Karen Smith

International development consultant specialising in private sector development: inclusive business, market systems and innovation funds. Co-Founder & Director of Smallholdr, an inclusive software as a service (SAAS) business based on a mobile app and web-based management system which enables the collection and management of smallholder and farming processes data and work-plan based management of extension teams.

  • Extensive experience managing large scale projects and teams in both public and private sectors for over 25 years.
  • Highly analytical and strategic thinker with excellent verbal, written and visual communication skills.
  • Seven years international development experience in Malawi and consultancies in Nigeria and Bangladesh covering a broad range of markets including agriculture, renewable energy and the business enabling environment.
  • Delivers high quality support and advice to a wide range of clients including national and international businesses, bilateral donors, government agencies and development programmes
  • Currently the Project Delivery Lead for the Business Innovation Facility (BIF) Business Partnerships Fund and Technical Adviser on the Company-led Window.

Introducing an ‘Unusual Beast’: the Technical Assistance Facility to the African Agriculture Fund

Finance for Inclusive Business
Impact Investing
Last mile distribution
5. Jun 2017

by Karen Smith and Carolin Schramm

“(AAF’s TAF) has been able to leverage funds that would not normally be associated with commercial investment and deploy this capital in a way that can make huge social impacts in areas where commercial investors might not naturally invest.”

Stuart Bradley, Joint Managing Partner, Phatisa, from the Ashley Insight, 2016 Impact Report

The African Agriculture Fund (AAF) is a US$246m private equity fund created in response to the food security challenge across the continent, financed by African, European and US development finance institutions, including private investors. It is comprised of two sector specific agri and food-focused funds: the AAF managed by Phatisa and a subsidiary small and medium enterprise (SME) fund, the AAF SME Fund managed by Databank Agrifund Manager Ltd (DAFML).

The Technical Assistance Facility to the AAF (TAF) was created with a budget of US$11m to add value to the investments of both funds, as well as generate new opportunities for smallholder farmers, farmer business groups and rural communities. TAF is donor funded, managed by the International Fund for Agricultural Development (IFAD) and implemented by TechnoServe, a US-based not-for-profit organisation focusing on business solutions to poverty. The manner in which TAF engages with the AAF companies is shown below:

aaf-taf-structure

The rationale for establishing TAF was to increase the effectiveness and development impact of the two AAF investment funds by supporting investees with dedicated technical assistance (TA). The AAF Fund Managers need to generate returns on investment on behalf of their investors. Technical assistance adds value by enhancing these returns, both by improving SME performance and reducing costs in the short term, but also by providing opportunities for portfolio companies to innovate and potentially develop new business models that strengthen their long-term value. The support can therefore ultimately contribute to better overall fund performance, making portfolio companies more saleable.

In our research trip to Johannesburg in October 2016 to begin the process of developing Ashley Insight’s report on TAF, Carolin Schramm and I spent a week with the core TAF team. As we sought to understand the unusual management structure of this development project in relation to the AAF, there was a recurrent theme of contrast, or even contradiction, that ran through the discussions. It became clear as we delved further that these dualities were key strengths of the project design.

Incorporated in the fundamental design, and differing from other technical assistance facilities which often funded by the same parent investor/donor, is the combination of TAF’s independent funding and oversight by donors and IFAD, and yet its integrated operations with the AAF Fund Managers.

 

mel

 

The integration is realised both physically in the Phatisa offices, with joint enterprise engagement and a successfully established working culture, and operationally through shared access to information and the ongoing relationships with the AAF’s investee companies. The balance of considering development aims alongside the Fund’s commercial objectives can only be achieved by having a Fund Manager that is development-minded and a TAF team that can understand both business and development worlds. By having the right strategies and the right people, this balance has been achieved and it is what enables harmonious and aligned thinking in designing and implementing appropriate TAF projects in support of AAF’s portfolio companies.

As Abigail Thomson TAF Program Director TechnoServe, explained, “TechnoServe designs TAF projects to ensure meaningful impact on food security and a win-win for the business and beneficiaries. A project will only be put forward for approval if it meets both of these objectives.” Abigail and her team find that many of the projects are co-creations emerging from discussions between the Fund Manager teams and the TAF team rather than being ideas generated from TAF that need to be sold to the companies or the Fund Managers. This sentiment is echoed from the Fund Manager perspective: “The greater the integration between the Fund and TAF, the greater the value to the companies. TAF helps the Fund Managers leverage their time”, Peter van As, Senior Partner Portfolio Director, Phatisa.

The counterpoint to this integration is TAF’s essential neutrality which means it can advocate for inclusive growth outside the constraints of the Fund Manager’s commercial imperative and the portfolio companies’ focus on immediate priorities. TAF’s independent and external view allows for more creative problem-solving to introduce innovations that busy company directors have less time to think about. TAF’s work with Zambian egg company Goldenlay is a great example of this: TAF invested time spent thinking about the best ways to reach poor consumers and retailers and this resulted in a business model which transformed the company’s approach to sales.

The Ashley Insight Team found TAF to be quite an 'unusual beast' in its concept and approach to supporting private sector development. However, whilst TAF is definitely unique in many ways, it should be noted that there are increasing numbers of players supporting entrepreneurial approaches to deliver development impact via finance (grant or commercial finance) as well as non-financial support. Acceleration support, technical assistance, business development services and other non-financial support offerings are available to inclusive start-ups testing their idea and to maturing businesses seeking scale. In the impact investment world the growing availability of non-financial support is based on the recognition that success is not just about choosing the right investees or deploying sufficient funding. Supporting investee companies with hands-on technical support is seen as a critical ‘more than money’ approach that can enable investors and their portfolio to succeed.

There is, however, relatively little information available about how such technical support is deployed, and what findings and lessons can be learnt on what works and what doesn't. In this regard, we hope that the our recently published report on the Facility’s work over its first five years, written in collaboration with the TAF team, provides a valuable insight and perhaps inspiration for development practitioners, donors and impact investors.

This blog is a part of the June 2017 series on advisory support for inclusive businesses in partnership with USAID and the African Agricultural Fund’s Technical Assistance Facility, both of which deliver advisory support and have new analysis of it just launched (AAF’s TAF) and forthcoming (USAID).

Read the full series for more lessons from seven different providers of advisory support and stories of success from entrepreneurs.