Annual Review - Summary Sheet

Title: Africa Enterprise Challenge Fund (South Sudan Window)

Programme Value: £3.9m Review Date: October 2015
Programme Code: 202848 Start Date: September 2011 End Date: December 2015

Summary of Programme Performance

Year 2012 2013 2014 2015

Programme Score B A B B
Risk Rating Medium Medium Medium High
to High to High

Summary of progress and lessons learnt since last review

The South Sudan Window (SSW) of the Africa Enterprise Challenge Fund (AECF) has had another
challenging year. The programme started in 2011 and DFID’s agreement with the Alliance for a Green
Revolution in Africa (AGRA) to manage the programme ended on 31 December 2015. The small size of
the window operating in a recently formed independent country (ranked the most fragile state in the
world) which has been in conflict since mid-December 2013 has affected results. The window has done
well in disbursing almost 60% of the contracted commitments to projects in this difficult environment, but
suffers from limited reporting and verification of the results. Only three out of five active projects (Century
Seeds, Honey Care and South Farmers Co. Ltd.) are currently reporting results and most of those
results come from one project (Century Seeds). While the DFID project currently ends in December 2015
it was always expected that the SSW would be a seven year window (the same as other windows within
the AECF) and therefore extended until 2017.

While the conflict continues in only 3 out of 10 states (and not the ones the AECF projects are operating
in), AECF grantees have still been severely impacted by the effects of the conflict throughout the
country, including difficulties in obtaining foreign exchange (due to devaluation), economic downturn,
increased insecurity (e.g robberies/theft) and fuel shortages.

The key issues identified during this annual review are:

 The window relies on one project for nearly all of its development results. Although it is
common for AECF windows to be dominated by 1-2 projects, in the case of SSW nearly all
the reported development results come from Century Seeds. The heavy reliance on one
project for success increases the risk of failure.
 The pro-poor nature of the development results reported may be overstated. Century Seeds
has changed its original project in response to market demand to work more with larger
farmers as seed-outgrowers than it had originally intended. The development results reported
for this component of the project therefore include a proportion of results which do not relate
to the target rural poor population (living on less than $2 per day). More detailed verification
work on these results is required.
 The value for money of the window is worse than other AECF windows. The reduced size of
the window has increased the proportion of management fees paid when compared to other
windows. From a DFID perspective, the management time required by the country office team
to oversee an AECF window has not reduced with the size of the window and is therefore
proportionately more than other windows.

Decisions need to be made about the composition of the SSW: whether to merge it with another window
or to run a mini competition to utilise potential uncommitted funds. The progress of the five projects,
advancement of the Peace Agreement and the status of the cessation of hostilities and any easing of the
current issues in South Sudan will play a crucial role in this decision process.

Summary of recommendations for the next year

i
Recommendations are listed in full in section H. They focus on: (i) improving the value for money of the
window by streamlining management, ensuring projects that won’t deliver are closed and considering
options for utilising uncommitted funds; and (ii) revising the logframe targets for future years to ensure
they remain challenging but also realistic.

A. Introduction and Context

Outline of the programme
The African Enterprise Challenge Fund (AECF) is a US$245m challenge fund for the benefit of rural
households in Africa, established in 2008. The Fund provides support to the private sector for new and
innovative business ideas in agribusiness, rural financial services and renewable energy/adaptation to
climate change that will benefit Africa’s small farmers and rural households.

In September 2011, DFID committed £6m to the Africa Enterprise Challenge Fund South Sudan Window
(SSW). An Accountable Grant of £6m was signed between DFID and the Alliance for a Green Revolution
in Africa (AGRA) in December 2011, covering the period December 2011 to December 2014. A no-cost
extension was then granted for one year to December 2015 and the initial £6m budget reduced to
£3.9m, to account for a reduced number of businesses supported (initial target of 11 projects but only 6
awarded and 5 contracted).

Expected Results
The Project Goal is promoting pro-poor growth in South Sudan with the expansion of innovative and
commercially viable agricultural and agribusiness sector that benefits the rural poor.

The Project Purpose is to improve the livelihoods of at least 50,000 farmers/ out-growers and clients who
will directly benefit from the provision of AECF support for innovative private sector initiatives in
agricultural, agribusiness and other enterprises impacting on the rural areas of South Sudan.

The programme achieves this through a combination of grants and 0% interest loans to innovative
agribusiness companies. The SSW target was to support 11 companies - 6 projects were approved but
only 5 were contracted. Following the outbreak of conflict the DFID office reduced the overall budget (to
focus resources on the humanitarian crisis and assess changes to the operating context) which meant
the AECF did not run another window to identify other businesses. The five companies contracted are:
Honey Care, Southern Farmers, Century Seeds, Frontier Microfinance and Garden of Eden.

Context
The context in which the UK support is provided remains unchanged. The Secretary of State (SoS)
made economic development one of her top priorities for DFID. A new economic development strategic
framework has been published to guide DFID’s approach to working with private sector to increase
investment and trade with Africa. In South Sudan the SoS asked that DFID do more to support an
increased private sector and the agricultural sector is a clear priority for such support. South Sudan is
currently heavily dependent on oil revenues (which are primarily spent on security) and would benefit by
diversifying into other sectors.

