Financial Sector Development in Africa: Opportunities ... - World Bank

Financing Agriculture: Selected Approaches for the Engagement of Commercial Finance 103
Box 3.4
Case Study: Equity Investment in a Fruit Juice Processing
Plant in West Africa
The business was a relatively sizable fruit juice (pineapple, citrus) processor in
West Africa with sales of several million dollars in both domestic and international
markets. The business had been built from inception by the owner, who had now
accepted the need to invite external investment and relinquish total management
control.
The business had for some time been underperforming, and bankers were not
responding positively for increased facilities. The situation came to a head, however,
when the owner/manager had to take a substantial break from work for
reasons of ill health.
Not untypically of businesses of this type, the owner/manager insisted on
exerting ongoing control—to the extent of taking the company’s checkbook
home and insisting that any payments to suppliers (for example, local fruit growers)
had to be authorized by him. Unsurprisingly, business began to grind to a halt
because suppliers were not paid on time.
This appears to have been a cathartic moment for the owner/manager, who
responded positively to the approach of a Nigerian private equity firm. As an
interim measure prior to investment, a professional general manager, who is
overseeing a restructuring of the business, has been appointed.
The latest news is that management expected the company to embark on
a successful new growth phase as a result of the new investment.
Source: Coates et al. 2011b.
Second, at a subsector level in particular, information is scarce and the
understanding of potential investors limited. Other sectors, such as those
noted above, put a great deal of energy into business planning and financial
analysis with a view to seeking investment. They publicize this information
and lobby hard to make sure that investors are kept apprised
about the growth potential of their sectors. It is difficult to find similar
examples in African agricultural value chains aside from some of the most
solidly structured.
Another possible inhibitor of potential investors is the lack of depth
in the market to develop viable exit strategies for their investments.
There are a range of approaches that can be considered. If firms have
grown to an appropriate size, then the potential for listing on the rapidly