The SAGCOT Catalytic Trust Fund (CTF) is an innovative financing mechanism for SAGCOT created in response to the challenges of catalysing private sector investment in commercially and financially viable agribusinesses.
It targets smallholder linkages along the value chain and aims at providing the bridging financing for commercially viable agricultural businesses that incorporate and support smallholder farmers.
The CTF will combine both high developmental impacts with commercial viability in order to leverage investment in the agribusinesses value chain. The CTF will have two investment windows:
The Matching Grants Fund (MGF) and the Social Venture Capital Fund (SVCF).
The MGF is a $45M facility designed to catalyze investments in the SAGCOT region through $250K – $1.5M grants in capital expenditure,operational expenditure or technical assistance to improve the productivity and incomes of small-holder farmers leading to incorporation of small-holder farmers into commercial supply chains.
The SVCF is anchored by $20M of initial funding designed to make mezzanine debt and quasi-equity investments in earlier stage companies to facilitate the growth of emergent agribusinesses to commercial scale and develop greater interaction with Smallholders.
To become a leading agricultural Trust Fund capable of catalyzing and sustaining local content in agribusiness investments.
To strategically finance and empower smallholder farmers to actively, commercially and profitably participate in all stages of the agribusiness value chain through investments that create access to markets for smallholder farmers produce.
- Raise the Profile and Image of SAGCOT CTF.
- Finance Agribusiness Investments as Primary Market for Farmers.
- Finance Farmers Development Program to Meet Market Demands.
- Market Creation for Smallholder Farmers’ Produce:
To create sustainable agricultural and agribusiness enterprises and attract private sector capital to invest in them with the aim of guaranteeing markets for smallholder farmers. In many cases the demand (or markets) lacks even when there is plenty of produce from and farmers struggle to find markets. Early-stage Project Development Capital is necessary to bring opportunities to the point where third party debt and equity can be attracted to invest in them.
- Farmers’ Development Program to Meet Market Demands:
To support smallholder farmers to increase productivity through both quality and quantity enhancements (with the aim of meeting market demands) as a primary means of raising their incomes. In Tanzania at large the i.e. the supply-side (especially smallholder farmers) is weak and cannot meet the demands of large enterprises that are likely to consume them. Problems range from lack of power harrows to clear land, to lack of irrigation schemes and relying on rain, to lack of skills and trading on farming as a business, to poor logistical handling, lack or poor farm inputs including seeds, fertilizers, pests, etc.) To makes things worse, the cost of doing business in Tanzania prevents the linkages between smallholder farmers and large companies to happen or flourish. The costs of doing business are normally necessitated by poor roads, broken bridges, lack/poor of irrigation infrastructure, lack of power sources, environmental degradation, and lack of market information.
- SAGCOT-CTF Image Building:
To increase understanding of the SAGCOT-CTF approach and encourage its adoption by third parties with the aim of raising more funds into CTF. Meaningful intervention in all of the above mention challenges requires financing from CTF in a way that is sustainable. Continuous engagement of stakeholders to facilitate third party financing is necessary and must be a continuous activity.
CTF Financing Windows:
- Matching Grant:This window facilitates reduction on the cost of doing business among producers and markets (off takers).
- Social Venture Capital:This window provides targeted finances that aim at creating new markets for smallholders producers.
The primary beneficiaries for the Catalytic Trust Fund are smallholder farmers who engage in agricultural activities including crop farming, livestock keeping, fisheries, beekeeping and forestry.
Scope of CTF Services:
Currently, CTF activities are limited within the southern Agricultural Growth Corridor of Tanzania (SAGCOT) including Mbeya, Ruvuma, Iringa, Njombe, Rukwa, Katavi, Morogoro, Dodoma, Pwani and Dar Es Salaam.
Why SAGCOT CTF?
1. In some places of the SAGCOT, demand lacks and smallholder farmers struggle to find reliable and profitable markets for their produce.
2. At large the supply side is weak and smallholder farmers cannot meet the market requirements.
3.In most cases the cost of doing business prevents business linkages between the markets and the smallholder farmers from happening.