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Agriculture & Agribusiness: From Comparative to Competitive Advantage

Agriculture & Agribusiness: From Comparative to Competitive Advantage. Chair: Amb. Dr. Roberto Ridolfi Head of European Union Delegation to Uganda. CBC Investment Forum 11th April 2013 Hotel Sheraton, Kampala, Uganda. Agribusiness produces jobs and reduces poverty.

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Agriculture & Agribusiness: From Comparative to Competitive Advantage

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  1. Agriculture & Agribusiness: From Comparative to Competitive Advantage Chair: Amb. Dr. Roberto Ridolfi Head of European Union Delegation to Uganda CBC Investment Forum 11th April 2013 Hotel Sheraton, Kampala, Uganda

  2. Agribusiness produces jobs and reduces poverty The impact of Agribusiness in Uganda and East Africa 1. Security of Supply 2. Large-scale production and the value of smallholdings and SMEs 3. Land value/Restrictions on land use and failures to maximise production from existing farmland 4. Climate Change issues (access to water) 5. The opportunities for investment

  3. 1. Security of Supply • Volume challenges • Production and productivity issues (incl. quality and quantity aspects) • Post harvest losses • Efficiency of Value Chains including infrastructure-related issues (roads, cold chain, Non Tariffs Barriers) to link production to market • Private actors are the driving force in Agriculture if Public sector provides the conducive environment

  4. 2. Large-scale production and the value of smallholdings and SMEs • SMEs help linking subsistence farming to practices with commercial viability, provide access to markets for small holders • The pull effect on poverty: smallholder farming contract, enhanced productivity and quality (standards/SPS) • Lack of availability and affordability of long-term finance: • Every 1$ investment in an SME generates 13$ in benefits to local society (employment, incomes, tax payments) • Small and Medium Agribusiness Development Fund (EU-led initiative € 30M)

  5. 3. Land value/Restrictions on land use/failures to maximise production from existing farmland • A source of conflict: • scarcity of productive lands (for investment) due to: population growth, preserved habitats for wildlife, wetlands, forests, etc.; and poor land management/inappropriate land use practices • Complex system of land tenure in Uganda: Customary/traditional, Mailo system, Freehold and Leasehold tenure • Implementation of the National Land Policy Feb. 2013 • Need for proper land information system

  6. 4. Climate Change issues (access to water) • Adapt with new measures • Develop irrigation scheme and ensure availability of water for production • Conserve water bodies (implement/enforce water bodies conservation laws) • EU-Irish funding to the sector amounts to € 11M (FAO Management) and targets the cattle corridor

  7. 5. The opportunities for investment • Fertile soil • Excellent climate (2 rainy seasons) • Inter-linked (surrounded by markets) • Uganda is among the most liberal countries in the Africa (no restriction on investment) • But …

  8. 5. The opportunities for investment (cont.) • BUT to be conducive to investment, the Rule of Law and Good Governance have to be adhere to = virtuous interplay between good governance and a strong private sector • A thriving private sector generates its own momentum, in political and economic terms (people with jobs and investments in their economy bring more stability, more confidence to demand more of their government) • A government receiving revenue from private sector depends on democratic legitimacy, and must de facto become more responsive to its electorate (increased transparency and rule of law) • Strong correlation between competitiveness and corruption performances • The EU welcomes the steps taking by the Ugandan Government to remedy these challenges

  9. Address by: Hon. Tress Bucyanayandi, Minister of Agriculture, Animal Industry and Fisheries Session’s panelists – 10min per presentation • Tom Adlam • John Magnay • Professor Saket Kushwaha Q&A session and wrap-up

  10. Small and Medium Agribusiness Development Fund A Public Private Partnership

  11. The Project • Objective : contribute to the development of Uganda's agriculture and to the improvement of rural livelihoods, incomes and food security. • Project purpose : support the development of Small and Medium Enterprises (SME) engaged in agribusiness by improving access to Business Development Services and to long-term finance. • Development impact : maximized through strict criteria for socially and environmentally responsible investments, a sound investment assessment and selection methodology and a strong monitoring and evaluation system.

  12. Fund Characteristics • Investment objective: Invest in commercially viable enterprises with strong growth potential that empower smallholder farmers in Uganda to increase their revenue, livelihood. • Fund Size :USD 30 million (at first closing) • Management :An experienced fund manager with good reputation and records for impact investment in developing economies. Will be recruited through a competitive process.

  13. Components • Funds Structure :Structured fund to accommodate different categories of investors (public investors and development partners), intermediate investors (FDIs, institutional investors) and private investors (private funds and private investors). EDF funds used to leverage public and private investments. • Technical Assistance Facility :The SME Development Fund will provide Business Development Services (BDS), through a matching grant facility, to improve corporate governance and the technical, managerial and marketing capacities of small and medium enterprises (investees and potential investees), and to strengthen their upward (market) and downward (smallholder farmers) linkages. • The BDS facility will amount to around 3 million Euro and will provide a matching grant to co-finance (potential) investee’s approved support

  14. Partnerships • Investors: EU, Dutch Cooperation, DANIDA, Aga Khan Foundation, National Social Security Fund (Uganda), Private investors from Uganda and abroad to be disclosed once the fund is established • Technical Assistance : IFAD will be the carrier and providing Technical Assistance. Further partnership will be also informally established with banking institutions and other relevant stakeholders.

  15. Investment Focus • Sector :Commercial Farming, Agribusiness (No Land acquisition) • Region :Uganda • Investment Size :USD 200,000-3 million. Average investment size USD 1,000,000. Fund investment normally not above 35% of total investment, and max 35% investee’s equity • Portfolio Size : 25-35 companies. • Instruments :Equity, mezzanine/convertible debt, debt financing, self-liquidating instruments with equity components • Investment Period :5 years • Holding Periods :3-8 years

  16. Target businesses • Strong and dedicated entrepreneur/management team, • Reach smallholders farmers as customers or suppliers, e.g. commercial farms with outgrowers scheme, input companies and processors/traders, • Sound Governance and good financial records, • Good market integration, • Growth stage,

  17. Calendar • 1st Sem. 13:Approval of the Project by EU HQ • 2nd Sem. 13: Contracting of IFAD / recruitment of the Fund Mger • 2nd Sem. 13 - 1st Sem.14:Closing of the fund • 1st Sem 14: Investment Return to presentation

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