February 1, 2017

Agribusiness-focused investment firm Pearl Capital Partners has announced the successful first close of its fourth impact fund, the Yield Uganda Investment Fund, at €12 million (US$13 million).

The Kampala-based firm states that the fund, which has been anchored by a €10 million (US$10.75 million) commitment by the European Union through the International Fund for Agricultural Development (IFAD) and a €2 million (US$2.1 million) commitment from the National Social Security Fund Uganda (NSSF), will focus on impact investments in agriculture and ag-related businesses along the entire value chain in Uganda through tailored equity, semi-equity, and debt solutions.

“Agriculture plays a vital role for economic growth and sustainable development. Investment in the sector is an effective instrument to alleviate poverty and enhance food security. Evidence suggests that gross domestic product (GDP) growth originating from agriculture is twice as effective in reducing poverty as GDP growth linked to the non-agricultural sectors, yet the sector is still underfunded.  The Yield Uganda Investment Fund is a great opportunity for NSSF to support the sector,” said NSSF Managing Director Richard Byarugaba.

Seeking out agribusinesses that have ambitious management teams, and the potential for significant financial returns, as well as the ability to effect great social impact through job creation, ensuring food security, increasing market access, and creating export opportunities, Pearl Capital plans to make investments of between €250,000 and €2 million in 20 SMEs active in all areas of agricultural production including input supply, processing, post-harvest storage, distribution, transportation, and certification processes. Through this action, the fund is aiming to improve the livelihood in 100,000 rural, Ugandan households and improve market access for 26,000 of the country’s farmers, while contributing to Uganda’s economic growth, and working to eradicate poverty.

“The launch today marks an important milestone. In creating this investment Fund, the EU has listened and is responding to the needs of Ugandan agribusiness,” said EU Ambassador to Uganda, H.E. Kristian Schmidt. “This is a first of its kind to be funded by the EU where we are blending private equity and grants and we are proud that Uganda is a beneficiary… This Fund will offer presently lacking long-term capital to entrepreneurs in the agricultural sector and contribute to the modernization and expansion of agribusinesses companies while providing quality financial returns for investors.”

Pearl Capital Partners states that together with Deloitte Uganda, fundraising from like-minded private investors is ongoing, and the firm expects the fund to see a second closing before the end of 2017 as it strives to meet its corpus target of €25 million.

“Deloitte Uganda is happy to be involved in making an impact that matters through provision of much needed financing for SME businesses especially in the agriculture space,” said Norbert Kagoro, Partner at Deloitte Uganda. “The team has worked very hard to bring this Fund to this stage and we shall continue to support the Yield Fund through the operation phase.”

BDS

Additionally, the Yield Funds will be provided with a €3 million Business Development Support (BDS) facility from the EU that will be implemented by IFAD for the benefit of the fund’s portfolio companies. BDS is seen as a critical factor in helping companies shift toward being modern, effective, growth-oriented, and profitable. And toward this end, the Yield Fund’s investment model will include assistance in project management, corporate governance, strategy support, accounting, budgeting, and tax compliance, technology transfer, human resource management, marketing insight, and the adoption of international quality and safety standards.

“Engaging with the private sector in agribusiness development is a key priority for IFAD,” said Alessandro Marini, IFAD Country Director for Uganda.” Leveraging traditional modes of financing with innovative tools such as the Yield Fund is needed to fast track development, foster the transformation of the rural economy and ultimately achieve the Sustainable Development Goals by 2030…The expertise of Deloitte and Pearl Capital Partners who have already been part of similar undertakings will be key to the success of the Fund.”

Pearl Capital

The Yield Fund is Pearl Capital Management’s fourth fund following its $25 million African Agricultural Capital Fund (AACF) launched in September 2011; the $12 million African Seed Investment Fund (ASIF), launched in August 2010; and African Agricultural Capital Ltd. (AAC), which was launched in 2005 with $9 million in equity commitments, according to the company website.

The firm’s AACF fund has backed eight agricultural businesses and has expectations of annual compounded returns of approximately 15 percent. Exits are ongoing from the firm’s ASIF and AAC funds, and the firm states that as its presence as an ag-focused fund manager continues to grow, it will soon be exiting its initial fund, AAC.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com