
IFAD partnership is evolving through extensive consultations in the Programme design process.

Produce Offtaker Scheme (POS)

By maintaining long-term relationships with international customers. POS will provide a steady income
to hundreds of small-scale farmers as well as job security for POS employees.

POS’s business model will be built on multi-year deals to supply its core clients so everything that the
contracted growers produce is already sold.

To maintain production quality and quantity requirements, POS will invest in its farmers as well as its
plant employees.

Agricultural mechanization in sub-Saharan Africa: time for a new look - by Geoffrey C. Mrema, Doyle Baker, David Kahan

Considering the above trends of the past three decades and the increasing globalization of the world
agricultural economy, a key question that arises is whether SSA countries can realistically achieve a
significant turnaround, development and growth with agricultural sectors that rely to the extent they
currently do on human muscle power and hand tools. Trends in mechanization worldwide clearly show
that there are strong correlations between economic growth and mechanization – those countries that
have achieved unprecedented economic growth over the past three decades and have succeeded in
solving their food problems have also advanced to higher levels of mechanization in their agriculture.
Countries that have stagnated economically with significant numbers of their citizens steeped deeper in
poverty, have also lagged behind in agricultural mechanization. This is quite apparent to many African
experts and policy-makers, especially given the impetus of globalization and information flows.
There is a need therefore to re-examine the role of agricultural mechanization in the
agricultural and economic development of SSA. The initial focus would be on those powerintensive
field operations,
such
as land preparation,
which
make
agriculture
unattractive
and

difficult.
There
is evident need for transforming
the agricultural
systems in Africa through a

combined
and synchronized
approach
to promote biochemical
technologies
with mechanization,

abandoning
the controversial
low
input systems and the incremental approach
to agricultural

development.
A dual agricultural
system needs to emerge
through encouraging more commercial

farming
by
medium-scale farmers
(10–200 ha). Such
medium-scale farmers
are likely
to be the

ones
who will be able to provide
mechanization
services
to the majority of
small-scale farmers.
They are also likely to create large enough demand for inputs and produce large volumes of
outputs to enable viable and sustainable input supply and output recovery enterprises to be
established, which can also serve the small-scale farmers at competitive rates/prices.

Some of the essential factors for successful and sustainable agricultural mechanization
in SSA are: First is the need for effective demand for the outputs of agricultural production
in national, regional and international markets that can be met through profitable farming
enterprises. These profitable farming enterprises will in turn lead to an effective demand for
agricultural inputs including mechanization services. The second factor is the need to ensure
effective utilization rates for machinery and implements through policies and other support
services that facilitate multifarm use, development of sustainable machinery rental markets,
and freer movement of machinery across district and national boundaries to exploit the
rainfall isohyets and peak land preparation seasons. The third factor is the need to establish
efficient agricultural machinery supply chains and service enterprises, including linkages to new
suppliers/manufacturers, as well as local equipment manufacturing, nationally or regionally
where this is feasible.

Agricultural engineers and other proponents of mechanization (often equated then to

tractorization), advanced five main reasons to justify the replacement of the cutlass and hoe
and/or draught animals with tractors:
• Mechanization allows previously unutilized land to be brought under cultivation. This may
be the result of the ability of tractors to perform deep tillage of hard soils as well as reclaim
wasteland. It could also come about by bringing additional land under cultivation.
• Mechanization should result in timelier field operations and as a result increase in
productivity. Timeliness is essential for multiple cropping because of the need for rapid
land preparation between sequential crops, especially in irrigated agriculture or in areas
with bimodal rainfall and in unimodal rainfall conditions for breaking the hardpan and
exploiting the short rainy season.
• Tractors and animal traction are not only useful for land preparation, but can also be
used to power implements and equipment used in improving and maintaining farm and
rural infrastructure in general (e.g. drainage, irrigation, fencing, rural roads). The same
equipment also can be used for transport, carrying inputs, transporting produce to the
market, as well as driving pumps and grain milling equipment.
• Mechanization can overcome seasonal shortages of labour and/or release labour in critical
periods for other productive tasks. If labour is released for the production of other crops,
total farm output should increase; for non-farm activities, overall household income
should increase.
• Mechanization reduces the drudgery associated with farm work, especially for power
intensive tasks such as tilling the land with a hand hoe. This is particularly important in tropical areas
where high temperatures and humidity render farm work relying on human
muscle power to be ergonomically quite difficult and arduous.