However, the context in South Sudan has changed significantly since the programme was implemented,
a conflict erupted in December 2013, insecurity (criminality) has increased, the economy is in decline
especially in the last year (with the consumer price index showing inflation at 118%).

Agriculture in South Sudan has enormous potential. It accounts for about 80 percent of employment, with
traditional livelihood systems involving various combinations of livestock rearing, crop production, fishing,
wild food collection and trade1. The country has the largest arable land area per capita in the world, yet
only 5% of arable land is currently cultivated. South Sudan’s abundant land and water resources could
help to meet massive unmet local and regional demand in all areas of agriculture, forestry and fisheries.
There is significant potential for regional trade. South Sudan plans to join the East Africa Community
(EAC) and is bordered by countries with which there is significant trade potential, including Kenya,
Uganda, Ethiopia, Sudan and the Democratic Republic of Congo (DRC).

Nevertheless, agricultural knowledge and capacity in South Sudan remains very low. Investment by the
Government of South Sudan, whose budget is dominated by security spending, is extremely limited. The
1 FAO Plan of Action for Southern Sudan, 2010
i
economy is highly dependent on imports, more than 2 million people have been displaced by conflict and
an estimated 3.9 million people (34% of the population) are severely food and nutrition insecure at
September 20152. This is an 80% increase compared to the same period in 2014. Insecurity, ongoing
conflict, lack of infrastructure and natural hazards have been major contributing factors to this, as well as
low productivity and institutional weaknesses in the agriculture sector.

The conflict and violence that erupted in mid-December 2013 has had a significant detrimental impact on
all sectors and caused a major humanitarian crisis. In response to the changed context, DFID South
Sudan undertook a review of all programmes in 2014 and given the vast scale of the humanitarian
needs, some funds were reallocated to the humanitarian crisis response and a decision was taken that
no new investments would be made in businesses beyond the existing five supported. A ceasefire came
into effect in late August 2015 but violations continue.

B: PERFORMANCE AND CONCLUSIONS

Annual Outcome Assessment
The intended outcome of the SSW is the creation of jobs and an increased income for the rural poor,
along with the improvement of wider market systems.

Indicator(s) Milestones Progress

1 Cumulative Development Impact:
(a) total net benefit (US$) (a) 2,000,000 (a) 688,431
(b) total net wages (US$)
(c) development rate of return (DRR) = (b) 260,000 (b) 239,157
ratio of development impact
(a+b) to funds disbursed (4.5f) (c) 1 (c) 0.5
2 Cumulative (US$):
(a) grantee matched funding (sum of (a) No target (a) 2,000,000
grantee: cash, in-kind, re-invested
profits); (b) No target (b) 446,000
(b) third party funding (sum of actual third
party: equity investments, loans, in-kind, (c) No target (c) 0
supplier credit, grants from other
funders, bank loans, bank overdrafts); TOTAL: 3,500,000 TOTAL: 2,500,000
and
(c) funding successfully facilitated by AECF
Connect3.
3 Number of ongoing projects:
(a) bringing a new technology or business (a) 1 (a) 0
model;
(b) replicated by other market players in (b) 2 (b) 2
some way; or
(c) that have led to other systemic changes (c) 1 (c) 5
(regulatory, factor and other markets).
The SSW is not yet meeting expectations on cumulative development impact. The development rate of
return (DRR) is lower than that of other AECF windows of a similar age, including those in post conflict
environments such as the Post Conflict Window (PCW) which has DRR of 3.5. A higher DRR indicates
strong development returns for every $1 invested by the AECF. For the SSW every dollar invested has
created $0.50 of benefit. However, the business environment has proven to be particularly challenging
and although the cumulative development rate of return to date remains below 1 it is expected to at least
exceed this threshold in the medium term. Single-country windows like SSW are inherently more risky
than multi-country windows such as the PCW and this is reflected in the development returns.

Matched funding in the SSW comes slightly under the target of $1 for every $1 provided by the AECF
with a total matched funding raised of $2.5m, against a target of $3.5m. This is understandable given the
environment where access to finance is very limited but remains below the already low target.

2 Integrated Food Security Phase Classification (IPC)

3 AECF Connect is part of the AECF which supports AECF grantees in raising capital from private investors and
lenders.
i
The SSW has achieved a degree of wider market system change. There have been some examples of
replication of business models using improved seeds by some farmers and among Non-
Governmental Organisations (NGOs). The SSW has created additional business opportunities for
input suppliers and other projects have positively changed regulatory procedures: Honey Care
became the first company to obtain a certificate of origin to export their product, a process which
took them four months first time round but is now only taking one week.

Overall, with such a low development rate of return the SSW cannot be considered to be achieving
its intended outcome.

SSW Project Summary

The development results for the SSW grantees are summarised below. Outcome Indicator 1, as well as
Output 1 (both of which focus on the development impact of the portfolio) reference the results achieved
up until the end of December 2014. The remaining Outcome and Output indicators (that are more
concerned with the operation and management of the business and funding windows) use data as of the
end of June 20154. There has been limited and sometimes incomplete reporting from grantees and it
has therefore been difficult for the Fund Manager (FM) to verify impact to the same extent as for other
windows:

Company 2014 Net 2014 2014 Total Cumulative

Number of Average Net Benefit Total Net
Households Net ($) Benefit as
Benefit per at Dec 2014
HH ($)
($)
Century Seed Co.Ltd 2,612 171 446,652 646,652
South Farmers Company Ltd -5 - - 23,300
Honey Care Africa Ltd 284 64 18,176 18,479
Frontier Microfinance Ltd - - - 0
Garden of Eden Co. Ltd 0 0 0 0

As can be seen from the table above, the development impact for SSW is heavily dependent on Century
Seeds. There have been delays in starting the Frontier Microfinance and Garden of Eden projects,
including due diligence concerns regarding the latter. A brief summary of the progress and position of
each grantee is at Annex 2.

