- Promotion / Aids / Facilitation
- Policy / Planning

54. Further information: Enquiries for additional information or clarification should be
submitted in writing to the following e-mail address: birgit.holderied-kress@kfw.de;
ralph.kadel@kfw.de; and rainer.hartel@kfw.de. Responses to enquiries will be
communicated to all applicants by email.

Search for Business Partners interested to set-up with KfW the
(1) Africa Trade Enhancement Fund (“ATEF”),
(2) The African Outgrower Development Fund (“AODF”)
Or
(3) an integrated Fund
05 July 2010
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1. On 23 June 2010 KfW has issued a notice for a search for Business Partners to set
up the Africa Trade Enhancement Fund (ATEF). Preliminary feed back from the market has
indicated that agricultural products and processing may become a focus of the fund. Also the
ATEF link to producer finance hints to a link of agricultural producer exports in the value
chain.
2. While the focus of ATEF remains open to exporting services, manufacturing, and
agricultural products in general, a specific form of agricultural finance is the explicit focus of
the African Outgrower Development Fund (AODF)1 both currently under preparation within
KfW group. Therefore, KfW, after careful consideration came to the conclusion that this focus
on agriculture may provide a unique opportunity for potential business partners of linking
both investments in ATEF and AODF.
3. Potential business partners may choose to opt for expressing interest in either ATEF
or AODF or propose a structure for a solution that integrates both fund activities under one
umbrella. This approach is to avoid unnecessary complexity while ensuring synergy of the
two funds. Potential business partners are free to suggest the most suitable solution to them.
4. The following document supersedes the notice “Search for Business Partners
Interested to set-up with KfW the Africa Trade Enhancement Fund (ATEF)”. Fund in this
notice means ATEF, AODF, or a combined structure.
A. Strategic context
5. The two recent decades have demonstrated the positive impact of international trade
on employment, income and income poverty reduction in developing countries especially in
Asia. Until the onset of the current global crisis in October 2008, the 2000s have shown a
trend of buoyant economic growth and globalization of markets in which international trade of
goods and services played an important role. Advanced, emerging and less developed
countries benefited from this trend. The current crisis shows the vulnerability of collapsing
real demand on poverty in particular in developing countries. Also Africa, which accounts for
only 2% in international trade has benefited from this trend.
6. The World Development Report 2008 (“Agriculture for Development”) highlighted the
importance of growth in the agricultural sector and its impact on poverty reduction. To
achieve the Millenium Development Goal of reducing income poverty the World Bank
emphasizes the need to considerably boost investments in agriculture especially in
agriculturally dominated countries which applies for most African countries..
7. The globalization in the 2000s also showed an intensification of South-North and
notably South-South trade. Despite this overall progress, low income countries largely
remained exporters of raw materials and trail way behind advanced countries in value
addition to their exports. Africa is a case in point, where fuel and mining exports accounted
for 71% of total export value in 2008, while the share of manufactured and agricultural
products amounted to only 18% and 7% respectively. Manufactured exports usually reflect
higher degree of value addition in the exporting country compared with commodity exports.
8. Agricultural exports however are often dominated by powerful trading companies in
the value chain, who dominate pricing of the product at the farm gate. Enhancing value
addition in agriculture entails improvement of product quality and transport infrastructure,
adequate and affordable financing and payment of fair prices to the producers. While
currently still on a small scale, “fair trade” practices are being increasingly demanded as a
standard for product quality by consumers in advanced economies. As a result, leading
companies in the agricultural commodity value chain are embarking on strategies of fair trade
certification in order to respond to the increasing customer demand and secure their markets.
9. Africa’s large endowment both in natural and human resources and its low
connectivity to global value chains and financial markets points to a potential in value
1 AODF has been prepared by KfW Entwicklungsbank and DEG.
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addition of exports that remains to be developed. Among the important factors hampering
Africa’s development is the lack of exporters’ access to investment and working capital to
deliver contracted products in time at international standards. For example fair trade certified
producers face increasing demand for export quality products but often lack the working and
investment capital to reach the necessary standard.
