Investing in Value-Added Processing Businesses
The agriculture sector is often seen as a risky bet for investors, though interest in the area, particularly for impact investors, is growing. This holds true in the processing sector, where investors and businesses alike are not always “ready” to take risks in less-certain markets for financial and impact return. Costs of entering new markets, competition from importers and lack of sustainable supply sources are impediments to immediate commercial viability. The latter can be particularly difficult with value-added processing, because new varieties need to be developed for making the final processed product often.
In many such examples, pre-investment acceleration services help businesses prepare for funding by identifying and addressing issues prior to showcasing to commercial investors. It increases investee capacity and demonstrates to investors the potential for financial and social returns.
There are a number of ways that USAID and development practitioners support investments in businesses, including for value-added processing. One recent example is the Feed the Future Accelerating Women Entrepreneurs (AWE) Prize. The award was designed specifically for women-owned businesses in Africa, and through this process, Nature’s Bounty and Health Products Ltd., better known by its brand name, ReelFruit, was selected to receive acceleration services.
ReelFruit is a dried fruits and nuts packaging and distribution business based in Lagos, Nigeria. The company is a major shareholder of a subsidiary farming business that produces fresh mangoes sourced from smallholder farmers. ReelFruit plans to invest across the value chain to expand production capacity of new smallholder farmers to supply raw materials for their business. It already sources from producers in Nigeria and imports fruit from other countries to supplement local sourcing. See a full interview with Affiong Williams, the CEO of ReelFruit, here.
Through USAID’s support, ReelFruit is receiving investor-ready services through modelling how to develop and analyze financial statements, preparing a pitch and developing investment materials. The business is also connected to a network of commercial investors that can support ReelFruit’s scaling plans. This will result in ReelFruit expanding in-house processing, diversifying into new product lines and reaching high-value export markets, which is critical to their profitability and to reaching more smallholder farmers as suppliers of their products.