Recommendation
R1 - The FM should continue to review the Frontier Microfinance and Garden of Eden projects and
should determine by end March 2016 whether it is likely they will be in a position to progress in the next
year. If these projects will not progress sufficiently they should be closed. If the projects do proceed, the
FM should report to DFID on the outcome of any outstanding due diligence findings prior to proceeding
with disbursements.
Action by: Funding Manager Timeline by: 31 March 2016

Key Lessons
South Sudan is a complex and difficult environment to run a business. A key lesson that has been
learned is that the AECF must take a longer term planning horizon and increase the flexibility in the way
it provides support to businesses in these environments. It has not been possible for the original
business plans to be implemented as planned due to the impacts of the first oil shut down in 2012 which
affected currency and fuel, it was further compounded by the fighting which started in December 2013.
 Businesses should continue to review their business plans in light of the new operating context
in South Sudan.
 DFID should review the logframe indicators on the SSW to ensure they provide realistic
measurable targets in the current fragile/uncertain SS context.
 The risks inherent in a single country post-conflict competition window are very high, as the
success of the project is dependent on the condition of one fragile economy. The PCW, for
4 This is due to differences in reporting periods by the AECF, businesses and donors.
5 Where a ‘-‘ is recorded there are no results available.
i
 example, supports 18 projects across four countries and its results are therefore less
susceptible to economic problems in one country.
 Finally, the cost of managing a small programme such as SSW is relatively high, both in terms of
management fees and staff time. DFID should look at ways to streamline the management of
the AECF as a whole and in particular the SSW, for example management alongside another
window.

Has the logframe been updated since the last review?

New logframes have been put in place for all windows in the AECF. There is now one logframe for all
windows with the same outcomes/outputs with country specific indicators; milestones have been
identified for each window based on their specific context.

Actions from 2014

Action taken on recommendations from last year’s review are summarised in Annex 1.

v
 C: DETAILED OUTPUT SCORING
Output Title Business initiatives supported by the AECF generate development benefits with high
outreach, in particular to: those in rural areas; very poor; women; and youth.
Output number per LF 1 Output Score B
Risk: High Impact weighting (%): 40%6
Risk revised since last AR? Yes Impact weighting % revised Yes
since last AR?

Indicator(s) Milestones Progress

1.1 Net number of primary beneficiaries
benefitting from ongoing AECF funded projects, (a) 15,000 (a) 2,896
by year, expressed as number of:
(a) households; and (b) 75,000 (b) 14,480
(b) people.
1.2 Average net benefit per household 80 161
per year (US$).
1.3 Percentage of direct primary beneficiaries 60% -
that live in rural areas.
1.4 Percentage of direct primary beneficiaries 50% -
that are poor (i.e., earn less than US$2 per
day).
1.5 Percentage of direct primary beneficiaries 50% -
that are women.
1.6 Net additional jobs created (FTE 7) through/in (a) 38 (a) 19
enterprises supported by AECF:
(a) men; (b) 37 (b) 10
(b) women; and
(c) youth (18-35 years). (c) No target (c) 19

TOTAL: 75 TOTAL: 29
Progress against Output 1, which measures the development impact of SSW, has seen mixed results
during 2014.

1.1 The number of beneficiaries 8 is significantly lower than expected and the reported results are
largely attributable to one project (Century Seeds). The number of beneficiaries for Honey Care could be
higher than the 284 that were verified however, Honey Care records were not adequate to demonstrate
this. South Farmers has potential to reach many beneficiaries, but has faced issues sourcing foreign
exchange due to the fragile economy. Furthermore, South Farmers has not submitted its most recent
report meaning the full development results are not included here. The development results for this year
are therefore probably understated. There is potential for the number of beneficiaries to increase as
projects develop, as better reporting is provided and as the continued effect of the current fragile
ceasefire is felt.

1.2 The net benefit per household is the only indicator in this output that exceeds its target. This is
due to the high net benefit attributable to Century Seeds’ and may be impacted by the fact that this
project has worked with larger farmers than originally intended and the benefit per farmer is therefore
higher. This brings into question the impact on poverty results (e.g. indicator 1.4) as a proportion of
beneficiaries (at least) are not poor, smaller farmers.

1.3 – 1.5 The verification studies for these milestones have not yet been completed so it is not
possible to report on their progress. Verification work will be needed if these projects are not in the scope
of the final evaluation.

