Sector: Seed potato
Investment: Aeroponics system, warehouses and transport vehicles
Total estimated capital expenditure: 994,000 USD for this expansion phase
Investment type: Seven-year convertible subordinated loan, three-year grace period
Amount invested by Kampani: 580,000 USD
Co-investor: Not applicable
In portfolio since: October 2021
Deal sourced by: Agriterra
Founded in 2015, the Seed Potato Fund (SPF) is a seed potato multiplication company owned by farmers and four farmer cooperatives. SPF’s business model is to address the issue of “seed leak”, i.e. when seed potatoes are sold as ‘ware’ potatoes for immediate consumption instead of being stored until the start of the following growing season.
SPF is designed to address the cash flow challenge this poses for seed potato producers by buying seed potatoes at harvesting time from the local producers in their network; storing the seed potato; and making it available the next season. Importantly, SPF also aims to improve seed potato quality.
In an effort to further improve the potato value-chain in the country, SPF also wants to scale up the production of minitubers, ie first generation seed potatoes, by investing in an aeroponics unit capable of quadrupling current production capacity.
There are only a few places in Africa where the soil and climatic conditions are right to produce seed potato. These include the northwest of Rwanda, parts of eastern Congo and the northeast highlands of Guinea-Conakry. At the same time, climate change has driven a big shift in large parts of Africa from growing basic grains such as maize to the production of potato which is much more resilient to the vagaries of the weather. At a macro-level, SPF is well-positioned to benefit from this continent-wide shift.
Being farmer owned, the company is very socially aligned, reaching farmers at different stages of the potato value chain:
– Providing input and support for seed potato producers
– Buying and storing seed potato from seed potato farmers
– Selling seed potato to farmers to produce ware potato
SPF’s intervention provides a ready market and better prices for potato farmers, making SPF a key actor in the potato value chain of Rwanda. SPF has very ambitious growth targets.
This deal was identified by Kampani’s partner Agriterra. SPF has been working with Agriterra since 2016 to improve agricultural practices, governance, post-harvest practices and business management. It is thanks in part to this support that SPF is now investment ready for Kampani.