15 OCT 2018

Investment Opportunities in Nutritious Foods Value Chains in Kenya and Tanzania

Investment Opportunities in Nutritious Foods Value Chains in Kenya and Tanzania

iGravity was mandated by GAIN to assess and size the financial needs of enterprises working along food value chains that could produce nutritious foods in Kenya and Tanzania with a particular focus on SMEs (small and medium sized enterprises) and food systems after the farm gate. The gathering of this information led to the development of capital needs-based archetypes of enterprises working in or alongside these value chains as well as of a deal-book.

 

Analysis of the interview results revealed three major insights:

 

Most of the companies interviewed fall under the Global Development Incubator's "Zebra" categorization of African SMEs. Zebras” are typically defined as medium growth businesses in “bread and butter industries” with profit margins of 5-10%, and between 5-50 employees, are often family-owned businesses, and are unlikely to exit to third parties.

 

Many companies interviewed fall within multiple archetype categories, which is a reflection that most companies are in need of some sort of working capital financing, as well as a longer- term investment in productive assets to grow the company and improve efficiency or increase production.

 

Investment needs for these enterprises are relatively small (below USD 1 million) and many enterprises indicated a desire for more flexible terms, such as longer tenors for loans. However, in general, mature agriprocessors that have healthy profits and (with collateral) are able to access financing from local banks but at terms that are not always favorable for their businesses.

 

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