Investment Proposal for an Agricultural Social Enterprise in Ghana

Equity financing amount of $50,000 sought for 12% stake in the company. Payback will be in three years with an ROI of 14.8%.

B. Foods is operating an agribusiness model that seeks to strategically engage a significant number of educated and skilled young people in the entire value chain. Building on the successes of the National Service Scheme’s agriculture programs, we are initiating a new model of Partnership in large scale agribusiness operations across the country with a strong youth focus.

B. Foods is a unique agricultural social enterprise that seeks to become a continental leader in the supply of quality foods to consumers by constructively re-investing in the long term growth of agribusiness in Ghana. Unlike existing agribusinesses in Ghana, Babaoo is operating a business model that seeks to strategically engage a significant number of educated and skilled young people in the entire value chain. Building on the successes of the National Service Scheme’s agric programs, Babaoo is initiating a new model of Partnership in large scale agribusiness operations across the country with a strong youth focus.

It is a problem that Ghana is developing a largely urban population. Clearly, this trend comes with huge market opportunities created by rising urban consumer demand especially for food (processed and raw). However, with more people moving to cities, and growing concerns over world food prices, there’s a need for more vibrant agriculture that will provide a secure foundation for food security for this growing urban population. Unfortunately, despite Ghana’s much touted agricultural growth, there are lots of weaknesses in the value chain that inhibit further growth. Cereal yields are just over one-third of the average and have barely increased in 30 years with even more production deficits expected in the coming years. The obstacles to increased productivity in smallholder agriculture are well known and continue to persist. The problem therefore is how to translate these problems into viable business opportunities for the huge cohort of skilled young graduates all across the country. As a solution Babaoo Foods has developed a model with the potential to provide the productivity breakthrough for Ghana’s agricultural sector.

The solution is to set up ‘Hub Farms’-large scale commercial farms in all regions that explore opportunities in using improved farming systems,expand market opportunities and develop higher value chains through an active engagement of young people and fostering a new wave of “Agribusiness Entrepreneurship”. Babaoo has started the first of such farms in Akrade in the Eastern Region. This model provides the opportunity for fresh graduates to see the opportunities in the agricultural sector and to begin considering it as available business option. For government, this helps solve the worsening youth unemployment.

The target market for the products are supermarkets, restaurants, schools and Hotels. These clients will pay for goods upon delivery either in cash or checks.

Basic expenditure anticipated within the 1st year includes staff stipends, cost of inputs &equipment, administrative and operational costs and other miscellaneous expenditures.Projected fixed costs total $280,000 in the first stage with a variable cost of $300,000. If the current strategic plan were to deliver expected results, this venture will break-even in 2014Q4 after a total expenditure of $580,000 and move to positive cash flow by 2015Q1. Profitability will be greatly improved by 2016Q2 when Babaoo begins a strategic liquidation of its equity interests in a number of the supported agribusiness startups to generate cash flow.

B. Foods' competitive advantage over other agribusinesses operating in Ghana is manifold:

Lower costs of Production and Management: Since National Service allowances are by nature lower compared to salaries in competitive market, we will be paying for quality man power but at a lower cost since the constitution of staff will be largely National Service Personnel.

Unique Re-investment Programme: B. Fodds’ re-investment program through the establishment of the Agribusiness Innovation Fund is truly unique. It offers opportunities for further partnerships with private equity firms, impact investors etc. in a drive to improve the commercial viability of agribusiness in Ghana.

Partnerships: The model provides a hybrid business model of private sector engaging state and quasi-state agencies in the production process. Such strong partnerships increase the chances of this venture to raise significant private investment from both local and international funders. It also opens up opportunities for the venture to access some grants that private initiatives are unlikely to access.

Strategic Youth Engagement: In keeping with our commitment to high standards, Babaoo will be engaging the most skilled of our youth population i.e. graduates from tertiary institutions. Channeling the enthusiasm, commitment and unique skills set of young people into agribusiness, holds real promise for the sector.

Ghana is developing a largely urban population. Clearly, this trend comes with huge market opportunities created by rising urban consumer demand especially for food (processed and raw). However, with more people moving to cities, and growing concerns over world food prices, there’s a need for more vibrant agriculture that will provide a secure foundation for food security for this growing urban population. Unfortunately, despite Ghana’s much touted agricultural growth, there are lots of weaknesses in the value chain that inhibit further growth. Cereal yields are just over one-third of the average and have barely increased in 30 years with even more production deficits expected in the coming years. The obstacles to increased productivity in smallholder agriculture are well known and continue to persist.

We will fill the gap in food deficit by cultivating vegetables and cereals in quantities and that can meet existing demands on the local market and subsequently export to meet demands overseas likewise.

Players in the Ghanaian agric space have been making good revenues over the years by supplying both local and international markets. And with our one year experience in the sector, we believe we have learnt most of what the agriculture learning curve has to offer and have little room to make mistakes. Profit maximization seems like the most feasible option for us going forward.

Financing will be used to purchase inputs, augment existing irrigation facility, Casual labor, salaries, storage equipment, and kick start the phase two which includes the setting up of Agricultural Incubator Farms to engage young graduates in Agriculture.

We seek equity financing amount of $50,000 for 12% stake in the company and look to pay back in three years with an ROI of 14.8%.

We have no preference on either the investor be hands-on or silent. We will prefer a one time bullet payment of equity.