There have been significant changes in the number of tractors in use in developing
countries, and dramatic differences among regions:
•
In Asia, the number of tractors in use increased phenomenally – by five times between
1961 and 1970 (from 120 000 to 600 000 units), and thereafter increased by 10 times from
1970 to 2000 (from about 600 000 to 6 million units).
•
In the LAC region, the number of tractors in use increased by 1.7 times between 1961 and
1970 (from 383 000 to 637 000 units), and almost tripled between 1970 and 2000 (from
0.64 to 1.8 million units).
•
In the North Africa and the Middle East the numbers of tractors in use increased similarly
to that in the LAC region – doubling between 1961 and 1970 (126 000 to 260 000), and
increased by 6.5 times between 1970 and 2000 (0.26 to 1.7 million).
•
In SSA, the trend has been different. While the number of tractors in use in SSA in 1961
was greater than in both Asia and the North Africa and the Middle East region (172 000
versus 120 000 and 126 000 units, respectively), it increased very slowly compared to the
other regions, peaking at only 275 000 by 1990 before declining to 221 000 units by 2000.
A poignant point to emphasize is that Africa (here including North Africa) had more
tractors in use in 1961 than Asia (235 000 and 139 000, respectively), and by 1970 the numbers
were in the same range (333 000 and 398 000, respectively). By 1980, however, the number of
tractors in use in Asia had increased to three times more than in Africa (1.27 million against
0.44 million, respectively); by 1990 this ratio had increased to almost six times, and by 2000 to
ten times (at 0.52 million in Africa and 5.30 million in Asia).

While different mechanization patterns emerged in Asian countries because of a

combination of factors, it is evident that supportive government policies played a dominant
role. Sri Lanka, Thailand, India, the Philippines, Taiwan and the Republic of Korea are examples
of countries with persistent policies in favour of mechanization and high rates of adoption.
Many Asian countries did provide some subsidies for equipment investments, both directly and
indirectly (APO, 1995). In India, government policies encouraged the development of smaller
and low-cost equipment (Gotsch, 1973). In the Philippines, subsidies were provided through
special credit programmes and subsidized fuel. To some extent, these incentives encouraged
capital-intensive farm development. Because of Thailand’s low government intervention in
the establishment of a local agricultural machinery manufacturing industry, its experiences
stand out as an exception to this general pattern. However, the government sector played a key
role through providing technical assistance to manufacturers, developing practical handbooks
for equipment operators, and establishing quality standards for equipment (Krishnasreni and
Kiatwat, 1998).
In general, the Asian experience shows that local manufacture and supply of agricultural
machinery and implements emerged as a response to a perceived demand in agriculture.
The diesel engine and tubewell industry in Pakistan, and the water pump and power tillers
manufacturers in Thailand are good examples. The Indian tractor industry is another case in
point: tractor sales have doubled every decade for five decades (Singh, 1998). Singh (2001)
attributes this to the dynamism of tractor manufacturers and pragmatic governmental policies.
The high cost and unsuitability of imported machinery from developed countries have also
influenced these local efforts.
L
ESSONS LEARNED FROM MECHANIZATION EXPERIENCES
In general, key driving factors responsible for the uptake of mechanization in Asia in the 1970s
and 1980s can be summarized as:
•
the presence of a sizeable number of medium-scale farmers providing mechanization and
other services to the more numerous smallholder farmers;
•
availability of registered land that could be purchased or leased by individual farmers,
thus increasing farm size and subsequent profitability as well as providing farmers with
an opportunity of using their land title deeds as collateral for credit to buy machinery;
•
entrepreneurial capacity of farmers and versatility in adapting to changing markets,
technologies and policies (adaptive management);
•
opportunities to use tractors and other agricultural machinery in off-farm activities, such
as transport, construction, repair and maintenance of rural infrastructure;

