CASA’s first webinar of the Agri-Business Breakthrough Series focused on ‘Stronger, Greener and Fairer Recovery: The Investment Response’. It included the following panel members: Michael Shaw from Wellspring, Professor Thomas Jayne and Dr Ousmane Badiane of the Malabo Montpellier Panel.
The panel discussed the impact of concessional finance in agri-businesses and challenged some of the more persistent narratives around investment, agri-finance and global development, with a view to building more effective support for agri-businesses after the pandemic. The vibrant discussion featured two recent CASA reports.
Here are the four main takeaways from points made by the panellists: (This is not a summary of the research).
- Concessional finance has great potential for developmental impact, but the industry needs to produce and share quality evidence to back this aspiration. The majority of evidence studies are being produced by investors themselves and lack of the necessary rigour to identify key lessons learned, which should inform future investments and contribute to maximizing the impact of concessional finance overall. Consistency across impact evaluations (e.g. using approaches like the ones proposed by the GIIN) would facilitate the task of comparing across studies and identifying impact success factors of concessional finance models. There is also a number of studies that have been produced for private consumption (at the fund level) that should be repackaged for public consumption
- Most of the investors might be hunting the same gazelles. There is a shortage of ‘investible’ agri-businesses, mainly due to the investment requirements imposed by impact investors, which try to balance impact and returns in their investments. The majority of impact investors hunt investments with ticket sizes that range between $500K and $5M, with an investment timeframe of five to seven years. This is what Professor Jayne refers to as the “gazelles” of agri-SMEs, due to their potential to scale with speed. However, there aren’t that many ‘gazelles’ and investors end up competing with each other for the same deals, which doesn’t mean that there isn’t enough capital ready to hunt the right deals. Longer-term patient capital and smaller ticket sizes would offer an opportunity to increase the number of investible agri-businesses while contributing towards building the critical mass needed to attract more investments to developing countries.
- The enabling environment for investments extends beyond the national level. National investment promotion plans are not being matched or included in clear regional or continental (e.g. pan African) investment plans with explicit commitments of resources and timeframes for implementation. This contributes to increasing the perceived risk of investing in agriculture in Africa, as there is uncertainty about the sustainability of the political commitment towards attracting investments into the continent.
- Now is the time for African governments to help de-risk agricultural investments. Growth in Africa over the last 20 years has been unprecedented, but more needs to be done at the policy level to play a catalytic effect in attracting agricultural investments. African governments should concentrate on promoting access to technology, finance and markets for ‘survival agri-businesses’ which would contribute to their maturation and to increasing the population of ‘gazelle SMEs’. Investment in agriculture support services like technology, digitalization and access to energy should become the cornerstones for building a more investment friendly environment within the continent. Acknowledging where we are in the ‘market life cycle’ also has implications for the way investors think about and are supported with impact assessment approaches.