10. In particular agriculture still has substantial production reserves in Africa. Farm
productivity is far below other regions of the world and the huge irrigation potential is only
used to a low degree. In spite of weak capital and technology endowment Africa has
comparative advantages in the agricultural sector to be utilized. This became clear during the
food price booming in 2008 when foreign direct investment in African agriculture increased
substanially, especially from Arab and Asian investors.
11. Firm surveys conducted in various African countries point to a poor business enabling
environment and to the lack of access to finance as key impediment for business growth in
particular. In many countries banks tend to invest their resources in low-risk Government
papers or low-risk large corporate entities. The ongoing crisis has well demonstrated the
massive collapse of commercial finance to Africa, where international commercial banks and
investors have drastically reduced their risk limits for African counterparties to address
liquidity and solvency problems at their home base. As a result even quality exporters lack
access to finance. There is widespread recognition that special efforts are necessary to help
stimulate finance for value added (manufacture and agricultural) goods of African exporters.
12. Agricultural production in Africa is characterized by the presence of low yield and
income smallholder producers not having access to markets with sufficient purchasing power
nor to efficient agricultural extension services. On the other side there is a growing number of
large sophisticated agribusiness enterprises which are perfectly linked to international
markets. The productivity of smallholder producers is normally extremely low and associated
with high levels of poverty in rural Africa. The run on productive lands is largely driven by the
dynamic private agribusiness sector as witnessed by the establishment of new plantations
across Africa. The downside risks of this run on productive agricultural areas are ecological
and social damage as witnessed by deforestation and land grabbing, and if not appropriately
designed the danger that smallholder producers would not adequately participate in the
benefits of value addition.
13. However the co-existence of the two producer segments provides for a large potential
to improve yields and value addition and income of small farmers through integration with the
agribusiness production and processing process. Successfully tested contract farming
schemes initiated by private initiative have proven to be an effective solution in Africa by
appropriately embedding producers in the agricultural value chain and sharing benefits of
value addition (for example through Fairtrade certification or other mechanisms). Contract
farming provides a unique opportunity for value addition and the potential for smallholder
producers to escape poverty.
14. The need to develop Africa’s trade and agriculture sectors and financial markets has
been recognized in various international initiatives and gained strong support since the G8
summit in Heiligendamm (2007) and the G20 Aquila summit with substantial financial
commitments for the agricultural sector in Africa.
15. Consistent with their overall policy framework, Germany and other development
partners strongly support the promotion of private producers/exporters and financial sectors
in Africa in order to contribute to employment and income generation in particular for the
poorer segments of the economies. With the African Trade Enhancement Programme ATEP,
and the Africa Outgrower Development Fund (AODF) KfW aims at strengthening (i) value
addition of Africa’s exports in the non-oil- and non-mineral segments and (ii) lifting African
smallholder producers out of poverty through contract farming arrangements.
16. The ATEP Programme is based on three pillars :
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- Africa Trade Enhancement Fund (ATEF): Improving African producers and exporters
access to finance for export value addition in agriculture, manufacturing and services;
- Africa Small Exporter Support Fund (ASEF): a matching-grant facility to incur
expenses for studies and consulting services dedicated at identifying export
potentials for Small and Medium Enterprises working in agriculture, manufacturing
and services;2
- Fairtrade Producer finance (FPF): Exploring producer needs and developing business
opportunities for financing of fair trade partners – this component will cooperate in the
beginning with the FairTrade Labeling Organisation (FLO)3.
17. The AODF aims at improving African agricultural producers’ (including agricultural
exporters) value addition and income through better access to investment, markets and
finance. AODF will be based on
· Successfully established experience with outgrower schemes in various sub-sectors
of African agriculture, where promoters aim to collaborate with smallholders in order
to realise further growth potential, and a pipeline of possible contract farming
schemes identified in 5 African countries through a recent market analysis.
