Social and development impact evaluation of the African Agricultural Capital

Food Processing
Share
Situation

In 2004, the African Agricultural Capital (AAC), a pioneering agricultural impact investment vehicle, was set up to stimulate investment in East Africa's agricultural businesses. AAC invested in early-stage and small-scale agribusinesses with the potential to bring agricultural innovation and social and economic benefits to smallholder farmers. Several portfolio companies grew substantially and had a significant impact within their industries and upon their stakeholders. From the outset, AAC aimed to foster social and economic gains by supporting businesses requiring investments ranging from US$100,000 to US$1.2 million.

After fully divesting and formally closing the fund in 2019, the portfolio manager, Pearl Capital Partners (PCP), and the fund investors—Gatsby Charitable Foundation, The Rockefeller Foundation, and Volksvermogen NV—sought to capture AAC’s broader impact and lessons learned, which could inform other impact investment funds, both under PCP management and beyond.

Industries
Impact Evaluation & Learning
Agribusiness & Food Systems
Finance & Investment
Capital Raising & Impact Investing
Engagement

The client engaged ORI to conduct a detailed social and development impact evaluation of AAC upon the businesses the fund supported. In addition, the client wished to identify the broader impact of these businesses on agricultural markets, which are so important to the livelihoods and economic security of East African citizens. While it was clear that many portfolio companies would not have existed or grown into the industry leaders they are today without patient, early-stage support from AAC in various forms, conducting an in-depth evaluation was essential for finding deeper learnings.

In delivering the engagement, ORI helped the client by:

  • Framing key themes, structuring relevant questions for determining AAC’s transformative impact, and building a research methodology.
  • Conducting extensive desk review of AAC’s investment strategy, investment term sheets, and board meeting records; portfolio company documentation, e.g., business plans; and scrutinizing data and reports related to the agricultural industries and markets within which investee companies operated.
  • Carrying out interviews with key stakeholders, including portfolio company founders and current management, AAC and PCP staff, investors and Board members, industry experts, and other impact investors.
  • Documenting the remarkable growth of some of the businesses and developing case studies of selected portfolio companies that had grown into leading players in their industries for in-depth learning. These companies were involved in avocado growing and exports in Tanzania, poultry production in Uganda, biological crop protection solutions in Kenya, and the improved seed maize industry in Kenya and Uganda.
  • Evaluating AAC’s transformative impact in relation to several strategic objectives and consistent with the purpose of the study.
  • Delivering a public presentation of the findings and lessons learned to the agricultural impact investing industry.
Outcomes
  • The impact evaluation captured AAC’s journey and the journey of several portfolio companies that have had a transformative impact. Further, the evaluation presented AAC’s experience and lessons learned, which were relevant not only to PCP and AAC’s stakeholders but also more broadly to investors, fund managers, and development institutions operating in agriculture and economic growth.
  • One of the most important impacts of AAC was the survival and growth of its portfolio companies. Of the sixteen businesses that the fund supported from 2006 to 2010, twelve have survived to the present day and continue to make a positive contribution to the broader market. Ten of these twelve companies have grown substantially in size and support their stakeholders in numerous ways: as employers, as customers, including of smallholder farmers’ produce, as suppliers, and as taxpayers.
  • The impact evaluation surfaced key learnings on the development impact that AAC achieved, including expanding farmers' access to high-yielding seed and other agro-inputs; increasing investment in the seed sector and in other agro-inputs; enhancing access to markets and demand for small-scale farmers' produce; success in attracting strategically aligned capital; and AAC’s role in pioneering East African agricultural impact investing.
  • In addition, the study identified major lessons learned in three key areas: investing in early-stage SMEs, achieving market impact, and Fund structure and management.
  • ORI and PCP presented the study’s findings in a public webinar to an international audience comprising the impact investing industry, the economic development sector, and development finance institutions. We jointly published the study's findings in a report named Final Closure Report of African Agricultural Capital (AAC), which is now publicly available here. The report is also available in the Resources/Publications section of this website.