Rethinking Agri-Business Investments Through the Pandemic: Support Panel summary

Whilst a pandemic of this scale has not been seen in recent decades, the pressure points it is creating for agribusinesses are not new challenges. Niraj Shah, Principal Investment Officer and Program Manager, Global Agriculture & Food Security Program, Private Sector Window at the IFC broke these down into three areas: (i) access to markets, where movement restrictions stemming from ‘lockdown’ measures have caused logistics disruptions, export restrictions and reductions in demand for certain industries; (ii) access to finance, where the COVID-19 pandemic has, in many markets, choked off liquidity and forced suspension of the credit lines that many working capital-reliant agribusinesses rely upon; and (iii) access to inputs which are often time-sensitive and have been disrupted by currency devaluations, complex cross-border supply, importation and last-mile distribution networks.

The response to these pressure points must be fast. Caroline Bressan, Managing Director at the Open Road Alliance, highlighted the critical importance of timing. There is a need to get fast and flexible cash to businesses without waiting on long investment processes. The need is global, whether from agribusinesses in the southern hemisphere currently in the harvest season, or in the northern hemisphere where agri-SMEs require cash to finance inputs. The sudden contraction in bank lending and the frequent suspension of purchase orders and disbursements within the supply chain leaves a critical short-term financing gap that impact capital can fill.

Investors are providing different types of support, primarily focused on liquidity issues such as flexible short-term capital and grants. Chris Mitchell, Partner at Bain & Company, highlighted the need for rigorous cash management to preserve liquidity and the related need for banks to amend their operations to provide flexible working capital and resist risk aversion. The IFC has responded by committing $8 billion in fast-track financing to support existing clients and financial institutions to offer critical financing to SMEs affected by the pandemic. Sarah Marchand, the head of CDC Plus, explained that CDC has accelerated decision-making and is working to support investees to withstand current and future shocks. CDC is providing TA and working capital facilities to its existing clients, including for companies to scale-up healthcare responses and food production and distribution. CDC is also extending its response beyond existing investees by working with local banks to provide the liquidity businesses need.

Whilst there are challenges, the sudden pressures of COVID-19 are sparking innovation and investment opportunities. Companies are also looking for support to innovate, rapidly trying out new distribution models – from home delivery to tech-enabled delivery models. To reduce the impact of COVID-19 disruptions to distribution chains and to meet the spike in demand for home deliveries, Twiga Foods, an investee company of the IFC and the GAFSP Private Sector Window is now partnering with e-commerce firm Jumia in Kenya for last mile, contactless delivery bundles of food products.

Another potential silver lining of the crisis is that value chain disruptions imposed by COVID-19 are accelerating incipient technology trends that had already started across the agricultural value chain. Mark Kahn, Managing Partner and co-Founder of Omnivore Venture Capital explained that in a marketplace where many farmers are now unable to reach end markets via traditional methods digitisation is pivotal. Take for instance DeHaat, an agri-tech start-up present in India’s eastern states that brings together access to inputs, market linkages, finance and advisory services onto one platform. We are seeing a rapid shift from traditional supply chains to digitally-enabled supply chains. Policy makers must “not waste the crisis” by driving reforms that support and enable this transition.

Innovations to build and optimise platforms that reduce the frictions created by COVID-19 and address longstanding fragmented value chains will be needed – not just in food delivery, but in the flow of key materials such as agro-inputs. Capacity development to support businesses to pivot and efficiently operationalise responses to increased demand will also be needed. Leveraging these insights, the CASA Technical Assistance Facility will continue to address technical support gaps for agribusinesses and with support from FCDO, CASA’s implementing partners have reoriented their work to support businesses to adapt to the impacts of the crisis, adopt new business models, secure new finance and recover stronger.