· A matching grant facility (“Center of Competence”) to (i) cover consulting and
monitoring costs, to (ii) assist local banks in better assessing risks and opportunities
of agricultural finance and to (iii) establish a data base for contract farming in Africa
18. Because of the significant overlap of ATEF and AODF there may be synergies to
establish both funds either as a single entity or under a single roof. KfW is seeking feed-back
from competent business partners, which structure appears to be most promising from a
commercial perspective.
19. KfW is actively seeking competent business partners (“Business Partners”) to
establish and manage (i) ATEF, and /or (ii) AODF either separately or in a combined
structure.
B. Fund – Mandate and General Outline of functions
The Fund’s business mandate will be to promote international competitiveness of
African entrepreneurs through funding of investments, working capital for trade and
agriculture value addition, as well as and trade finance delivered through appropriate
intermediary mechanisms and thus enhancing the availability of appropriate financing to the
existing and potential commercial producers, in particular in agriculture, but also in
manufacturing and services. The Fund will focus its promotion to African producers,
exporters and contract farming schemes, who lack regular sufficient access to financial
markets. The following key elements of the Fund mandate will have to be reflected in the
incorporation documents: (i) enhancing access to finance for private producers, especially
smallholder farmers and exporters in the agriculture and manufacturing sectors
(additionality), (ii) enhancing competitiveness of local export markets, especially in term
finance while applying prudent risk management, (iii) promoting suitable finance to African
exporters through qualified participating financial institutions (PFIs) and other suitable
intermediaries to be identified by the Fund in a rigorous due diligence process.
20. A Public Private Partnership. The Fund will be a public private partnership with
experienced and committed Business Partners to be selected in an iterative dialogue
process. The Fund will encourage capital contributions from further private investors,
2 ASEF will form an individual facility. To simplify its management, subcontracting by ATEF is desirable.
3 FPF will be managed separately. We anticipate that FPF will closely collaborate with ATEF, ASEF, and AODF.
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Governments, social investors / philanthropic organizations and development finance
Institutions as well as private institutional investors. Through the substantial potential for
mobilizing additional funding (leverage impact), the Fund proposes a unique opportunity to
augment scarce public budgetary funds by resources raised in the market.
21. Strategic link with Fairtrade initiatives. Through its close link to Fairtrade initiatives
and value chains that span from developing to more advanced economies, the Fund actively
explores the opportunity to augment the export readiness and product quality and quantity,
For the benefit of Africans depending on low (or no) income, value addition originating from
Africa should be increased, while improving the availability of quality products meeting
international product and social standards including Fairtrade standards in the importing
countries. This latter aspect also bears important benefits for companies selling the produce
in importing countries.
22. Fund Design. The selection of a viable fund design will be part of the negotiation
process with interested Business Partners, thus benefiting most from the financial and
managerial experience and commitment of the private sector. Interested Business Partners
will contribute significantly own funds to the establishment of the Fund. Further key
conditions for success are:
(i) shared vision of Business Partners as well as potential future investors
respecting the development objectives outlined;
(ii) general access to funding through adequate corporate governance structure,
respecting different risk bearing capacities of potential investors;
(iii) competitive selection of an adequate, experienced fund management with
proven knowledge and local market know-how in relevant regions and
countries and relevant trade value chains; and
(iv) adequate arrangements for safeguards and compliance. The Fund’s business
model and will support professional credit underwriting, risk management and
monitoring systems, and ensure competent internal and external supervision
and audits.
