private sector development in agriculture: tracking the developmental performance of investments for...

Private Sector Development in Agriculture:

Tracking the developmental performance of investments for smallholder farmers.

By David Priest - dmpriet@gmail.com

By David Priest – Consultant to African Agricultural Capital (AAC)

3rd December, 2008

David Priest - dmpriest@gmail.com www.aac.co.ke

Gatsby Charitable Foundation

• Established: in 1967 by David Sainsbury

• Endowment: £580M

• Annual spend: £50M pa - £6M in Africa.

African Agricultural Capital (AAC)

Investment fund established in 2004

Shareholders: Gatsby Charitable Foundation, Rockefeller Foundation Volksvermogen

Purpose:To invest in agricultural businesses in Kenya, Uganda, Tanzania

• positive financial returns (12 % gross)• affordable and flexible capital• development impact on smallholder farmers

Fund size: 8 million USD

Deals: 16 investments of 100,000 – 1,000,000 USD

David Priest - dmpriest@gmail.com www.aac.co.ke

Smallholder Farmers

Why support smallholder farmers ?

• Agriculture 1/3rd of GDP, 2/3rds of labour

force

• Under-supported – 4% public spending

• Twice as effective at reducing poverty as growth in

non-Agriculture sectors

Who is smallholder farmers ?

•

generally 1\4 - 2 ha,

certainly < 5ha

David Priest - dmpriest@gmail.com www.aac.co.ke

Avocados Poultry Seed

Palm Oil Real IPM Vanilla

HybridSeed

Seed

Developmental Performance System

Little Time / Resource

Realities of Business Situation•½ hour to 1 day•What data is available?

Where? How?• FAO, IFAD, DFID, • IFC, Commonwealth Development Corporation• Acumen• Incofin, PSOM

Cheap & Simple`Investment team are making better decisions`

David Priest - dmpriest@gmail.com www.aac.co.ke

To develop a system for investees to report their own developmental impacts.

Adapted Incofin Modelby David Dewez

1. Mission & Vision (5)

2. Company Viability & Growth (9)

3. Market & Competition

(12)

4. Job Creation & Quality (12)

5. Smallholder Engagement (50)

6. Community & Environment (12)

David Priest - dmpriest@gmail.com www.aac.co.ke

Dimensions

David Priest - dmpriest@gmail.com

www.aac.co.ke

David Priest - dmpriest@gmail.com

www.aac.co.ke

David Priest - dmpriest@gmail.com

www.aac.co.ke

David Priest - dmpriest@gmail.com www.aac.co.ke

David Priest - dmpriest@gmail.com www.aac.co.ke

Reporting of Data - Comparison

by David Priest from 18 - 27 February 2008

Overall score /100Mission & Vision /5 3.0 /5 0.0 /5 4.0 /5 2.0 /5 4.0 /5 4.5 /5Economic & Market 1.0 /5 1.6 /5 3.0 /5 2.5 /5 2.9 /5 2.6 /5Job Creation & Quality /5 2.2 /5 2.3 /5 2.3 /5 2.7 /5 3.5 /5 4.3 /5Smallholder Engagement /5 1.0 /5 3.0 /5 2.8 /5 2.8 /5 3.3 /5 1.3 /5Training and Capacity /5 4.0 /5 2.3 /5 4.0 /5 4.0 /5 3.3 /5 4.2 /5

AAC InvestmentTurnover (USD)Expenditure (local)

Jobs Created (direct)

Smallholders

Employees trained

DEVELOPMENTAL IMPACT REPORT: COMPARISON

Mission & Vision

Company Viability & Growth

Market & Competition

Job Creation & Quality

Smallholder Engagement

Community & Env ironment

0

1

2

34

5

Mission & Vision

Company Viability & Growth

Market & Competition

Job Creation & Quality

Smallholder Engagement

Community & Env ironment

012345

Poultry

Seed2

Mission & Vision

Company Viability & Growth

Market & Competition

Job Creation & Quality

Smallholder Engagement

Community & Env ironment

0

1

23

4

5

Seed4

Mission & Vision

Company Viability & Growth

Market & Competition

Job Creation & Quality

Smallholder Engagement

Community & Env ironment

012345

Real IPM

Mission & Vision

Company Viability & Growth

Market & Competition

Job Creation & Quality

Smallholder Engagement

Community & Env ironment

0

1

2

34

5

Honey- new

Mission & Vision

Company Viability & Growth

Market & Competition

Job Creation & Quality

Smallholder Engagement

Community & Env ironment

012345

Plant Product Export

Challenges:

General

Consensual • Assumes information provided is true• Not independent• Reluctance to search for historical information

Absence of baseline data

Time lag till impact realised

Impressionistic/ repeatability

Impact of Investee not Impact of Investment

Expensive to monitor

Market & Competition

Little knowledge of competition

Smallholder EngagementHow to define smallholderLittle direct contact with farmers

1. Before Investment• Agree with investee• Collect baseline data• Set developmental targets• To be considered by investment

committee

David Priest - dmpriest@gmail.com www.aac.co.ke

2. Routine Reporting by Investee• Annual reporting extending two years• Investment managers and board nominees – follow up

3. Independent M&E Exercise

Link Bonuses / Interest on Loans

to Social Returns on Investment

Thanks to

Tom Adlam (CEO) Tom.Adlam@aac.co.keJoel Ssemukaaya Patrick Ndagu

Joe Devries (Rockefeller/ AGRA)

Walter Vandepitte

Justin Highstead (Gatsby)

David Dewez (Incofin)Julian Bolt (PSOM, EVD)

Investees

David Priest - dmpriest@gmail.com www.aac.co.ke