During Foodfirst Conference - 1st June - at Rabobank Utrecht
Organised by: AgriProFocus, ICCO, Rabobank Foundation
Frank Bakx (Rabobank Foundation) presented the results of the study Critical Capital for African Agri-Food SMEs that reviewed demand and supply of risk capital for agrifood SMEs in Sub-Sahara Africa, based on field studies in Kenya, Tanzania, Zambia and Mali
Hans Docter: Director for Sustainable Economic Development at Ministry of Foreign Affairs, the Netherlands
Laura Smeets: Investment Director at BiD Network Foundation
Jaap Jan Verboom : CEO at Truvalu
Sean Patrick: Founder and Food Innovator at Green Banana
Demand for and supply of risk capital do not match! Entrepreneurs in the SME agri-food sector in Sub-Sahara Africa have a high demand for capital injections between 150 and 250K USD. Private equity and venture capital providers consider the risks to invest in these businesses rather high, the returns often too low and the technical and commercial capacities of entrepreneurs insufficient.
Now that we better understand the issues: what needs to be done by who?
Financial blending: different types of funding products - new and innovative - available for different stages of the business, starting with more ‘friendly’ types of funding - from e.g. impact investors, public sector - at the early stages. Investment funds will follow once the business shows results.
Activity blending: capacity strengthening and business services are offered to the entrepreneur in combination with funding. There is, however, a need to distinguish between the capacity strengthening needs of entrepreneurs (demand) and what funders want to offer and think entrepreneurs need. Both are running a business.
Donor money should be used to start something or bear costs that the market can not. Public money should not promote private businesses.
SMEs need to have great ideas, plan, have a good business model and know their markets before approaching investors.
In order to achieve this:
Stakeholders need to collaborate to make the ‘value chain of the investment environment’ transparent: overview and insight for all relevant actors.
Knowledge about each other between SMEs and investors must improve and mutual understanding increased of the still rather different worlds both are operating in.
Linking between SMEs and between SMEs and investors to exchange information, learn lessons and innovate.
AgriProFocus, ICCO and Rabobank Foundation to
Define the first concrete steps towards a coalition of willing stakeholders to jointly work towards 1. the design of innovative instruments and approaches in making critical capital available for agri-food SMEs and 2. the realisation of a more transparent ‘value chain of the investment environment’ (July 2018).
Share the results of the study with stakeholders in the countries where the study was conducted to begin with (September-December 2018).