C. The Fund - Key features
1. Objectives
23. The Fund will adopt a market and demand-driven approach and fulfil the following
objectives:
(i) significant contribution to value addition of private exporters and producers ,
including smallholder farmers through suitable partners providing appropriate
financial intermediation in the agriculture and manufacturing sectors;
(ii) provision of innovative funding at market oriented terms which responds to the
particular requirements of the African market while integrating development
objectives. The Fund should qualify for Official Development Aid (ODA) as
classified by the Development Aid Committee (DAC) of the Organisation for
Economic Co-operation and Development (OECD);
(iii) adequate consideration of fair-trade as well as other environmental, social
standards, and principles consistent with international good practice;
(iv) adoption of an appropriate set-up for the Fund (virtual account or legal entity /
structuring of contributions) to match risk appetite and the development
agenda of different investor types and thus enhance availability of investment
capital;
(v) diversification of risk in various countries, sectors, institutions and
intermediation structures;
Page 6
(v) integration of a matching-grant facility (funded by donors) into the Fund by
subcontracting to firms specialized in TA.
24. In this context AODF is particularly targeting to promote agricultural value addition
through contract farming involving small scale producers and larger entities that further
process and trade the produce in the value chain.4 AODF is to promote such Outgrower
schemes through appropriate tripartite agreements between agribusiness enterprises,
farmers, and financiers including banks.
25. The Fund’s mandate and objectives will be appropriately reflected in its incorporation
documents, policies and business plans.
2. Market and Fund Size
26. To determine the target size of the fund and a feasible market approach, KfW is
currently conducting a market study for ATEF’s business potential in ten selected African
countries as well as relevant agricultural product value chains. The results of the market
study are expected by August 2010 and will be shared for comment with Business Partners
selected for the negotiation process. As for AODF a market study has already been
conducted and assessed the potential market size and business opportunities. The
respective studies will be made available to pre-selected Business Partners.
27. FairTrade certified producer-exporter-consumer supply chains are an important
partner for the Fund. However, the Fund will support other African export value addition in
the non-oil and non-mining sectors as well.
28. The relevant overall African market potential is currently estimated at about USD 70
billion. Assuming an average nominal growth of that business of 10% p.a. that potential
should reach USD 113 billion within five years (end 2015).
29. The size of the Fund will be driven by the investments committed. The initial capital
provided by the German Government is estimated at
(i) EUR 25 Million for ATEF, and
(ii) EUR 20 Million for AODF.
30. KfW group expects to initially invest up to equal amounts, depending on the agreed
fund concept and the business partners commitment.
31. In addition KfW expects additional public and private investments for the first closing
once the concept is agreed.
D. The Fund –Search process for Business Partners
32. The search for business partners will go through several successive stages, as
follows:
- Stage 1:
(i) Invitation for Business Partners (through this present document) to express
commitment for initiating ATEF, AODF in separate or combined structures.
Although this invitation is not part of a formal tender process due to the nature
of the project and of the required partnership, it is a transparent process as
described in the following paragraphs.
4 In contract farming ( e.g.outgrower schemes ) commercial agricultural enterprises conclude long-term contracts
with organised groups of smallholders (“outgrowers”). As a rule, the contractual relationships do not only
govern the production and marketing of the farmer’s products, but also include a comprehensive package of
agricultural services including the provision of the necessary input (seeds, fertiliser, pesticides, technical
equipment), consulting, transport infrastructure, loans.
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(ii) Selection of up to 4 qualified potential Business Partners. The indicative timing
for this is early September 2010.
- Stage 2:
Iterative design enhancement through a negotiation process with the selected
firms/consortia based on competitive concepts (the “dialogue process”). This
process will consist of successive rounds of discussion on the fund concept where
qualified potential business partners will be asked to elaborate their applications
and the concept of the Fund in more detail based on the existing studies and the
inputs from the dialogue process. The indicative timing for concluding negotiations
is end-September 2010.
- Stage 3:
Selection of one or more Business Partners (firm or consortium): preparation of
the ATEF/ AODF or a combined structure with the aim to launch the Fund end
2010 and to start activities in early 2011.
