What are the financing options available for an agriculture project in Africa, and particular in Ethiopia? Panellists at the recent Ethiopia Investment Summit, held in Addis Ababa, tried to answer this question.
According to Barbara D’Amato, CEO of US-based Trilogy Capital, there is not a scarcity of capital for projects in Africa, but investors are seeking capable entrepreneurs that can make a success of their ventures. “Capital is not lacking for Africa … In [investors’] view what is lacking is entrepreneurs … real talent. There are a lot of proposals out there … for great projects that would bring about future cash flow, but obviously [investors] are looking for those real solid teams with a real track record … entrepreneurs that have had this experience in emerging markets, that can make things happen.”
Trilogy Capital is involved in a large scale agriculture project in Ethiopia with US-based Morrell Agro Industries.
Thomas Ferede, an investment consultant, agreed with D’Amato’s comments, and said there is currently considerable interest internationally to finance projects in Africa. He told the audience that “the great thing about Ethiopia is because it has such a great growth story (close to 10% annual average GDP growth over the past five years) there are a lot of people that are interested in investing. [It is up] to you guys as entrepreneurs to put together a team that is viable and that is investable. Having the right set of experiences [and] backgrounds, really go half the way to getting there,” he said.
Ferede noted that entrepreneurs could also look regionally for funding. “There are a lot of funds that are investing in Ethiopia that are based out of Nairobi.”
Another option is to source funding within Ethiopia. “If you look locally, there is a lot of capital that is also floating around locally. There is a lot of wealth in the country … that is why you are seeing a lot of buildings being built. If you guys have real investible businesses, there is a lot of wealth locally that you can tap into, which is something I find really interesting,” said Ferede.
Earlier this month, emerging markets private equity firm Schulze Global Investments (SGI) announced the launch of Ethiopia’s first private equity fund – a US$100 million fund devoted exclusively to investment in Ethiopian companies. SGI has been active in Ethiopia’s private equity industry for the past four years. The firm takes minority stakes in companies, with a maximum shareholding of 40%. It has so far invested in four Ethiopian businesses.
Birinder Singh, executive director of Karuturi Agro Products, noted that although local Ethiopian banks have limits when it comes to lending money to the agriculture sector, things are improving. He said that Karuturi, which owns large-scale floriculture and agriculture projects in the country, has been partially funded by local banks.
Singh added that there are a number of institutions such as the African Development Bank that are “ready to look at projects and evaluate them for funding”.