Development equity at work in the DRC

The 100-year old Yaligimba plantation was in much need of rehabilitation (2012).

The 100-year old Yaligimba plantation was in much need of rehabilitation (2012).


The African Agriculture Fund (AAF) is a unique investment vehicle, which provides equity funding to private companies in the African agricultural and food-specific sectors. It strives to make a positive impact on African agriculture and food production. Through its funding, portfolio companies are able to implement strategies that enhance and diversify food production and distribution in Africa, in response to the continent’s food security challenges.

Established in 2009, AAF has a particular focus on sub-Saharan Africa, and its investments now extend across the continent – in West, Central, Southern and East Africa – and across the value chain of agriculture and food production.

AAF is managed by Phatisa and funded by a pool of international investors that include leading European, US and African development finance and government institutions.

Through its work with the AAF, Phatisa has coined a new asset class, ‘Development Equity’, which combines the development finance spirit of the majority of our investors with the principles of commercial private equity investment, demonstrating that the two disciplines can be mutually inclusive.

While the AAF is focused on delivering rewarding economic returns for its investors, at the same time it aims to make a difference. From the employees and suppliers in its portfolio companies, to the communities in which it operates, and into the fragile state of African food security, Phatisa’s investment decisions are designed to have a huge impact.

At the heart of this development impact philosophy are well-entrenched environmental, social and governance (ESG) principles. Where possible, AAF companies implement international best practice, as expected by investors, and this approach puts them ahead of local averages on many ESG metrics and measurements.

AAF investments

AAF reached its first close at US$151m in November 2010, and in August 2011 its first investment – a palm oil plantation and processing mill in Sierra Leone, West Africa – was concluded.

Final close of the Fund was in mid-2013, at $246m, and so far, AAF has committed more than $135m into eight portfolio companies. These investments are across 15 African countries and a variety of agri-related businesses.

  • The Goldenlay investment in Zambia is focused on the production and distribution of table eggs.
  • AAF has two investments in palm oil production – Goldtree in Sierra Leone; and Feronia in the Democratic Republic of the Congo (DRC).
  • The Meridian Group investment spans Malawi, Mauritius, Mozambique, Zambia and Zimbabwe, and its main business is the manufacture and distribution of specialised fertiliser blends.
  • Smaller investments are Continental Beverage Company, a water purification, bottling and distribution business in Côte d’Ivoire; and Farming and Engineering Services, an agricultural engineering and equipment distribution company in Malawi.
  • More recently a food packaging investment in a Nairobi, Kenya – General Plastics which is set for expansion into the region.
  • AAF has also invested into a subsidiary SME fund, focused on food production and processing at the small business level. Managed independently, its investments to date include mixed farms and diversified agri-products, organic fertilisers, branded food and beverages, and bakery and bread distribution products.

Taking a closer look at Feronia – a case study

Country: Democratic Republic of Congo (DRC)
Population: 77 million
Percentage below national poverty line: 70%
GDP growth: 8.1%
Economy: Mining, mineral processing, food & beverages and cement.
The business: Palm oil plantations and milling; palm seed research, development and production.
Locations: Lokutu in the Orientale Province; Boteka and Yaligimba in the Equator Province; head office in Kinshasa
Deal announcement: December 2012

Palm oil is one of the world’s most important vegetable oils, used in countless food and non-food products. Due to civil war in the DRC stretching from 1998 to 2003, Plantations et Huileries du Congo (PHC) business (since acquired by Feronia from Unilever) deteriorated, and its Lokutu plantation fell into rebel hands. The  100-year-old operation was much in need of rehabilitation before it could return to operational efficiency and prominence, and help the country reduce its palm oil imports – at around 85,000 tonnes a year at the time of the AAF’s investment.

When AAF invested in the Feronia palm oil business, there were only 10,213 hectares were in production, and the palm oil processing mill at Yaligimba was out of commission. AAF’s investment financed the replacement of this mill, with a processing capacity of 20 tonnes per hour. A staggered replanting process was introduced at all three plantations, requiring the replanting of 5,000 hectares per annum – equivalent in size to 10,000 football pitches each year. This programme ensures that supply of raw material will be sustainable for close to 30 years, and that there is zero deforestation from Feronia operations. CDC Group PLC has also invested alongside AAF.

Due to the size and complexity of the Feronia business, AAF has introduced various subcommittees to improve governance, oversee procurement, and effectively manage remuneration and ESG matters. An allocation of $3.6m will ensure that Feronia meets its various ESG targets, as well as helping it become compliant with the internationally accepted standards of the Roundtable on Sustainable Palm Oil (RSPO) and the World Bank’s IFC Standards for environmental and social sustainability. Feronia is implementing measures to improve its effluent treatment system, including the introduction of environmentally sustainable methane capture systems, which deal with waste while capturing methane gas for energy production. Its onsite research centre has become a market leader in the creation of disease-resistant palm suited to African climates.

Feronia now employs over 3,600 people and the company is refurbishing its employee housing stock through a $800,000 programme, as a result of over 3,000 houses having fallen into disrepair during the civil war.

In November 2014, Feronia signed a wage agreement with all relevant labour unions, making it one of the few businesses in the DRC to comply with national minimum wage legislation.

As a country with a significant skills shortage, training is a priority. Feronia has offered its employees training and qualifications from the British National Examination Board in Occupational Safety and Health (NEBOSH) – a first in Francophone Africa, and has recently started a management training programme which is open to Congolese nationals with relevant qualifications and experience.

It is estimated that over 85,000 people live around the Feronia plantations and are directly or indirectly dependent on the company. To support these residents, the company has participated in the refurbishment and maintains four hospitals, 16 supporting dispensary clinics and four outreach health centres. It assists with 94 schools around its plantations, and contributed building, repair and maintains 2,800 kilometres of road networks – the distance equivalent of driving from Paris to Moscow.

Feronia has also embarked on a clean water initiative in collaboration with Water4Africa, aimed at providing clean, potable drinking water to all communities around its plantations.

AAF’s investment into Feronia has not only supported the continuation of a strategically important business for the DRC, but improved the lives of rural community members located in one of the remotest parts of Africa.

Over the coming years, Phatisa wants to see more development equity in action, increasing Africa’s food production, promotion of economic transformation and improvement of livelihoods – all under the ambit of commercially sound investment principles.

About Phatisa

Phatisa logo_235x140Phatisa is an African private equity fund manager, operating across sub-Saharan Africa, with offices in Mauritius, South Africa, Zambia, Kenya, and Ghana, as well as London. The firm has two sector-specific funds under management, totalling more than US$285 million, focused on food and affordable housing. Phatisa comprises a team with a significant track record of managing private equity funds and businesses throughout the continent.

Phatisa’s African Agriculture Fund has committed investments in excess of US$135 million, from Sierra Leone in West Africa to Mauritius, East Africa and 13 other countries in between. This reflects a total of eight portfolio companies across diverse sectors: primary farming, palm oil, processing, inputs, mechanisation, fertiliser, protein production and FMCG beverages. Phatisa also introduced an eastern and southern African investment initiative in response to the ever-increasing housing shortage – the Pan African Housing Fund (PAHF). The US$41.95 million Fund commenced operations during Q1 2013 and has concluded three investments to date.

At the heart of Phatisa is development equity, as embodied in the unique formula of DevEq = PAT * x + i 2 ™; a balanced blend of private equity and development finance – striving to build sustainable assets on the ground; ensuring best possible returns for investors, including the community in which these operate.