•
policies encouraging industrialization, resulting in rising real wages, and complementary
policies contributing to the private profitability of farming;
•
high levels of effective demand for mechanized equipment, leading to the development
of suitable low-cost equipment (tubewells, power tillers, diesel engines) as an alternative
to purchasing high-cost and often unsuitable machinery from developed countries;
•
presence of local entrepreneurs dealing with repairs and manufacturing, and development
of machinery supply chains ensuring availability of spare parts;
•
business- and enterprise-friendly policies, laws and regulations as well as physical and
institutional infrastructures, which encourage commercial activities and entrepreneurship
in farming, input supply as well as produce handling, processing and marketing.
Some other points emerging from mechanization experiences in Asia and SSA include:
(see Binswanger, 1978, 1986; Sargent et al., 1981; Farrington et al., 1982 ; Burch, 1987; Pingali
et al., 1987; Nagy et al., 1988; Starkey, 1998):
•
Mechanization of processing and pumping has tended to precede the mechanization of
crop husbandry and harvesting operations.
•
Mechanization of power-intensive processing and pumping operations can be profitable
at low wage rates.
•
Mechanization of difficult and arduous tasks, such as land preparation, does not necessarily
lead to unemployment.
•
Field productivity increases stem from combinations of technologies used as a package,
including farm power mechanization and biological technologies.
•
To pay for investments in mechanical technologies, farmers have to be able to generate
income and profit from their production; sustainable mechanization has often been
associated with programmes that facilitated or supported access to organized markets for
crops such as cotton.
•
Tractorization has often led to increases in farm size through land consolidation and
procurement of adjacent farms.
•
Because of the high capital costs associated with tractors, only larger farms were in the
position to exclusively utilize them efficiently.
•
Farmers who purchased tractors were able to use them profitably only if the tractors were
also used for purposes such as transport and other off-farm activities in addition to onfarm
activities.
•
Where rental markets exist or can be established, farm size has had less influence on the
pattern of mechanization (e.g. in India).

•
Substitution of labour by tractors tended to occur as a result of the high supervision costs
associated with hired labour, particularly on larger farms.
•
Government subsidies, tax concessions and overvalued exchange rates may have
accelerated the pace of tractorization.
•
Efforts to design and promote implements and machinery especially for particular farming
systems or specific groups of farmers have not fared well.
•
There is a perception that mechanization programmes operated directly by government
agencies have been more dominant in the process of mechanization in SSA than in Asia.
From these experiences, four main policy lessons for mechanization in SSA can be gleaned
from the Asian and African experiences over the past three decades:
First, attention should be placed on increasing the profitability of investments in
mechanization for farmers by encouraging commercial agriculture and focusing investments and
support on both farm and non-farm enterprises.

Rethinking agricultural mechanization in sub-Saharan Africa

When considering the future of mechanization in SSA, it is important to recognize

that one key problem undermining the success of past mechanization initiatives has been a
preoccupation with introducing animal traction or tractors for land preparation. In part, this
preoccupation stems from an old adage in the mechanization literature that mechanization
starts with power-intensive operations, followed by operations and equipment that require
greater precision. In part, this preoccupation stems from the expectations created during the
early days of the Green Revolution, as noted above, when the shift to multiple cropping and
associated increases in productivity put a premium on timely and high quality land preparation.
The reality, however, is that mechanization is not only an issue of substituting labour with
animate or motorized power in land preparation – although very visible, this is only one of its
dimensions.

