Pearl Capital Partners (PCP) has launched an East Africa-focused small and medium-sized enterprises (SME) private equity vehicle – the African Agricultural Capital Fund (AACF).
The fund has received $17 million in equity commitments from the Bill & Melinda Gates Foundation, the Gatsby Charitable Foundation, and the Rockefeller Foundation. JP Morgan has also pledged an $8million loan to the fund, 50% of which is guaranteed by the US Agency for International Development (USAID).
AACF will also have access to $1.5 million in business development services through the USAID, under President Obama’s Feed the Future initiative. The USAID support is expected to bolster investee companies’ access to markets.
The fund will target 20 SMEs operating in the agriculture and agri-business sectors, and will invest between $0.2m and $2m per deal. PCP expects AACF to have an average deal size of $1 million and will invest using both equity and debt instruments. The fund has a projected gross internal rate of return (IRR) of 16%, which PCP believes is in line with a good number of the solely financial focused funds currently being raised. The fund has a five-year investment period.
“A funding gap exists for small cap agricultural businesses across East Africa, between large-scale commercial banks and microfinance institutions,” said Tom Adlam, managing partner of PCP. “This new fund will help to address this gap, providing long-term capital to entrepreneurs who are building businesses in the agriculture sector while delivering quality financial returns for investors.”
Article by Wen Zhang, reporter, Private Equity Africa