MIGA and Chayton Capital LLP to support Agribusiness Investments in Southern Africa
WASHINGTON, May 10, 2010— The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group, announced today that it has issued a conditional guarantee supporting up to $50 million of agribusiness investments in Zambia and Botswana.
The agency has entered into a contract with Chayton Atlas Investments, an investment holding company within Chayton Atlas Agricultural Company (the Fund), a private equity fund with extensive regional farming experience focused on investing in agribusiness in countries in the Southern African Development Community (SADC).
Under the contract, MIGA will provide political risk cover for Chayton's investments in Zambia and Botswana subject to the Fund meeting MIGA's underwriting standards. MIGA and Chayton have agreed on a fixed guarantee premium that will not change during the life of the contract and MIGA has reserved capacity for Chayton's investments. The first planned investment is $10 million for the purchase and expansion of irrigated cultivation on a farm in Zambia. The Fund plans to make a further $40 million equity investment in the modernization and expansion of primary production and other agri-businesses in the region, bringing the total investments to $50 million.
The Fund’s investments will promote strong developmental impact including technology transfer, employment, and food security. The main objectives are to expand and improve farm land irrigation, improve farming techniques, and achieve economies of scale through vertical integration across the agribusiness value chain. The resulting produce is intended for sale within sub-Saharan Africa.
In a signing ceremony held in Washington, Izumi Kobayashi, MIGA’s Executive Vice President, noted the Fund is particularly important in an environment where investor confidence is lacking. “This blanket commitment of MIGA’s guarantee capacity will help Chayton Atlas raise risk capital at a critical time, especially as the African sub-continent recovers from economic turmoil. These investments will benefit an important sector, contributing to job creation and increased food security for many in the region.”
Chayton Capital CEO Neil Crowder noted the signing represents a landmark transaction not only for investors but more broadly for the region, as a potential catalyst to transform sub-Saharan Africa into an important food producer. “We are investing in sustainable agricultural ventures in Africa and see the opportunity to create and support agricultural companies that meet the return requirements necessary to attract foreign capital and to ensure that the many opportunities are developed in a sustainable way.”
This is the third master contract of guarantee that MIGA has signed with a private equity fund investing in sub-Saharan Africa. MIGA has also issued contracts to the African Development Corporation and to Sierra Leone Investment Fund LLC and ManoCap Soros Fund LLC. Under the contract with Chayton, MIGA will be offering breach of contract cover—the first time that such cover is being offered under a master contract.
Hal Bosher, MIGA’s underwriter for the contract says the master contract will facilitate the rapid issuance of MIGA’s coverage and provide critical risk management for African investors. “MIGA also, however, plays an important role for governments in assuring their countries benefit from responsible investments as we will review each investment to ensure eligibility and compliance with our underwriting standards—including the environmental and social impact.” Bosher says that MIGA was particularly interested in working with Chayton Atlas as agribusiness is a priority sector for MIGA and the World Bank Group.
Bosher also notes the contract underscores the strengthened cooperation between IFC, the private sector development arm of the World Bank Group, and MIGA. The two World Bank Group agencies have enhanced joint business development and cross-marketing support to achieve better services for clients and increased developmental impact in member countries.