Rethinking agricultural mechanization in sub-Saharan Africa

Even in the specific context of technological change, there are many mechanization options
and opportunities in addition and complementary to mechanization of land preparation. This
often was overlooked in Africa when governments imported tractors and set up government
tractor hire schemes, and when more than 20 years of investment was poured into promoting
and subsidizing the introduction of animal traction in the savannahs of West Africa. Meanwhile,
under the radar scope of donors and many African governments, mechanization was slowly
moving ahead with much less support in activities where African farmers and processors had a
felt need to break farm power constraints.
Some of the quiet success stories in Africa include various types of water pumps
including the treadle pumps, hammer mills for grain milling, cassava graters, driers and other
preservation technologies, tractor and donkey carts for transport, spraying equipment for
pesticide and herbicide application, and chainsaws for forest clearing. Even with respect to
traction use in field operations, one might ask why there is such preoccupation with land
preparation when the majority of field studies in Africa point to the pervasive importance
of labour constraints during the weeding period. Timely land preparation is important in
some areas, but is not everywhere the main bottleneck (Eicher and Baker, 1982). In summary,
mechanization is about many types of power and equipment, not just land preparation with
tractors and animal ploughing.
In addition, mechanization is not an “all or nothing” process. Levels and types of improved
mechanical technologies need to be compatible with local economic, social and agronomic
conditions. For example, tractor power is likely to be best suited to the moist savannah areas
and flood valleys (Pingali et al., 1987), while mechanization of agroprocessing may be more
important in the more humid areas where farming systems are dominated by perennial crops.
Moreover, neither animal nor tractor cultivation are exclusively suitable for all regions and
districts. Hand cultivation will continue to be necessary where:
• topography makes tractor or draught animal ploughing difficult, e.g. highland slopes;
• tree crops can be grown, such as coffee and tea, which make it possible in other ways to
obtain a satisfactory output;
• labour can be hired at reasonable cost to cope with peak labour requirements.
In brief, it is desirable to think of agricultural mechanization not as a short-term
commitment to replace human labour with machinery and equipment, but rather, as a longerterm
developmental
process that involves
various
mixes
of
farm power sources over time. No
single source of farm power (human, animal, mechanical) is mutually exclusive, and the most
effective results ensue from a combination of them, synchronized and targeted to address
specific local problems. The key challenge, however, is to create incentives and enabling
conditions so that farmers and managers of non-farm enterprises can mechanize those
difficult, arduous and power-intensive operations that constrain productivity growth and are
difficult to perform, when relying entirely on human muscle power. Such reliance on human
muscle power makes agriculture a very unattractive sector, largely contributing to the exodus

Agricultural mechanization in sub-Saharan Africa: time for a new look 31

The argument that mechanization is essential to agricultural development and economic
growth cannot be proven or disproven. However, trends in mechanization worldwide show
clearly that there are strong correlations between economic growth and mechanization (Clarke
and Bishop, 2002): those countries that have achieved unprecedented economic growth over
the past three decades and have succeeded in solving their food problems have also moved to
higher levels of mechanization of their agriculture. Countries that have stagnated economically,
with significant numbers of their citizens steeped deeper in poverty, have also lagged behind
in agricultural mechanization.

E
FFECTIVE DEMAND
Effective demand for agricultural products, generated by a growing urban population, high
incomes per capita, off-farm employment opportunities and rising wage rates creates both
the need and the opportunity for mechanization (Clarke and Bishop-Sambrook, 2002).
Mechanization therefore needs to be linked to market-oriented enterprises in order to generate
necessary cash flow to cover capital costs and make loan payments. As Cleave (1974) pointed
out in his seminal review of nearly 50 studies based on farm surveys on labour use, the
establishment of markets – along with management guidance and inputs provided by traders
and government – stimulated production increases and corresponding adjustments in resource
management including labour use. Adjustments made in farm management following the
introduction of market-oriented crops have led to a doubling or tripling of farm income.
Effective demand for products translates into effective demand for equipment and
machinery services only if farming is profitable. Farm profitability needs detailed attention

if farms
are not profitable before mechanization, the likelihood of becoming profitable as a result of
mechanization alone is low. In most circumstances, it is perhaps more realistic to view farm
profitability as a condition that makes mechanization feasible, rather than as an outcome of
mechanization.