33. Throughout the stages, all submitted documents will be treated with strict
confidentiality by KfW. KfW will seek prior written consent by the Business Partners before
bringing any specifications of that party into the negotiating process.
34. KfW hereby enters stage 1 and invites Business Partners to express interest and
commitment to set up the Fund with KfW. Business Partners may be individual companies as
well as consortia. Business Partners will demonstrate their interest and ability to set-up the
Fund with KfW in submitting the following documents
(i) Short business concept for the Fund;
(ii) Ability and commitment to invest in the Fund;
(iii) substantial experience in structuring and executing the proposed financing
concept and demonstrated commitment to carry it out;
(iv) organisational outreach in Africa.
35. Business Partners are requested to submit their concise application in English.
36. Interested Business Partners should evince their interest in initiating the fund by
submitting the documentation by 6 August 2010 15h CET. The Business Partners will be
ranked and up to four first ranked will be asked to elaborate the application in more detail
based on the market study and a more detailed concept for starting stage 2 (dialogue
process). The dialogue process will commence in mid-August 2010, with the aim of reaching
agreement on a detailed fund design and financing agreements with KfW by 30 September
2010.
37. In the course of stage 2, the appropriate Fund design and implementation steps to
establish the Fund will be finalized. Initial target investments (deal flow) will be detailed in a
business plan. The range of the Fund’s financing products will be detailed in the constituting
documents and may include - but not be limited to - loans, guarantees, and letters of credit.
The Fund will support funding to market oriented agricultural producers and manufacturers
by using qualified financial institutions and other relevant intermediaries in export value
chains. The Cash flow and profit and loss projections form part of the business plan. The
Fund‘s investment policies will specify appropriate targeting and investment limits. The
Fund’s clients will be selected through appropriate credit limits and risk management policies
and observe environmental and social standards consistent with national laws and policies
that represent international good practice.
38. In stage 3, KfW will subsequently enter into a financing agreement with one (or
eventually more) successful Business Partner(s) to establish the Fund. The Fund is expected
to be established by end 2010 and commence operations in January 2011.
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E. Criteria for inclusion in the negotiating process:
1. Documents to be submitted:
39. Applications of Business Partners will be submitted in English and be structured as
follows:
40. Letter of concern: including the name and address of the Business Partner, contact
person and details (fax, e-mail, and telephone); in the case of a consortium, name, address
and contact details for each member of the consortium. A consortium will identify the lead
party within the consortium.
41. Brief presentation of the firm(s) (maximum 15 pages): A profile of the Business
Partner and of all consortium members as relevant: This includes the resources of the firm(s)
and a clear description of the legal form, ownership and, where applicable, role/ task sharing
in the consortium. Any application that exceeds 15 pages of firm/consortium presentation will
be disqualified.
42. Business Concept (maximum 10 pages per proposed concept or 15 pages for a
combined proposed concept): Basic Concept Note with views on key aspects of the
development, business and management of the Fund, including but not limited to
- Preliminary outline of the Fund’s approach for additional access of African producers
and farmers to agricultural and trade finance (who were formerly prevented fully or
partially from sufficient opportunities) - indicate i.a. terms and conditions of the
financing instruments for the potential clients;
- Establishment and management of the Fund;
- Achieve close collaboration with Fairtrade and their partners to maximize export
potential;
- Develop specific market presence/share for aforementioned clients;
- Indicate outreach through adequate financial institutions, as well as other relevant
intermediaries well positioned in the export product value chains;
- Mitigate risk by appropriate selection and diversification of investments by region and
sector;
- Indicate requirements for treasury and asset liability management; and other
supporting functions for the Fund;
- Ideally: suggestions for integrating the matching-grant facility in the Fund.
