MIGA and OPIC Team Up to Support Private Equity Fund, Supporting Half a Million Small Farmers in Sub-Saharan Africa
June 9, 2014
(OPIC)
The U.S. Overseas Private Investment Corporation (OPIC) and the Multilateral
Investment Guarantee Agency (MIGA) announced today a $350 million political risk
facility to support agribusiness investments in countries throughout sub-Saharan
Africa, contributing to improved food security and self-sustainability for
agricultural production in the region. Under the facility, OPIC will serve as
primary provider of the political risk coverage that will protect each of the
investments made by the Silverlands Fund, a private equity fund focusing on
agribusinesses in several countries in Sub-Saharan Africa, particularly in
Southern and East Africa. MIGA as reinsurer will take on 60 percent of the risk
of each investment. OPIC originally helped capitalize this fund in 2011.
This joint OPIC and MIGA effort is a significant new development in the
political risk insurance marketplace. The two institutions are cooperating
effectively to catalyze investment by private equity funds in high-priority
regions and sectors, by reserving significant amounts of capacity to offer
coverage for all of a fund’s planned investments. Such coverage is offered on
pre-agreed general terms and conditions and is then tailored as project-specific
coverage when the fund makes its investments. The facilities are expected to
help attract capital for private equity investment funds in emerging and
frontier markets by providing fund managers with an effective instrument to
mitigate losses resulting from political violence, expropriation and currency
inconvertibility.
The Silverlands Fund plans to reach 500,000 small farmers over the next 10
years, leading to an estimated increase in total food production of over 1
million tons per year. The fund aims to accomplish this by investing across the
agricultural value chain in sub-Saharan Africa in a variety of segments
including fruit, grains, soya, sugar, poultry, and livestock. It will adopt a
“hub-outgrowers” model, which involves close cooperation between neighboring
local small-scale farmers and the Fund’s commercial agribusiness. The commercial
businesses will become hubs and provide a market for local farmers as well as
education, technical assistance, and compensation for their harvest.
“We’re very excited about this partnership with OPIC that allows us to further
our support to sustainable investments in sub-Saharan Africa’s agricultural
sector—an area that is essential for the region’s prosperity and food security,”
says MIGA Executive Vice President Keiko Honda. “Cooperation with development
finance institutions such as OPIC is part of MIGA’s mandate and allows us to
maximize efficiencies and contribute to increased flows of foreign investment
that improve lives around the world.”
“This project represents the best of what OPIC has to offer private capital
looking to grow their investments in emerging markets,” said John Moran, OPIC’s
Vice President for Insurance. “Silverlands is a highly developmental fund
supporting a key sector in one of OPIC’s priority regions. By offering OPIC’s
political risk insurance coverage in this innovative partnership with MIGA, we
are helping Silverlands to mobilize and deploy critically-needed new private
investment in Sub-Saharan Africa’s agricultural sector. OPIC appreciates the
opportunity to team with such a like-minded institution on this and future
projects.”
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