The historical record indicates that successful and sustainable mechanization cannot be
established by direct public sector provision of mechanical technologies and services. There
are signs that this lesson has not yet been learned, with the corresponding risk that earlier
failures will be repeated. The public sector can nevertheless effectively promote mechanization
processes, as indicated above by the establishment of enabling environments, training and
human resources development, the strengthening of local organizations, and research and
development. Particularly important will be targeted efforts to provide public goods and
services that create incentives to ensure that large areas and segments of the population are not
left behind as agricultural sectors become more modern, commercial and mechanized.
Efforts to accelerate mechanization in SSA will no doubt require substantial long-term
political and financial commitments while grappling with new problems. Unless commitments
are made to address these problems, the prospects for African agriculture and African farmers
remain bleak. The process may at times be turbulent, but governments and leaders in the
agricultural sector must remain steadfast, as Asian governments were in the 1960s and 1970s.
Otherwise, African agriculture in the twenty-first century will be doomed to seventeenth
century tools and implements, to the detriment not only of food security, but overall economic
growth of the continent. As suggested earlier, now is the time for a new look at agricultural
mechanization in this region!

Emergent Capital Land Fund,

Emergent African Land Fund
Barak Structured Trade Finance Fund
Triodos Sustainable Trade Fund
African Agricultural Capital (AAC),
Africa Seed Investment Fund and
Root Capital.
Actis Africa Agribusiness Fund (AAAF)
Phatisa African Agri Fund
Africa Invest -Africa Transformational Agri Fund
GAIA World Agri Fund

Small Enterprise Assistance Funds

Small Enterprise Assistance Funds (SEAF) is a global investment fir m specialized in the
management of private equity and mezzanine funds in emerging markets, which was selected
through a global bidding process. SEAF’s two decades of experience investing in small
businesses have permitted it to effectively develop and manage investment funds that deploy
growth capital to SMEs in markets where such companies are underserved by traditional funding
sources. Currently managing 21 investment funds, each with a different set of investors, SEAF
identifies and invests in promising companies that deliver both positive financial results, as well
as significant economic and social benefits to their employees and their communities.
Commonwealth Development Corporation Group plc
Established in 1948, Commonwealth Development Corporation (CDC) Group plc is a United
Kingdom Government fund of funds that invests in private equity funds focused on the
emerging economies in Africa, Asia and Latin America, with a particular focus on low-income
countries in sub-Saharan Africa and South Asia. It is wholly owned by the Government’s
Department of International Development (DFID). In mid-2009, it had net assets of USD 4
billion; in addition, 56 percent of its total portfolio was aimed at Africa compared to 39 percent
for Asia, while the agribusiness sector accounted for 5 percent of its total portfolio. CDC draws
on more than 50 fund managers. Its only shareholder, DFID, does not require a dividend from
CDC. Instead, all profits are re-invested in funds throughout the target emerging markets. CDC
has received no government capital for a decade.
Burlington Capital Group
The Burlington Capital Group, a limited liability company (LLC), formerly America First
Companies, was founded in 1984 as a financial service fir m that manages private and public
investment funds. Today, the company focuses on real estate development and management
as well as money management and investments in agribusinesses in emerging markets. The
Group has different subsidiaries, including some non-profit entities serving communities in
the United States of America. According to the information available on the Group’s website,
it has managed a total volume of about USD 4 billion.

Rabobank Group
The Rabobank Group has been a leader in agribusiness investment through banking, investment
advisory services, investment management and a foundation. Its investment programme comprises a
series of investment funds tailored to specific objectives and investment mandates. It has more than
one million private clients, more than 169 mutual funds and more than 70 years of experience in
worldwide investing. Within its development portfolio, through Rabobank International, it has
developed many agribusiness funds, including the Rabo Sustainable Agricultural Guarantee Fund
described in the following section.