43. Affirmations and Declarations: The following affirmations and declarations will be
provided by the candidates (for consortia each member will provide the affirmation):
(i) Confirmation of submission of application: Declaration to the effect the
Business Partners will participate in the negotiating process if pre-selected;
(ii) Presentation of affiliations: disclosure of affiliation (and its nature) with other
firms, which may lead to conflict of interest regarding the establishment of the
Fund;
(iii) Consortium declaration: for a consortium, indicate through a binding
declaration by the lead firm of the consortium and clarify the form the consortium
(joint venture, sub-contract, other). Letters of the participating firm confirming
their participation in the consortium and recognition of the consortium leader (in
case of local partners a fax copy of such letter of intent is sufficient).
44. Financial capacity: This includes for each firm and member of a consortium:
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(i) Balance sheet and profit & loss statement for the past three years in
English or translated into English. If these documents are unavailable, the
candidate may submit inter alia details of the firm’s financial support.
(ii) Fund management Experience: declaration of
1. the total value of assets under current management (only firms with at
least USD 500 million or equivalent under management will be eligible
for the short-list);
2. total value of equity invested in Funds.
45. Organisational capacity: This includes for each firm and member of a consortium
the organisational infrastructure deemed necessary for the implementation of the Fund as
suggested in the concept note.
46. Declaration, that the candidate - if selected - is willing and able to invest significantly
(indication of amounts or percentage share in Fund capital).
2. Eligibility Criteria
47. Business Partners and their affiliates applying in stage 1 will be identified for the
dialogue process in stage 2 by the following criteria:
- Viable suggestions with regard to the design of either ATEF or AODF or a combined
fund structure;
- Financial capability and willingness to invest a significant share in the risk capital of
the proposed fund structure ; if selected as Business Partners;
- Proven skills and a significant track record in successfully overseeing complex
investment funds;
- In-depth knowledge of the Banking business;
- For AODF experience in funding contract farming
- Experience in trade and development finance (including trade finance, agriculture
finance, credit business, MSME-finance);
- Experience in financing exporters through financial and other appropriate value chain
intermediary structures to exporting SMEs in emerging markets;
- Demonstrated ability to manage iterative and complex processes such as the one
that will lead to the establishment of the Fund;
- experience in Africa in the relevant areas;
- Depending of the proposed business concept: demonstrate an adequate marketing
and distribution presence either in-house or through established partnerships.
48. Although not a formal requirement, it is desirable that the Business Partners are
willing to sub-contract and supervise matching-grant facility funded by donors against an
appropriate fee.
49. At their own discretion, interested fund management firms may reinforce their
expertise by associating with a qualified investment adviser or consulting firm.
50. KfW is not bound to select any candidate. The preparation and the submission of the
application is the responsibility of the interested Business Partners and no relief or
consideration can be given for errors and omissions. KfW submits itself to treat the
applications as confidential.
3. Submission Details
51. Deadline for Submission of Application: 6 August, 2010 at 15:00 CET
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52. Applications received after this deadline will not be considered.
53. Submission of Applications. Applications should be submitted at the offices of KfW.
One original and two (2) copies of the Application will be sent in one sealed envelope to the
following address:
KfW Entwicklungsbank
Africa Region
attention: Ms. Nuran Atas
ATEF/AODF– Search for Business Partners“
Palmengartenstr. 5-9
60325 Frankfurt am Main
Germany
The application should also be sent by email to nuran.atas@kfw.de and copied to:
birgit.holderied-kress@kfw.de , ralph.kadel@kfw.de; and rainer.hartel@kfw.de .
54. Further information: Enquiries for additional information or clarification should be
submitted in writing to the following e-mail address: birgit.holderied-kress@kfw.de;
ralph.kadel@kfw.de; and rainer.hartel@kfw.de. Responses to enquiries will be
communicated to all applicants by email.
55. Validity of the applications. Applications will remain valid until 31 March 2011.
56. Miscellaneous: Costs for any site visit, collecting information and preparation and
submission of documents, participation in meetings, negotiations, in relation to the
application and negotiation process will be borne by the candidates