1. Objective of the BII investment in the Trade Access Program (“TAP”)

The Africa-focused Trade Access Program (“TAP”) managed by INOKS Capital was launched in April 2022 with an initial capital of US$ 25million from British International Investment (BII). As such, this first-of-its-kind program will help to increase urgently needed liquidity to SMEs and target trade intermediaries in Africa. In addition to fostering trade, job creation, local income, and positive impact generation on climate change, TAP will boost economic inclusion by specifically seeking to improve access to finance for women by targeting investments that qualify for the 2X Challenge. The 2X criteria will be used to determine whether an enterprise can be considered woman-owned, woman-led or woman-supporting. Access to funding is limited for African SMEs, AgriTech and FinTechs, particularly those in the Agri/Food sector. TAP funding will help extend credit to such businesses, including ATFs such as trade-based services and products providers, including aggregators, e-commerce platforms, SME-focused banks, and non-bank financial institutions. The capital will increase trade and food supply, help to develop local infrastructure, and rejuvenate market-enhancing corporates that meet consumer and business needs. This will in turn foster long-term economic growth and contribute to a productive, sustainable and inclusive future. Boosting trade finance is critical to supporting small businesses which are the cornerstone for a thriving private sector and development in any economy. BII’s new Trade Access Program and the larger Trade Access platform will help contribute toward bridging Africa’s US $81 billion trade gap, helping drive long- term economic prosperity across the continent.

 

  1. Sample current portfolio investments hold in the Africa-focused Trade Access Program (“TAP”)

 

Case study 1 “IVORIAN RICE”:

One of the portfolio investments is a company aiming at improving local rice availability for all Ivorian through increased quantities and more stable market prices. The agri-business company has built-up its strategy around two pillars:

 

-Development and structuring of the local rice sector to promote the production of smallholders farmers. “IVORIAN RICE” aims to increase local rice yields and quality by structuring the Ivorian rice sector. For this purpose, the company is largely involved in local agricultural communities: since 2014, it has contributed to the creation of 40 smallholder farmers' cooperatives and targets to achieve 80 cooperatives by 2023, which would enhance the production efficiency and coordination of nearly 50,000 local rice producers. Moreover, the company is engaged in various projects to improve access to seeds and inputs, increase the adoption of modern agriculture and irrigation techniques as well as reduce manual labour through mechanization. The company expects to multiply farmers' yields by 2.5 within five years.

-Development of industrial facilities to increase local milling capacities. In 2017-2018, the company started operating two rice milling factories and plans to run two additional factories by 2023 to achieve 88,000 MT of paddy rice processed. The facilities will be equipped with modern equipment to produce high-quality milled local rice that would compete favourably with imported rice.

There are several development projects undertaken by the company to boost i.e. food security and increase farmer’s yields.

 

Training program for smallholder farmers:

In partnership with other foundations, “IVORIAN RICE” has developed a training program to provide technical assistance and training to 7,750 farmers of 11 cooperatives over three years. The program has two major components:

 

Inputs financing

The IVORIAN RICE” company has launched a project with the goal to finance seeds, fertilizers and herbicides for 300 smallholder producers of 8 cooperatives. The company is simultaneously overseeing a pilot project to pre- finance 100% organic inputs and increase yields up to 4 tons / ha over 195 cultivated Ha.

 

Rice distribution to school canteens

The IVORIAN RICE” company sells half of its rice volumes to 30 women-led cooperatives which manage the distribution of rice to school canteens. Through this project, the company aims to reduce child hunger at school and de- schooling, improve school success, child health and reduce inequalities.

 

Case study 2AFRICAN COFFEE:

This is a company aiming to connect players from the coffee value chain (producers and offtakers) through a digital platform. The company seeks to redesign the agricultural value chains placing producers at the centre and removing intermediaries (cooperatives can for example directly engage in trading and export activities via the platform). The impact mission of the company is to improve producers’ revenues and decent livelihood through more efficient value chains, enhanced access to market (guaranteed offtake), better prices and access to different types of services (financing, logistics, insurance, etc). On the other side, traders benefit from traceability over the value chain as well as better prices (lower costs). Current countries of operations are Ethiopia, Burundi, Rwanda, Tanzania, Uganda, DRC.