6 This output is currently weighted as 40% as output 2 is not relevant at this stage. It will revert to 30% weighting in
2016 when output 2 goes live.
7 FTE: Full Time Employee
8 Beneficiaries can be outgrowers or clients: Honey Care and Century Seeds beneficiaries are the producers that
supply the raw honey and seeds, whilst South Farmers beneficiaries are the customers of the company.
v
1.6 The number of jobs created has reduced from 76 in 2013 to 29 in 2014. The reduction has been
explained in part due to the challenging context in South Sudan and the conflict that started in December
2013. It is also down to the poor reporting with only two projects providing reports to the FM in time for
the annual review process. Limited capacity of the partners that are operating has limited the reporting of
results. South Farmers have struggled to keep the project moving and did not have the time to complete
the reports. Honey Care need to improve their reporting to ensure all attributable results are counted.

Recommendations
R2 – The milestones for output indicator 1.1 on households should be reduced to 10,000 in 2015, 12,500
in 2016 and 18,750 in 2017. These figures are based on an appropriate proportion of the PCW
milestones. We measure a household in South Sudan as six people so the number of people (x6) should
also be updated in line with these revised figures. These targets still represent a challenge for SSW but
one that it may be able to meet when full reporting is provided by the projects.
Action by: FM Timeline by: 31 March 2016

R3 – The FM should work with Honey Care and South Farmers to ensure they are report all their results
in a timely fashion next year.
Action by: FM Timeline by 31 March 2016

R4 – Progress against output indicators 1.3-1.5 needs to be verified. A verification study is required for
the Century Seeds to understand its development impact and the poverty status of beneficiaries. The FM
and DFID will need to discuss potential budget sources for this work.
Action by: FM Timeline by: 31March 2016

R5 – The log frame needs to be updated taking into account the operating context and milestones
populated for future years. In particular, future milestones for jobs created should be included beyond
the total 50% men and 50% women with youth accounting for 80%.
Action by: FM Timeline by: 31 March 2016

v
 Output Title The business initiatives supported by AECF (and the products and services delivered
through them), are sufficiently commercially viable that the associated development
impacts are sustainable.
Output number per LF 2 Output Score N/A
Risk: High Impact weighting (%): 0%9
Risk revised since last AR? Yes Impact weighting % revised Yes
since last AR?

Indicator(s) Milestones Progress

2.1 Ongoing projects that are profitable 36 N/A Contracts for the five
months from date of contract: companies were signed in
(a) total number; and 2013; this indicator will not be
(b) percentage reported against until 2016.
2.2 % repayable funds due for repayment N/A First loans are not due to be
that are repaid. repaid until the end of 2016.
(a) = cumulative total repayable
grants due (US$); and
(b) cumulative total repayable
grants repaid (US$),
(c) = percentage.
This output is not yet applicable for the SSW so it is currently weighted as 0% and not scored. It will be
weighted as 25% from 2016 and will be reviewed in the 2017 annual review.

Future milestones are in line with contractual agreements for repayable. The 2016 milestone for
profitable companies (two companies) is in line with the PCW logframe. However the expectation that
4/5 projects will be profitable by 2017 is considered to be too high given the operating environment and
when considered against the milestone for the PCW which is for 60% of projects to be profitable.

Recommendations
R6 - It is recommended the milestone for output 2.1 in 2017 is revised down to 3 projects (60%) in line
with PCW.
Action by: FM Timeline by: 31 March 2016

9 Output 2 is not relevant at this stage.

v
 Output Title AECF identifies and supports business initiatives which generate sustained and
positive development impacts and which are innovative.
Output number per LF 3 Output Score B
Risk: High Impact weighting (%): 33%10
Risk revised since last AR? No Impact weighting % revised Yes
since last AR?

Indicator(s) Milestones Progress

3.1 Total number of ongoing projects. 5 5
3.2 Ongoing projects that are marked 3 or
above on the AECF innovation scale: (a) 311 (a) 4
(a) total number; and
(b) percentage. (b) 60%¹¹ (b) 80%
3.3 Ongoing projects achieving high
development impact: (a) 2¹¹ (a) 1
(a) total number; and
(b) percentage. (b) 40%¹¹ (b) 20%
3.4 Ongoing projects where innovation is
recognised: (a) 2¹¹ (a) 1
(a) total number; and
(b) percentage. (b) 40%¹¹ (b) 20%
Output 3 looks at the sustainability and innovation of the projects within the window and overall, the SSW
has broadly met expectations.

The number of ongoing projects (3.1) has met target and remained the same which is probably
unsurprising given the early stage of this window. Projects within the SSW score higher on the AECF
innovation scale (output 3.2) than other windows because many practices which are common elsewhere
remain innovative in South Sudan. South Farmers and Century Seeds are not innovative business
models compared to other AECF windows but in South Sudan they are the first companies of their kind
and therefore scored more highly on the AECF innovation scale. However, there has been less external
communication and discussion of these innovations than anticipated (output 3.4) and fewer projects than
expected have had a high development impact (output 3.3)

This output (3) does not include a measure of country risk which would more accurately quantify the
overall risk of a project. In South Sudan the country risk is high. This indicator should be a composite of
both innovation risk and country risk in order to fully capture the risk involved and therefore the
justification for making a public subsidy to support these businesses.

