Africa

Focus Areas

Investing for Sector Change

We look to increase access to the finance needed to transform East African sectors by taking calculated risks of our own to lessen risks for others, incubating innovative ideas and promising businesses in order to prove concepts. By demonstrating models we aim to reduce barriers to investment, ultimately encouraging greater private sector involvement to scale interventions.

Investing for Sector Change

Investment into East Africa has increased hugely over the last decade.  However, much of this investment has been concentrated into certain segments of the economy - such as mining, oil and gas - with others left behind.  In particular there is a lack of patient risk capital for pioneering firms in early stage industries who need such investment to upgrade technology, innovate and expand.  There is also massive underinvestment in agriculture. 

Yet investment in these areas is crucial for inclusive and sustainable economic growth – 70-80% of Africa’s population works in agriculture, while industrial development is vital to create the new jobs needed as East Africa’s population continues to grow.

Despite the opportunities in these segments, investors are reluctant to engage due to high costs and risks.  Agriculture is vulnerable to unpredictable weather patterns, volatile international commodity prices and political interference, while the cost of expanding financial services through rural areas is often prohibitively expensive for traditional business models.  Pioneering firms in early stage industries are often not investment-ready, and lack the time and resources to build investment-readiness by, for example, increasing management capabilities.

Gatsby therefore looks to take calculated risks of our own in order to lessen risks for others, incubating innovative ideas and promising businesses in order to prove concepts and thus encourage others to scale-up interventions.

For example, we are:

SUPPORTING PIONEERING FIRMS IN HIGH POTENTIAL INDUSTRIES

We are setting up a new, long-term industry development organisation that will operate across East Africa. It will identify new and existing high-potential industries and catalyse innovation, growth and increased competitiveness in these industries by supporting pioneering and catalytic businesses through technology transfer, capability building and investment. For example, it may procure a technology from outside the region and license it to a local business, while supporting the firm to increase management capabilities, plus potentially providing initial quasi-commercial finance. By de-risking the firm and improving its commercial outlook, other investors could then be drawn in to further scale the business.

DEMONSTRATING THE COMMERCIAL POTENTIAL OF SMALLHOLDER OWNERSHIP OF PROCESSING FACILITIES

We have invested in two privatised tea factories in Rwanda in conjunction with farmer groups, intending to eventually fully transfer ownership of the factories to the smallholders when our loans are repaid and key performance indicators on management and governance are met. The aim is to greatly increase the incomes of those farmers involved, while also providing a potential model for other factories and the development of new greenfield sites, both in Rwanda and beyond.

TRIALLING INVESTMENT MODELS FOR AGRICULTURAL SMES IN EAST AFRICA

In 2005 Gatsby and partners set-up African Agricultural Capital – the first private equity fund dedicated to investing in agricultural SMEs across East Africa.  We have subsequently helped raise an additional $25 million fund.  These funds aim for social impact and financial returns by investing in SMEs whose growth can catalyse the value chains they operate in, benefitting large numbers of smallholders.  The wider objective is to learn how investing in East African agricultural SMEs can be made profitable, creating a model that commercial investors can scale in the future.

Creating sustainable agri-businesses in Mozambique

We support the investment company AQUIFER to catalyse economic and social development in Mozambique by creating sustainable agri-businesses.  AQUIFER has a 100 per cent shareholding in Grupo Mozfoods S.A. and its main subsidiary Companhia do Vandúzi, which has become Mozambique’s largest exporter of fresh produce.  Vandúzi operates in the most challenging of environments, facing issues with infrastructure and the shortage of local skills, plus significant risks in terms of climate, pests and disease.  Management are working hard to tackle challenges, mitigate risks and secure financial sustainability, sharing experience and lessons to improve investment into Mozambican agriculture.

Investing for Sector Change