Written Evidence Submitted by Sahel Capital Agribusiness Managers Ltd.
3rd February 2023
Investment for development: The UK’s strategy towards Development Finance Institutions
Sahel Capital is a Nigerian headquartered agribusiness-focused investment manager with offices in Lagos, Nigeria, and Abidjan, Côte d’Ivoire. Sahel was established in 2013 and today oversees $90 million in investment capital from a mix of European and African development finance institutions (“DFIs”). It manages two funds, one domiciled in Mauritius and the other in Luxembourg.
Sahel Capital is focused on addressing food security and strengthening regional food supply chains across sub-Saharan Africa through its investments into small and medium sized agribusinesses (“SMEs”).
Sahel Capital received a $15 million investment from BII in 2017, which has been instrumental in enabling it impact over 475,000 beneficiaries across Nigeria.
In 2017, BII invested $15 million in Sahel’s maiden fund – Fund for Agricultural Finance in Nigeria (“FAFIN”). BII’s involvement in the process enabled Sahel to unlock capital from other development finance institutions, ultimately enabling Sahel to raise the total fund size to $66 million.
FAFIN invested its capital in 8 companies, geographically disbursed across Nigeria, and across different value chains. Investments were made in:
Sahel Capital first reached out to BII in mid-2015 with a proposal for BII to invest in FAFIN. FAFIN’s strategy was focused on generating attractive returns while backing SME agribusinesses in Nigeria to address food security constraints through strengthening supply chain links to Nigerian smallholder farmers. Over the subsequent 18-months BII had multiple touch points with Sahel Capital prior to executing investment legal agreements in June 2017.
1. BII focus on vetting credibility of team:
(a) BII had multiple meetings with Sahel’s team in London and in Lagos, as well as periodic conference calls. Meetings were also scheduled around industry conferences in other cities. Focus was on understanding Sahel team motivations, team dynamics, knowledge of the food and agricultural sector, and ability to execute on the intended strategy.
(b) BII did extensive reference checks of key Sahel team principals going back the previous 10-years.
2. BII focus on vetting Sahel’s investment strategy and investment pipeline: BII was the only investor in FAFIN that insisted on doing field due diligence to vet the fund’s investment pipeline. In 2016, Sahel scheduled a multi-day trip across Nigeria to visit companies (some in hard-to-reach locations in northern Nigeria) where the BII team could physically meet the (mostly family-owned) companies that Sahel was considering investing in through FAFIN. Discussions focused on viability of business model, why the companies wanted to partner with Sahel/FAFIN, and the potential scope of impact that could be achieved should the investment be made.
3. BII focus on governance structures of FAFIN: BII actively engaged with other DFIs with whom Sahel Capital was speaking with to gauge 3rd-party investor interest in FAFIN. During the legal document contracting stage, BII (through its legal counsel) also actively provided input on governance structure requirements at both Sahel Capital and FAFIN that would be requirements should BII invest. BII’s requirements were fully incorporated into FAFIN’s legal documentation and aligned with other investors.
The 2-year due diligence and legal process to the investment closure of the fund was more extensive than Sahel had gone through with other investors prior to this point and was also instrumental in enabling Sahel to strengthen its own investment and operational processes.
Since BII’s investment in 2017, BII has provided oversight of Sahel and FAFIN in the following manner –
BII was very clear on the areas of impact it expected its investment capital to unlock, and some of these requirements were inserted into BII’ investment agreement with FAFIN in 2017 and are discussed on an ongoing basis with Sahel. These requirements include: (1) a code for responsible investing, (2) financial sustainability, (3) strengthening of governance within the portfolio companies, (4) a focus on environmental issues linked to the portfolio company’s operations, (5) job creation (number and quality of jobs; gender split), (6) smallholder farmer engagement, and (7) and sector specific impact targets for each investment.
Sahel provides BII with quarterly data on key development impact metrics, as well as a more in-depth annual impact report. A summary of some of the development impact achieved by FAFIN is highlighted in the table below:
| Developmental Impact | Est. 31Dec22 |
Number of individuals indirectly impacted (employees, suppliers, farmers, retailers) | 478,655 | |
2. | Total number of smallholder farmers engaged | 26,044 |
3. | Number of female smallholder farmers engaged | 9,776 |
4 | Active micro-retailers within food distribution network | 63,375 |
5. | Direct job creation at portfolio companies | 2,000 |
6. | Food security – Milk aggregated Poultry meat Rice paddy processed Cassava processed Shea nuts processed | 3.1 million litres 11,945 MT 49,732 MT 96,608 MT 18,491 MT |
Sahel has also been able to leverage BII’s technical assistance facility (and that of other DFIs) to support FAFIN portfolio companies. Funding from the TA facility has been used to (1) provide training and capacity building to the management and staff of portfolio companies, (2) embed technical talent into the portfolio companies, (3) upgrade factory waste treatment processes, and (4) provide technical support for the build-out of smallholder farmer out-grower networks, amongst other initiatives.
Not only has BII catalyzed direct development impact across a range of indicators within FAFIN’s portfolio of companies, BII has also enabled the strengthening of Sahel’s team itself and Sahel’s investment process over the past 6-years. This has enabled Sahel to secure (1) interest in its successor funds from a broader set of institutional and DFI investors, and (2) investment capital to help agribusinesses scale in 13-countries across sub-Saharan Africa (up from just a Nigeria focus in 2017). This will have substantive impact in addressing food security and strengthening the food ecosystem in sub-Saharan Africa over the next 10 years.
Kind regards,
Mezuo O. Nwuneli
Managing Partner
Sahel Capital Agribusiness Managers Limited
Page 4 of 4