Recommendations
R7 – The log frame should be updated, the indicators reviewed to ensure they are consistent with other
windows and the local environment.
Action by: FM Timeline by: 31 March 2016

R8 – This output should include a measure of country risk of the projects, for example by using the
World Bank Doing Business ratings. A composite measure of innovation and country risk can then be
used to measure the risk of each project and window. Changes to logframe should be pursued centrally
so all logframes are consistent.
Action by: FM Timeline by: 31 March 2016

10 This weighting will reduce to 25% when output 2 goes live.

11 Milestones were not included in the approved logframe. The GW, AAW and PCW milestones were used for
consistency.
i
 Output Title AECF identifies, selects, contracts and provides managed support to business
initiatives.
Output number per LF 4 Output Score B
Risk: Medium Impact weighting (%): 27%12
Risk revised since last AR? No Impact weighting % revised Yes
since last AR?

Indicator(s) Milestones Progress

4.1 Cumulative number of:
(a) competitions closed; (a) 2 (a) 1
(b) registrations completed; (b) No target (b) 493
(c) applications received; and (c) 200 (c) 187
(b) eligible concept notes marked. (d) No target (d) 116
4.2 Cumulative number of:
(a) full applications (i.e. business plans) (a) 20 (a) 15
submitted; (b) 11 (b) 613
(b) approved; and (c) 55% (c) 40%
(c) approval rate.
4.3 Cumulative number of projects successfully 5 5
contracted.
4.4 Cumulative number of contracted projects 0 0
that closed before their original contract end
date.
4.5 Cumulative project funding pipeline metrics:
(a) new funds available to projects (US$); (a) No target (a) 4.5m
(b) funds committed to projects at IC stage, pre- (b) No target (b) 3.964m
contract signature (US$), (c) 100% (c) 88.7%
(c) % available funds committed; (d) No target (d) 3.4m
(d) funds contracted to projects (US$); (e) 100% (e) 75.6%
(e) % available funds contracted; (f) No target (f) 1.8m
(f) funds disbursed to projects (US$); and (g) 30% (g) 40.4%
(g) % available funds disbursed
The SSW has not held the expected second round competition for new projects. The programme has not
met expectations against this output and revisions should be made to the logframe for future years.

It is worth noting that $670,000 in disbursements have not yet been made to two projects which are
under review. Frontier Microfinance has struggled to raise matched funding and it is not clear whether
the current management has the capacity and drive to implement the business plan that has been
agreed with AECF. Garden of Eden has been the subject of local press reports regarding a conflict of
interest of government officials. The Fund Manager is investigating both these issues. In the event that
this money is not disbursed it may be available for reinvestment in existing grantees or new competitions
or a further reduction in the SSW budget. It would be possible to inject new funds at a low cost to the
AECF as management fees have been incurred on a proportion of funds withdrawn earlier from the
window.

While not all the available funds have been contracted there has been good progress on disbursing the
contracted funds to projects, when considered against the original seven year competition period, with
40% disbursed by the end of 2014, despite two projects having barely started. The disbursement
position at June 2015 had further improved with only 42% of commitments yet to be disbursed (see
below):
Company Grant Loan Total AECF Amount Balance
Approved Approved Funds disbursed to
Approved disburse
South Farmers Company 300,000 500,000 830,000 535,000 265,000
Honey Care Africa Ltd 500,000 750,000 1,250,000 851,892 398,108
12 Output 4 weighting will reduce to 20% when output 2 goes live.
13 6 projects were approved at the investment committee but only 5 went on to be contracted and are active
projects.
x
 Garden of Eden Co. Ltd 75,000 225,000 300,000 80,000 220,000
Century Seed Co. Ltd 200,000 300,000 500,000 450,000 50,000
Frontier Microfinance Ltd 249,600 250,400 500,000 50,000 450,000
Total 1,324,600 2,025,400 3,380,000 1,966,892 1,383,108
% 100% 58% 42%

Recommendations
R9 – indicator 4.1 should reduce the number of competitions planned for future years to 1 and indicators
4.3 and 4.4 should be updated in future to reflect the likelihood of project closures, to the anticipated
20%.
Action by: FM Timeline by: 31 March 2016

R10 – the DFID South Sudan team or alternative administrator (see section D below and
recommendation 11) should consider how any funds which are not expected to be disbursed to current
grantees should be used. Options for the use of these funds include: top ups to existing business (which
may have additional management cost implications), running a small competition for other projects to
apply for in South Sudan; or using the funding for other agribusiness related projects within the PCW or
Agribusiness Window.
Action by: DFID Timeline by: 31 March 2016

D: VALUE FOR MONEY & FINANCIAL PERFORMANCE

Key cost drivers and performance
The competitive nature of the AECF ensures funds are provided to the most commercially viable ideas
that offer a large development impact. Management fees of the fund are fixed at 20% of the funds
allocated for businesses, which is less than many other Challenge Funds. The original management fees
(20%) are split: 4% to AGRA who manage all fiduciary and legal matters; and 16% to the Fund Manager,
KPMG, who conduct the day-to-day operations of the fund. However, following the reduction in the
amount committed to the window by DFID South Sudan, the effective overhead rate for this window
increased to 35%. This reflects the fact that higher management fees had already been charged for the
first two years of the window on the assumption that the value of the window was £6 million and not the
eventual £3.9 million. These management fees cannot be reclaimed. A reduction of £82,000 of
management fees was agreed with effect from 1 January 2015 based on the reduced budget but, it is
probable that the total overhead cost will exceed 35% as not all of the remaining funds will be dispersed
to businesses due to anticipated project failures.