 

Coffee is one of the world’s most popular beverages and 80% of it is produced by 25 million smallholders. In Sub-Saharan Africa, coffee supports the livelihood of many households (e.g. 400,000 in Rwanda, 600,000 in Burundi, 400,000 in Tanzania and 1,700,000 in Uganda) and coffee export constitutes an important source of hard currency revenues for these countries. However, the share of value reaching coffee-producing countries is very low, in contrast to that remaining in the hands of roasting companies in consuming countries. Reasons include:


The purpose of the financing provided through BII is to finance the procurement of green coffee from AFRICAN COFFEE” partner cooperatives and export to European offtakers.

 

Expected impact:

              Increase volumes traded through the AFRICAN COFFEE” platform with the aim to contribute supporting higher revenues for smallholder farmers and cooperatives

              Enlarge the number of active countries (so far only being able to concentrate financial resources mainly in Ethiopia and Uganda)

              Increase the number of producers having the possibility to digitalise their supply chain and having direct digital access to the market

              Increase number of farmers connected to our platform and building a history of records

 

Impact targets:

              15% increase in revenues for producers (commercial coffee)

              #15,000 farmers reached

              50% women in the workforce

              25% women in middle and senior management

 

 

 

 

  1. What due diligence does BII undertake prior to making investment decisions ?

The due diligence is comprehensive and requires appropriate time and resource allocation on the side of the investment manager (INOKS Capital). The due diligence covers among other topics:

-The Investment Manager and the team

-Investment process

-Underlying portfolio investments

-Track Record and experience

-Defaults and NPLs

-Investment structuring and transactions

-Portfolio valuation

-Reporting

-Infrastructure

In addition, there are dedicated due diligence modules covering topics like corporate governance, risk management, compliance, conflicts of interest, policies & procedures. In the due diligence phase and also during the investment period there are checks built in to reach out to external parties (i.e. other investors, service providers, underlying portfolio companies etc.). In light of the mission of BII’s funding provided the ESG Management System and Impact framework require specific attention. The goal is to maximise the  impact generated through the investment -next to gaining a financial return- while complying with the highest business integrity, corporate governance & compliance standards. For an investment manager it is a great way to even further improve its processes and practices applied.

 

  1. Transparency over performance monitoring and reporting

 

During the investment period BII is receiving a customised portfolio reporting from INOKS Capital detailing for example:

 

-current portfolio composition

-performance achieved over time

-full look through on each individual transaction and underlying cash flows

-portfolio distribution analysis including trade flows and commodities exposure

-underlying portfolio company information

-reporting on Gender + 2X Criteria and Impact KPIs

 

In addition there are regular calls and physical meetings taking place between the Investment manager and BII to facilitate regular updates on the portfolio’s developments, investment pipeline, performance and any other significant developments.

 

  1. Evaluation of impact of the investments

An investment made through a development finance institution like British International Investment offers a more patient, flexible support for private sector growth and innovation. DFIs can take on more commercial risk (or differently put engage in investments with a higher risk perception) compared to private sector investors, as their aim is to invest to drive greater development impact.

 

This does not mean that traditional financial aspects are left aside as a business needs to be financially viable and successful in order to be able to reinvest the returns and proceeds to provide further funding and assistance to other businesses.

 

There are dedicated Impact KPIs that need to be reported to BII. The impact objectives, data collection and reporting requirements form a binding part of the investment.

 

To give examples of the data points collected on the underlying investments:

-              Number of jobs supported

-              Revenues generated

-              Women representation

-              Contribution to local community development

-              Support provided to smallholder farmers

-              Access to healthcare services

-              Climate change indicators

-              INOKS Capital’s impact scores