Impact Investment Profile

Investor

Root Capital

Investee

The Savannah Fruits Company

Root Capital is a nonprofit financial institution that provides finance to agricultural businesses in Africa and Latin America. The Savannah Fruits Company is a Ghanaian company that produces shea butter for export and improves livelihoods for rural women by providing a stable, well-paying market outlet for raw shea nuts. Root Capital’s trade finance loans remove cash flow barriers and allow the company to source the butter in larger volumes, enabling the business to grow, incorporate more women suppliers, and pay their suppliers a premium over the market price.

Investor Targeted Impact

Enhance livelihoods for rural women

Investor

Name Root Capital
Investor description Root Capital is a nonprofit social investment fund that grows rural prosperity by investing in small and growing agricultural businesses in Latin America and sub-Saharan Africa.

Investee

Name The Savannah Fruits Company
Sector Agriculture
Geography sub-Saharan Africa - Ghana
Investee business model The Savannah Fruits Company (Savannah) sources organic-certified shea nuts from 1,500 rural Ghanaian women who traditionally gathered nuts but lacked reliable markets for their product. Savannah then contracts an additional 2,000 women to manually process the nuts into shea butter. It is typical in the shea butter industry for processing to occur at industrial sites in Europe, so Savannah's commitment to processing at the village level in Ghana is unusual. It also ensures that more value is added domestically and retained by rural women. In selling to the company, both shea nut collectors and processors are typically entering the formal economy for the first time and their earnings go directly towards meeting household and community needs, particularly those of food, health, and education.
Motivations for investment Demand for shea butter is growing in the Western cosmetic market, which has led to an increase in imports of raw nuts for processing into butter. Savannah is a young, under-capitalized company that processes raw nuts into semi-processed shea butter at the local level in Ghana, rather than exporting raw nuts as is common in the industry. Savannah works with village-based groups of women in northern Ghana who harvest nuts in the wild and use traditional hand processing methods to convert them into butter, while meeting European quality standards. This value-add processing means local suppliers capture a greater portion of the product's value. In addition, the women suppliers protect the shea trees from being cut down for use as charcoal and hence preserve the greenbelt that is critical for slowing the southern creep of desertification in sub-Saharan Africa.Without access to trade finance the company would not be able to pay its suppliers in a timely manner and the women's groups would likely resort to selling nuts for cash on the open market to meet their immediate cash flow needs, but at a much lower price. Savannah was founded in 2006 and generated a small profit in its first year. Root Capital issued its first loan to the company for the 2007/08 season as it transitioned from a start-up to early stage company.

Investment

Instrument Debt
Investment size Root Capital has made several trade finance loans to Savannah. The average value of the loans is USD 375,000 and the median value is USD 230,000.
Source of deal Savannah was referred to Root Capital by the West Africa Trade Hub, a U.S. Agency for International Development-funded project that facilitates business development and trade originating from West Africa.
Stage of company at time of investment Early stage
Purpose of investment Trade finance loans from Root Capital provide cash flow to purchase the shea butter from the women suppliers. Since this enables Savannah to pay for the purchase of the shea butter by borrowing against the value of future sales, the company can purchase larger volumes and be more responsive to market demand. In the year prior to its first loan from Root Capital, the company generated USD 82,000 in sales and purchased shea butter from village groups representing 300 women. The following year, with access to trade finance from Root Capital, Savannah could purchase more shea butter and sales increased more than six times.
Investment impact objectives Through this investment Root Capital seeks to increase employment and wages for rural women in Africa and strengthen a well-performing agricultural small- to medium-sized enterprise.
Social and environmental metrics tracked on investment Root Capital tracks the following social and environmental metrics on this investment, including IRIS metrics (IRIS alignment noted in parentheses):Supplier Individuals (IRIS aligned - PI5350)Supplier Individuals: Female (IRIS aligned - PI1728)Payments to Supplier Individuals (IRIS aligned - PI1492)Volume Purchased from Supplier Individuals (IRIS aligned - PI7923)Financial Revenue (IRIS aligned - FP2054)Permanent Employees (IRIS aligned - OI8869)Units/Volume Sold (IRIS aligned - PI1263)Sales from Exports (IRIS aligned - PI5920)Sustainable Cultivated Land Area (IRIS aligned - OI2605)Access to Commercial Bank FinancingOther Sources of FinancingCertifications (Social and Environmental)

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