VfM performance compared to the original VfM proposition in the business case
No specific measures on Value for Money (VfM) were set when the programme was originally designed.
VfM indicators were agreed for Agribusiness Africa Window (AAW) and were reviewed in the 2014
annual review. The same method has now been used for all AECF windows. Benchmarks have been
included based on the AECF oldest window (the General Window-GW); two closely aligned but separate
programmes; and the Post Conflict Window (PCW) has been used for SSW given the similar contexts
they operate in.

Assessment of whether the programme continues to represent value for money

Economy
The economy indicators focus on fund management costs and SSW is currently reflecting lower costs
than the benchmarks at present, except PCW where it is 1.5% higher. The total fund management costs
as a percentage of amounts disbursed to grantees against the revised budget is now 46.1%. Eventual
management costs should be in the region of 35%-40%. There will not be additional grantees contracted
for the SSW so the management costs will remain disproportionately high.

Efficiency
Private sector leverage for the SSW is lower than other windows but at a similar level to the PCW, at
1.91 it is also higher than the minimum level agreed in the business case for AAW (1.08). Considering
the fragile and conflicted environment the SSW is working in (South Sudan is the most fragile state in the
world) this is considered to be reasonable.

x
The management fee to grant disbursement ratio shows that the SSW has a much higher ratio than the
benchmark programmes; it is more than double the benchmarks and other windows within the AECF at
85.29%. This is a concern, though it is recognised that the management fees are front loaded in the
AECF and should decrease proportionately over time as the portfolio matures.

Effectiveness
The total development rate of return (DRR) shows the SSW is delivering some development impact;
however, it is substantially lower than all other windows, including PCW which started the year after
SSW.

Overall it is considered that the SSW as a stand-alone window does not represent good VfM. The VfM
indicators need to be tracked carefully to ensure there is no further deterioration in economy and
efficiency indicators, particularly in the area of management fees to DRR. To maximise this, the fund
manager should be encouraged to disperse all of the funds within the window as early as possible (not in
advance of need).

A further issue on value for money relates to DFID's management of this window. It does not appear to
be good value for money to have separate teams managing each individual window and this is
particularly true for a small window such as South Sudan. DFID should look to consolidate the SSW with
another window to improve VfM.

Quality of financial management

The quality of the financial management of the portfolio by AGRA has been poor but has improved
during 2014/15. It was identified as a major risk to the project in the 2014 annual review and a financial
due diligence (FDD) of the AECF was commissioned. The FDD didn’t identify any fraud but did highlight
problems with AGRA’s accounting treatment of funds, inaccuracies and poor systems. Some of the
issues identified had led to cash balances building up in some of the AECF competition windows. AGRA
have invested in the capacity of their staffing since then and have completed a reconciliation of the net
cash position on each window. Donors are continuing to monitor the implementation of the FDD
recommendations through the AECF Committee.

After the 2014 annual review DFID put on hold all disbursements to AGRA pending the FDD results and
confirmation of the true financial position of each fund. The overall net cash position has now been
received from AGRA and DFID have confirmed they will again make disbursements on receipt of
quarterly reports which demonstrate the need within that window for DFID funds. DFID programme
managers have been working closely with AGRA to ensure the quarterly reports they provide are
accurate, confirming all expenditure to date and have realistic forecasts for the next quarter.

Date of last narrative financial report 15 August 2015

Date of last audited annual statement 15 August 2015

Recommendation
R11 – DFID should consider managing the South Sudan window as part of another, larger programme.
This could be achieved through SIDA who would manage the window along with their investment in the
Post-Conflict Window in which case DFID’s project would effectively end. However, this could only occur
once all disbursements have taken place according to SIDA. Alternatively the window could be
managed by another DFID team such as Africa Regional Department (ARD) or Tanzania who have
significant agribusiness investments and engagement with the AECF and have teams already managing
these windows.
Action by: DFID Timeline by: 31 March 2016

R12 – DFID should continue to monitor the VFM to ensure the management fee to grantee disbursement
ratio does decrease
Action by: DFID Timeline by: 30 September 2016

x
E: RISK

Overall risk rating: High

Overview of programme risk

The programme risk was updated at the last annual review to high given the conflict in South Sudan; the
situation has remained challenging and made an already weak system even worse. The risk register has
been updated.

The FM detailed their risk assessment process as part of this annual review, which was updated in 2014.
Improvements include a detailed 1-page summary of risks and progress that is submitted to the
Investment Committee. This contains a summary of progress, challenges and future direction, as well as
assessments on the following risks: business model, cash flow, development impact, reputational,
compliance and character. A detailed window risk and conflict of interest register is also maintained by
the FM; risks are updated at least every 6 months and conflicts of interest as they occur.

F: COMMERCIAL CONSIDERATIONS
Delivery against planned timeframe
As noted in previous years the number of grantees that signed contracts in the first round was just under
50% of the target and disbursements to grantees under those contracts has also been slower than
anticipated, this can be attributed to the conditions in South Sudan but has also been a feature of other
windows within the AECF and has an impact on the costs to run the challenge fund and therefore the
value for money of the programme.

Performance of partnership
The partnership is performing adequately. However more work needs to be done to institutionalise AECF
knowledge and experience beyond high level management and to increase longevity of AECF beyond
current partners.

