AgDevCo, a specialist investment firm focused on transforming agriculture across sub-Saharan Africa, has secured an $85 million equity injection from a consortium of European development finance institutions. The funding round was led by British International Investment (BII), the UK’s development finance arm, alongside Swedish counterpart Swedfund and Norway’s Norfund.

The investment, comprised of up to $50 million from BII, $20 million from Swedfund, and $15 million from Norfund, underscores growing international recognition of the critical need to bolster agricultural productivity and food systems across the continent. Africa’s agricultural sector faces significant headwinds including limited access to finance, climate change vulnerability, underdeveloped infrastructure, and restricted market access, hindering its potential to feed a rapidly growing population and contribute to economic development.

AgDevCo, established in 2009, aims to address these challenges by providing flexible, long-term capital to small and medium-sized agribusinesses (SMEs) operating across the agricultural value chain. This ranges from primary production to processing and logistics, targeting businesses often overlooked by traditional lenders due to perceived higher risk and longer investment horizons.

According to AgDevCo, the new capital will enable it to significantly expand its portfolio of SMEs across sub-Saharan Africa. The firm prioritises investments in businesses producing nutritious food for local markets as well as those cultivating high-value export crops, aiming to enhance both regional food security and generate foreign exchange earnings.

The development finance institutions (DFIs) highlighted the alignment of the investment with their broader mandates. Roman Frenkel, Director and Head of Food, Agriculture and Natural Capital at BII, stated the investment reflected their commitment to “empowering agribusinesses that are driving sustainable practices, strengthening food systems, and building economic opportunities for rural communities.” He added that the partnership aimed to “lay the foundation for long-term development and prosperity across sub-Saharan Africa.”

Tomas Wadström, Senior Investment Manager at Swedfund, emphasised the importance of investing across the entire food value chain to improve resilience and adaptability within the sector. He pointed to the potential for “poverty reduction through job creation and better production capacities, including for smallholder farmers.”

Norfund’s Investment Manager, Donald Muchiri Kariuki, echoed this sentiment, noting agriculture as a “cornerstone for fostering inclusive and sustainable economic growth in sub-Saharan Africa.” He highlighted the investment’s role in “empowering smallholder farmers, enhancing local food systems, and building resilience against climate change.”

AgDevCo reports that its investment model has already yielded tangible results. In 2023, businesses within its portfolio provided market and income opportunities for over 2.4 million small-scale farmers, customers, and traders, with almost a third being women. The firm also claims to have directly supported over 28,000 jobs during the same period. Furthermore, AgDevCo states that for every dollar invested to date, $2.50 of additional income has been generated for rural and peri-urban households.

With this latest funding round, AgDevCo projects significant scaling of its impact, aiming to reach four million farmers and support 60,000 jobs annually by 2030. Daniel Hulls, CEO of AgDevCo, acknowledged the “patient and strategic investment” required for developing commercial agriculture in Africa, welcoming the commitment from shareholders who “recognise the huge potential as well as the challenges of investing in the sector.”

The investment also aligns with the DFIs’ broader climate objectives. AgDevCo states that over half of its primary production investments incorporate regenerative agriculture practices, contributing to climate adaptation, resilience, and carbon sequestration.

Lord Collins of Highbury, UK Parliamentary Under-Secretary of State for Africa, lauded BII’s increased commitment to AgDevCo, alongside its Nordic partners, as an example of “how British private investment can deliver economic growth across Africa.” He suggested the investment would not only improve livelihoods and food security across the continent but also “strengthen UK supply chains.”

BII’s latest commitment, combined with a previous $50 million investment in 2022, makes it the largest external investor in AgDevCo, with a total investment of $100 million. This significant backing signals the continued prioritization of African agricultural development by both the UK government and its Nordic counterparts through their respective development finance institutions.

While development finance plays a crucial role in de-risking investments in challenging sectors and geographies, the long-term sustainability and scalability of such initiatives will depend on creating commercially viable agribusinesses capable of attracting further private sector investment and contributing to lasting economic transformation across sub-Saharan Africa.