New impact investment study

Pearl Capital Partners publishes a study that highlights multiplier effect of agribusiness investment

Strong financial returns, helping to reduce poverty across East Africa

Pearl Capital Partners (PCP), the African agricultural specialist investment house, today published an in-depth study into the social impact and financial returns generated through investment in agribusinesses in East Africa.

The 64-page study, commissioned by The Gatsby Charitable Foundation, a pioneer of agricultural impact investment in the region, took five months to complete and analyzed five of PCP’s twenty agricultural investments completed between 2006 and 2011 in East Africa. The investments were typical of those found in the PCP portfolio and the type of agribusinesses currently operating across East Africa. The study attempts to quantify the social impact of the investment and capture the “multiplier effect” on employees, suppliers, customers and the regional economy.

It found that agriculture’s perception as a high risk, low return sector has made it unpopular with commercial banks and large private equity investors, leading to a significant funding gap for agricultural SMEs, particularly those requiring between US$200,000 and US$2 million investment. All five companies had exhausted all funding avenues prior to PCP investing (although all have gone on to secure further third-party investment).

The application of investment combined with specialist private equity input, had helped each of the investees achieve high growth and market outperformance. Across the five investments, 30% turnover increase, 170% profit improvement and 15% customer growth were achieved.

All of PCP’s investments are expected to meet strict social impact criteria to demonstrate that they positively impact farmers and help develop agricultural sub-sectors. The study found that the core activities of the companies had a positive direct impact on nearly 1.4 million smallholder farmers and the direct value creation to employees, customers and suppliers from the US$2.6 million invested by PCP has been US$370 million (a 144x multiple on investment).

Speaking at the report launch in Kampala, PCP Managing Partner Tom Adlam said “We have always believed that the developmental impact of investing in small and medium-sized businesses operating in the agriculture value chain is considerable. This study confirms that belief and shows that there is a very strong relationship between business growth and profitability and developmental outcomes. We are extremely proud of all our investee companies across East Africa and we want to increase our future investment in the sector.”

The study also highlights that the significant level of social benefit has not adversely impacted the potential financial returns to investors and projects cash to cash return of 2.4x and 14% weighted annual internal rate of return (IRR) from the five investments. Supporting the thesis that investment in East African agribusinesses, can create both strong financial and social returns.

About

Pearl Capital Partners is an African investment fund management organization that finds raises and manages capital to invest across the agricultural value chain in ways which boost smallholder farm productivity and offers smallholders improved access to markets. 

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Pearl Capital Partners, Plot M697, 2nd Floor UMA Show Grounds, P.O Box 15373, Kampala Uganda,
info@pearlcapital.net , +256 312 264983/4, Fax +256 312 264985,