Africa’s agricultural enterprises that have traditionally received little to no funding from institutional and private equity investors due to their unpredictable status may not be that risky after all.
The African Enterprise Challenge Fund (AECF) – a non-profit affiliate financier of the Pan-African agricultural organisation Alliance for Green Revolution in Africa (Agra) – says it took a bet on some of the continent’s agro start-ups while others shied away and eight years later, they have seen immense growth. Investment is all that the agro start-ups need to thrive, it says.
In partnership with Global Affairs Canada, through the Agribusiness in Africa Window programme, the fund injected $14.8 million into 19 agricultural companies in 2014 and in 2022, as the financing window came to an end, the programme boasted more than $175 million in cumulative development impact.
Victoria Sabula, AECF’s chief executive, said 93 percent of the funds were given to start-ups as pure grants to help boost productivity among African farmers, reduce post-harvest losses, and diversify agricultural produce in efforts to boost the continent’s food security.
“This programme has demonstrated the essence of investing in close-to production downstream processing facilities that create markets and reduce costs for rural smallholder producers while increasing incomes, impacting lives, and providing opportunities for value addition,” Sabula said.
The agricultural sector contributes an estimated 23 percent of sub-Saharan Africa’s gross domestic product, which could double if the sector could attract sufficient investment to support production, experts say.
Selected for funding
Out of the 19 agricultural start-ups selected for funding, 17 survived, creating 1,582 direct jobs and helping over 30,000 smallholder farmers access new markets.
The firms represented 11 countries including Kenya, Uganda, Tanzania, Burundi and the DR Congo.
In their end of programme report, the financier said using non-repayable grants enabled it to “target highly innovative business models that would not be in a position to use even repayable grants.”
The agro entrepreneurs said it had been difficult to access seed capital as many financiers preferred faster-growing lower-risk start-ups.
Cosmas Ochieng, the founder of EcoFix Limited, a croton processing company that received $800,000 from the fund, said the company could barely meet its operational costs before the financing.
“We explored several financing avenues and there wasn’t a single local investor willing to finance us at agreeable terms, let alone give a non-repayable grant,” he told The EastAfrican.
“Many traditional financiers are hesitant to invest in social enterprises because they aren’t as profitable as other startups like technology or fintech companies.”
Proprietors who have benefited from the programme say the grants handed their enterprises a lifeline in a capital-starved environment.