Asset monitoring and control

Reporting by the Fund Manager and AGRA on DFID’s capital is deemed as adequate.

Recommendation
R13 – the DFID Accountable Grant arrangement with AGRA ends on 31 December 2015. The
agreement should be extended for one year to allow time for DFID and the AECF to reduce the
management burden of this window. If this can be achieved then a further extension should be granted
to the end of the seven year lifespan of the window.
Action by: DFID Timeline by: 31 December 2015

G: MONITORING & EVALUATION

Evidence and evaluation
The mid-term evaluation of the AECF has recently been completed by Ecorys and a draft of the report's
conclusions was available for the annual review team along with case studies performed for 32 projects
across the portfolio. The final evaluation will take place in 2018 and will be based on a continuation of
the case studies already undertaken along with 10-15 quantitative studies.

The mid-term evaluation confirmed the generally positive development benefits of the AECF but raised
questions regarding the additionality and sustainability of a proportion of the investments made by the
AECF. These concerns and the other general findings from the evaluation will be built into the design of
a strategic framework for the next phase of the AECF which will be completed by March 2016.

Enhanced monitoring work has been commissioned for existing projects to undertake verification studies
on the top 25% of the projects within the whole portfolio. The AECF Committee has approved a proposal
from the Fund Manager but there are uncertainties regarding how the project will be funded. AGRA is
x
continuing to work with donors to resolve the source of funds issue so that enhanced monitoring work
can be undertaken for the projects which account for the majority of the AECF’s development claims. If
this is not resolved, targeted verification work on the high performing projects should be commissioned
by DFID South Sudan and the Fund Manager. A decision will need to be taken about how to fund this.

Monitoring progress throughout the review period

A new harmonised logframe has been agreed with standard indicators across all windows in DFID to
enable better monitoring. This review has drawn out some recommendations for future milestones.

Field visits have continued to be restricted. The Fund Manager’s normal schedule is to visit in April/May
and at the end of October. However the conflict has impacted on monitoring reducing access to more
insecure locations. The FM has visited all projects twice in this period but has only visited 2/5 projects in
the field because it has been too volatile for extensive travel outside of Juba. Partners are required to
report to KPMG in January and July and KPMG also conducts informal monitoring and conversations
with partners on a regular basis.

Recommendations
R14 – DFID South Sudan to keep in view whether targeted verification work will be needed.
Action by: DFID Timeline by: 31 March 2016

x
H: ACTIONS
A summary of the proposed actions arising from this review is provided below.

Action Responsible Deadline

R1 - The FM should continue to review the Frontier Microfinance and FM 31 March
Garden of Eden projects and should determine by end March 2016 2016
whether it is likely they will be in a position to progress in the next year. If
these projects will not progress sufficiently they should be closed. If the
projects do proceed, the FM should report to DFID on the outcome of any
outstanding due diligence findings prior to proceeding with disbursements.
R2 – The milestones for output indicator 1.1 on households should be FM 31 March
reduced to 10,000 in 2015, 12,500 in 2016 and 18,750 in 2017. These 2016
figures are based on an appropriate proportion of the PCW milestones.
We measure a household as five people so the number of people (x5)
should also be updated in line with these revised figures. These targets
still represent a challenge for SSW but one that it may be able to meet
when full reporting is provided by the projects.
R3 – The FM should work with Honey Care and South Farmers to ensure FM 31 March
they are report all their results in a timely fashion next year. 2016
R4 – Progress against output indicators 1.3-1.5 needs to be verified. A FM 31 March
verification study is required for the Century Seeds to understand its 2016
development impact and the poverty status of beneficiaries.
R5 – The log frame needs to be updated taking into account the operating FM 31 March
context and milestones populated for future years. In particular, future 2016
milestones for jobs created should be included beyond the total 50% men
and 50% women with youth accounting for 80%.
R6 - It is recommended the milestone for output 2.1 in 2017 is revised FM 31 March
down to 3 projects (60%) in line with PCW. 2016
R7 – The log frame should be updated, the indicators reviewed to ensure FM 31 March
they are consistent with other windows and the local environment. 2016
R8 – This output should include a measure of country risk of the projects, FM 31 March
for example by using the World Bank Doing Business ratings. A composite 2016
measure of innovation and country risk can then be used to measure the
risk of each project and window. Changes to logframe should be pursued
centrally so all logframes are consistent.
R9 – indicator 4.1 should reduce the number of competitions planned for FM 31 March
future years to 1 and indicators 4.3 and 4.4 should be updated in future to 2016
reflect the likelihood of project closures, to the anticipated 20%.
R10 – the DFID South Sudan team or alternative administrator (see DFID 31 March
section D below and recommendation 11) should consider how any funds 2016
which are not expected to be disbursed to current grantees should be
used. Options for the use of these funds include: top ups to existing
business (which may have additional management cost implications),
running a small competition for other projects to apply for in South Sudan;
or using the funding for other agribusiness related projects within the PCW
or Agribusiness Window.
R11 – DFID should consider managing the South Sudan window as part DFID 31 March
of another, larger programme. This could be achieved through SIDA who 2016
would manage the window along with their investment in the Post-Conflict
Window in which case DFID’s project would effectively end. However, this
could only occur once all disbursements have taken place according to
SIDA. Alternatively the window could be managed by another DFID team
such as Africa Regional Department (ARD) or Tanzania who have
significant agribusiness investments and engagement with the AECF and
have teams already managing these windows.
R12 - DFID should continue to monitor the VFM to ensure the DFID 30

x
 management fee to grantee disbursement ratio does decrease September
2016
R13 - the DFID Accountable Grant arrangement with AGRA ends on 31 DFID 31
December 2015. The agreement should be extended for one year to allow December
time for DFID and the AECF to reduce the management burden of this 2015
window. If this can be achieved then a further extension should be granted
to the end of the seven year lifespan of the window.
R14 - DFID South Sudan to keep in view whether targeted verification DFID 31 March
work will be needed. 2016