Incofin Investment Management

28
Incofin Investment Management manages five funds, each with its own specific profile. The
Incofin family of microfinance-related investment funds totals nearly USD 120 million in 65
institutions in 26 countries. Funding consists of 83 percent loans and 17 percent equity and
quasi-equity investments. The investment management provides professional expertise and
made-to-measure financial solutions to meet the specific objectives of each fund.
African Agricultural Capital
The case of African Agricultural Capital (AAC) is somewhat distinct from those noted above
in that it serves a fund manager within the AAC fund itself. However, it has also begun to take
on a fund manager role of an fund called Africa Seed Investment Fund (ASIF) set up in 2009
and involving other investors.

29
Actis Africa Agribusiness Fund
Actis Africa Agribusiness Fund (AAAF) is a USD 92.7 million private equity fund launched
in 2006. The Fund has scope to invest across the entire agribusiness value chain from input
supply, through production, processing and distribution to marketing. AAAF is fully invested
and has a current portfolio of eight companies operating in East, Southern and West Africa in
the tea, sugar, forestry, arable farming and rubber industries, with deal values between USD 5
and 15 million. As an example, one of AAAF’s investments is for a tea company named Tatepa,
whose market capitalization had grown from USD 3.3 million to USD 5.8 million in 6 years
under AAAF’s stewardship. Tapeta has 55 percent share of the Tanzanian tea market. AAAF
also has a “greenfield (new venture) plantation investment” in Kilombero Valley Tea Company,
located in the remote Kilombero Valley of the United Republic of Tanzania. A current activity
is developing a sawmill and wood processing facility that will enable the fir m to export products
to the Far East, Europe and North America.
Successful exiting of investments is a goal of most funds. In AAAF, for example, this was
achieved with a farm investment in Nanga company in Zambia, with approximately 2 000 ha
of sugarcane, supported by some cattle ranching. During its time of investment, AAAF helped
to significantly expand the farm and contributed to the agricultural value chain in the Zambian
economy through increased sales of sugarcane to Zambia Sugar Co. In 2008, this investment
was sold to a private Zambian agribusiness company.
AAAF predates most agribusiness funds that have recently sprung up to take advantage of
the food crisis. It was created in 2004 following a restructuring of CDC Group plc (previously
the Commonwealth Development Corporation). The Fund’s sole investor, CDC Group plc,
a United Kingdom Government-owned fund of funds, has a track record of nearly 60 years investing in
emerging markets. AAAF is managed by Actis LLP, a specialist private equity
investor in emerging markets. To ensure responsible investment and sustainable private sector
development, Actis demands rigorous analysis of environmental, social and governance (ESG)
issues in all its business activities and investments.
The primary objective of AAAF is to deliver a top-quartile financial return for the sector.
On a high-level, long-term basis, agribusiness is seen as an important component of the
economies in SSA and one where availability of land with good soils and water should give rise
to significant growth and value creation, with all the developmental benefits that will bring.
Agribusiness Partners International Fund
Agribusiness Partners International Fund (APIF) was a private equity fund set up specifically
to invest in emerging food and agribusiness companies in the former Soviet Union. The
Fund was established in 1996 by the Burlington Capital Group with an investment capital
of USD 100 million, partially backed by a guarantee from the Overseas Private Investment
Corporation (OPIC), an agency of the United States Government. The closed-end fund had
been fully invested in seven agribusiness/food processing companies in five countries. The
Fund invested capital in agribusinesses, such as poultry, glass container manufacturing fir ms,
and food packaging and production companies. The Fund was fully returned to investors, an
example of successful exits that can be obtained.
APIF was set up in times when its target region was subject to substantial changes in
its political and economic environment. In those times, transition economies needed the
input of know-how and experience from Western markets in order to adapt their procedures
and processes to international standards. While this included a great deal of uncertainty for
investors, there were also tremendous opportunities. APIF successfully made use of this
window of opportunity and returned all investments with a significant premium to its investors.
Given that the investment fund was not set up to achieve developmental impact, the impact of
the know-how transfer was not measured.
