I recently spent a week in Northern Uganda visiting Acumen Fund’s first investment in a Ugandan business – Gulu Agricultural Development Company (GADC).
For those of you who have not read the press release or Fast Company article, Acumen Fund recently announced its investment in GADC, a cotton ginnery located in Gulu District in Northern Uganda. GADC buys cotton – much of it high-quality, organic cotton – from over thirty thousand smallholder farmers in the North of the country. Because of the devastation brought by the Lord’s Resistance Army, an infamously violent religious and political group, many of the cotton farmers were forced by the government into Internally Displaced Person (IDP) camps for many years. Selling cotton to GADC is among the first sources of income with dignity that some farmers in the region have received for many years. In addition to providing them with access to markets, GADC offers farmers a wide range of extension services supported financially by Danida, the Danish development agency.
Beyond the social impact, I was excited to work on the GADC investment for several reasons. I enjoyed working alongside Amon Anderson, who heads Acumen Fund’s agricultural investments for East Africa and knows a tremendous amount about the sector. The investment is Acumen’s first in Uganda – an exciting foray into a country with strong growth prospects, capable entrepreneurs, and challenging poverty problems to tackle. It is also the first time that Acumen Fund has invested in an agricultural processing business. Agri-processing is a business model that offers tremendous opportunities to alleviate rural poverty, through businesses which provide support and market access to smallholder farmers. Agri-processors can add significant value to basic agricultural products through simple operations – such as drying fruit, pressing oilseeds or ginning cotton – and thus they receive higher prices that they can pass on to farmers. I don’t think this will be the last time we invest in this space
When I traveled to Uganda, I had just spent the past four weeks working on wrapping up the deal with GADC and with Root Capital, our partner and co-investor on this project. In early November, I was in Cambridge, Massachusetts discussing the terms of the deal with Root; before too long, I found myself in Gulu itself. All the discussion I had seen on paper suddenly became real when I set foot on the grounds of the ginnery.
It was rewarding to see Acumen’s capital at work, and to see the impact that GADC is creating for the local farmers. Centurio, a GADC field officer who supports the farmers, took me “deep into the villages,” where the pace of cotton-selling is frenetic. I stopped by the cotton stores of Robert Okidi, an GADC-authorized cotton buyer. Robert buys and stores raw seed cotton before sending to the ginnery.
When I visited Robert, he was proud to show me his store, which had over three metric tons of cotton inside – a good start for late November. As I spoke with him, a short queue formed behind us with farmers politely waiting to sell their cotton to Robert. Many were carrying over 200 lbs. of cotton on the backs of bicycles, carted in from the fields nearby. For reasons unrelated to local production, cotton prices are at their highest point in human history; this means that farmers are enjoying record windfalls for their crop, even before taking into account any premiums for organic production.
Back at the GADC ginnery, the pace of work was hectic. Teams of workers collect the cotton, sort it into piles, gin it (“ginning” removes the cotton lint from the seeds), and pack it into bales for sale. GADC has already signed deals to sell hundreds of tons of cotton to international buyers. Because of its brisk sales, the company can’t afford to shut down the factory for too long; over a hundred local employees are needed to keep the operations running.
Although Acumen Fund’s model is one of patient capital, it is exciting to know that sometimes, our investments can have immediate impact if they support the right projects. Having seen firsthand the rapid impact that GADC has on the surrounding region, I’m confident that this is just such a project.
Read more on GADC in Acumen Fund’s press release, Fast Company article, and this blog post by Amon Anderson.
Alastair Green is a portfolio intern who works with Acumen Fund’s agricultural investments in East Africa. He is based in Cambridge, Massachusetts and is enrolled in his final year at Harvard Law School. He has been employed by management consulting firm McKinsey & Company and has worked on Africa- and agriculture-related projects with TechnoServe, the Millennium Challenge Corporation, the International Finance Corporation, and the Harvard Law & International Development Society. His personal blog can be found at: http://tanzlines.blogspot.com.