$24m fund for African agriculture launched by KfW, Sahel Capital

A Social Enterprise Fund for Agriculture in Africa (SEFAA), which will commit $24 million towards boosting productivity, and combating poverty, is being launched by Sahel Capital with support from the KfW Development Bank.

SEFAA is described as an impact fund with the goal of reducing poverty by investing in Social Agricultural Enterprises (SAEs) that contribute significantly to enhancing the business eco-system, or income opportunities, of smallholder farmers (SHFs) in sub-Saharan Africa. This is according to a press statement by Sahel Capital, which will act as investment adviser to the fund sponsored by the German development bank, KfW.

“We are excited at this next phase in the firm’s evolution as we leverage existing sector expertise, a broad network and regional partnerships to expand our investment footprint outside Nigeria into West, East and Southern Africa,” says Mezuo Nwuneli, managing partner at Sahel Capital, speaking on the final close of SEFAA.

In addition to SEFAA’s targeted impact of reducing poverty through its investments, the fund is also expected to create and preserve jobs and deliver on six of the UN sustainable development goals (SDGs 1, 2, 3, 4, 5 and 6). Sahel Capital will invest the capital in SAEs across the agricultural value chain with a particular focus on enterprises or intermediaries that increase productivity of SHFs, address market access limitations or information asymmetries or offer agricultural finance tailored to the specific needs and production cycles of SHFs.

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KfW, according to the statement, has been a committed supporter of agricultural development on the African continent, and over the past eight years has anchored several other funds such as Africa Agriculture and Trade Investment Fund (AATIF), Fund for Agricultural Finance in Nigeria (FAFIN), and Lending for African Farming Company (LAFCo).

Established in 2010, Sahel Capital raised its debut $65.9 million Fund for Agricultural Finance in Nigeria (“FAFIN”) in 2014 (final close in 2017) and has since invested in and grown SME agribusinesses across seven agricultural value chains. Through these investments, FAFIN is said to have created over 118,000 direct and indirect jobs – over 50 percent of which are occupied by youth – and engaged with or sourced produce from more than 16,000 smallholder farmers (43 percent of which are women) by supporting innovative business incentives and out‐grower schemes.

With SEFAA, Sahel says it will implement a new impact first investment strategy that is distinct from, but complementary to, its debut FAFIN fund and incoming successor Fund II, both of which are growth capital funds targeting high-growth, established SMEs. SEFAA will invest primarily debt (but with flexibility to invest some equity or quasi-equity) with the aim of filling the financing gap for earlier-stage enterprises that may not yet be mature or profitable enough to get equity and/or debt from commercial capital providers.

Sahel Capital says SEFAA fits well into its overall mission and strategy of allocating capital and technical support to solve hard agribusiness challenges, which ultimately will drive transformational and inclusive growth on the African continent.

It was also noted that Samawati Capital Partners will act as sub-adviser to Sahel, covering East and Southern Africa.