Sustainable Agriculture Guarantee Fund
In 2008, Sustainable Agriculture Guarantee Fund (SAGF) was established by Rabobank
International with a grant contribution of the Directorate General for International
Cooperation of the Netherlands (DGIS). As a PPP, the fund has been set up to improve
access of cooperatives and agricultural SMEs to formal finance in developing countries
through a guarantee scheme for pre-export finance. SAGF issues partial credit guarantees as
a risk-mitigating instrument for local financial intermediaries, which offer commercial credit
to agricultural cooperatives and SMEs. The credit guarantee will be phased out step-by-step
during the following loan cycles of the recipient. The local bank finances the client on the basis
of the sales contract with the off-taker and does not require the borrowers to provide fixed
assets as collateral.
member organizations, which represent a total of 5 000 producers of coffee, cacao and sugar
cane producers located in the mountain area and northeast of the country. In terms of impact
achieved to date, it is estimated that the Fund has benefited approximately 27 000 producers
and 135 000 indirect beneficiaries, i.e. family members, during the first year of operations.
The guarantees provided by SAGF facilitate local financing, thus contributing to sustainable
development impact. However, the current operational set-up and its investment process are
cumbersome, making the venture financially unattractive for investors expecting commercial
returns. Yet it does provide an interesting approach for the investors who aim at achieving
development impact and who do not expect to obtain market returns.
Rural Impulse Fund
Rural Impulse Fund (RIF) was established at the end of 2007 and managed by Incofin, a private
social investment company currently invested in MFIs in 26 countries. RIF is an MIV that
provides funding, either through loans, quasi-equity or equity participation, for commercially
viable rural MFIs to increase rural outreach. A considerable share of the portfolio of the
partner MFIs is provided to the agricultural sector.
The fund was set up in 2007 by Incofin, a specialized microfinance investment fund
management company, as a closed-end fund with a lifespan of ten years. RIF has a total capital
base of USD 38 million and has been set up by DFIs as well as private investors.
By the end of 2008, RIF had extended loans to 19 MFIs in 17 countries. Loans vary
from USD 0.75 to USD 4.5 million, with an investment horizon of one to five years. It has
also invested equity shares in two MFIs in India and Peru, and is expected to be fully invested
within a year.
RIF is an example how access to finance can be improved for MSEs in rural areas. Given
the target investees and the fund structure, investors may not expect fully commercial returns,
but may consider the participation of well-known investors in junior tranches as an implicit
guarantee, thus significantly lowering the risk profile of the investment vehicle.
African Agricultural Capital
In 2005, African Agricultural Capital (AAC) was established to address the financing gap of
agricultural SMEs in East Africa. Against the background of AAC’s vision to improve the
livelihoods of smallholders, the company provides venture capital to early stage enterprises
within the agricultural value chain that lack the asset base or track record to access financing
from commercial banks.
AAC was set up by two philanthropic institutions, the Rockefeller Foundation and the
Gatsby Charitable Foundation, together with Volksvermorgen NV, a private investment
company based in Belgium. It currently has an asset size of about USD 8 million, which is
fully invested in 16 ventures in Kenya, Uganda and the United Republic of Tanzania. As an
example, AAC made a loan to Victoria Seeds, a large Ugandan seed company that serves
smallholders in the country as well as in South Sudan and the Democratic Republic of the
Congo. The loan purpose is to contribute to improving the quality of seeds as well as further
extend their distribution. AAC has also made a loan to Africado, a start-up company based in the United
Republic of Tanzania, which grows and exports avocados to the European Union.
The company is setting up an outgrower project targeting 750 small-scale farmers who will
farm about 100 ha of land.
In addition to investing the capital of the companies’ shareholders, AAC also manages the
Africa Seed Investment Fund (ASIF), which provides capital to seed companies operating in
East and Southeast Africa. The goal of the fund is to improve the delivery of quality certified
seeds to smallholder farmers in these regions.
After three years of operations, AAC has not yet reached its financial performance
targets. The fact that the capital is fully invested shows the need for additional capital in the
target region. Given the small size of AAC, it is crucial to attract new investors and to turn the
company profitable.