Sales Markets for Africa
New Fund promotes African agricultural products
Through investments in the African agricultural sector, the Fund contributes to food security of the population. Source: KfW Photo Archive / Thomas Klewar
On behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW Entwicklungsbank together with Deutsche Bank established an agricultural fund for African enterprises and farmers. The Africa Agriculture and Trade Investment Fund (AATIF) provides loans and equity to secure the income of African entrepreneurs and improve their competitiveness.
The Fund primarily aims to increase the productivity of African agriculture, facilitate the sale of African agricultural products on the regional and world market, and create new jobs. "In this way we make an important contribution to poverty reduction and food security in Africa", emphasised Norbert Kloppenburg, member of the Executive Board of KfW Bankengruppe.
Tapping Existing Potential
The export and productivity potential of African agricultural production for goods produced in an environmentally and socially sustainable manner is immense. But there is a lack of sufficient capital. In addition, investors often do not have adequate knowledge about the African agricultural sector. For this reason, access to possible financing sources for projects which could improve the population's income and livelihood often remains closed.
To meet this challenge, AATIF uses an innovative approach: When financing farmers' cooperatives and small and medium-sized operations, stakeholders work closely together with private sector partners who know the African agricultural sector well and are prepared to share in the risk. The cooperation between these enterprises and local banks ensures the quality of the investments.
Strict Environmental and Social Standards
Projects are excluded which do not meet the Fund's strict environmental and social guidelines, for example the prevention of speculation on raw materials markets, of investments involving resettlement of local population groups or of child labour. Compliance with these guidelines are regularly monitored. Furthermore, KfW and Deutsche Bank have come to an agreement with the International Labour Organisation (ILO) of the United Nations that ILO, after completion of the ongoing consultations, will visit potential projects with Deutsche Bank and independently evaluate compliance with their own occupational safety standards and, with the involvement of experts, compliance with the environmental and social guidelines.
Already in October 2011 the AATIF made its first investment. An agricultural enterprise in Zambia received a loan for 7.3 million euros. Among others, the loan finances local irrigation systems to improve wheat cultivation in months with low rainfall. The loan agreements are also subject to requirements, for example provisions regarding occupational safety, prevention of malaria infections of employees and access for over 200 children to the local school system.
Currently the Fund has a volume of over 85 million euros. The BMZ contributed 45 million euros, KfW Entwicklungsbank 20 million euros and Deutsche Bank 20 million euros. Other potential private and public investors have already shown interest in working with AATIF.
Thursday, 26. January 2012