Review Process
The review process was completed by Simon Calvert and Katie Wambui.

The review team also spoke to the AECF funded projects - Honey Care Africa (see annex 2); the Fund
Manager; and the DFID Livelihoods Adviser and Programme Manager in DFID South Sudan.

The main sources of information for this Annual Review are:

 How to Note: Reviewing and Project Scoring.

 AECF Fund Manager Year 2013/14 Annual Performance Assessment
 South Sudan Window Annual Report July 2014 –June 2015 (Quest 5194503)
 AECF MTE Case Studies Report (Quest 5194502)
 AECF Portfolio Report (http://aecfafrica.org/windows/south-sudan-window/portfolio)
 AECF Annual Report (Quest 5194503)
 South Sudan Window Business Case equivalent (Quest 3286490)
 Due Diligence Report by Nathan Associates (Quest 4153345)
 AECF Revised Logframe (Quest 5194500)
 2014 AECF Annual Review (Quest 4798855)

x
Annex 1: Actions from previous Annual Review

Recommendation Action
A no-cost extension should be granted in A no-cost extension was granted for one year, to
recognition of the fragility of the environment, the December 2015, to allow the grantees more time
lack of time the businesses have had since signing to develop but ensure that DFID could take a
contracts, the average time taken for SMEs to further view on the VFM of this window before
become profitable in neighbouring, less fragile deciding whether to extend further.
states, and the negative impact of the outbreak of
conflict upon the enterprises. The review finds that The logframe was updated with standard indicators
DFID should also give itself more time to assess across all DFID windows, further recommendations
the impact and value of the AECF SSW on the future milestones have been made as part
programme in a fragile state context. Additionally, of this review.
non-extension would likely mean that several of the
businesses supported over the past two year
would fail. The no-cost extension should also
enable greater flexibility in relation to achievement
of targets and milestones.
With grant disbursements having only reached the See above.
half-way point, this factor should be considered
when determining the duration of any no-cost
extension for the programme, including accepting
that the ability of business partners to provide
matched funding may require an extended time
period. This review recommends a no cost
extension of at least another full reporting year.
Fund Manager to continue to follow up on The AECF relies on local capacity (valuation
consistent valuation of in-kind assets, addressing experts, auditors etc.) to prepare valuation reports
concerns from business partners who have been of assets to be used as in-kind contributions as
unable to complete this exercise, particularly when part of the matching funds. The grantee
cash-flow has been problematic. is responsible for sourcing the valuation expert,
however the AECF approves the final valuation
report. 
KPMG and AGRA to resolve the question on the Overall, the AECF is looking at improving its
use of the ring-fenced budget for dissemination of monitoring and learning through the discussions
best practice. This is still action pending from the of Monitoring and Results Measurement
recommendations of the last Annual Review. assignment. These discussions are led by DFID
centrally. In addition, the FM has worked with a
researcher from Durham University looking at the
poverty profile of beneficiaries.
The AECF innovation ratings system to be The ratings are updated in the 6 -monthly Site Visit
reviewed to allow for amendments during the Reporting. The synthesis of the changes in the
lifetime of the project rather than as a fixed one-off innovation scale might not have been sufficient in
rating. the reporting regarding the South Sudan Window
which the FM has worked on improving.

x
Annex 2: AECF Funded Project

Honey Care Africa

Business model and development impact
 Honey Care is a honey purchasing business based in Kenya which has expanded into South
Sudan, they support work with communities to improve the productivity of their existing hives,
supporting: hive management, processing and marketing.
 The number of households reported to have benefited in 2014 is 284 (discussions with
Honey Care suggested the households benefitting is a lot higher, they claim to have 1,200
households that they work with, unfortunately the FM was not able to verify those figures
and have asked Honey Care to improve their record keeping of purchases from
households in terms of volume). Based on the verified figures the cumulative net benefit
at December 2014 was $18,479. However, as noted above the actual benefit is likely to
be substantially higher.
 The company have faced a number of challenges:
o Working in a new country with very small manufacturing and export industry, in
many cases they have found they are testing the systems the country will use for
other companies: becoming the first company to receive a certificate of conformity
and origin South Sudan which took 4 months (now only takes 1 week) and finding
out what the export tariffs would be. 90% of the honey they buy from their farmers
is exported.
o The conflict which started in December 2013 has restricted their progress and
plans to expand, they have now developed a new strategy which involves
diversifying their products, creating peanut butter and other products.
o The MTE highlighted: (i) other buyers coming in and offering higher prices
affecting Honey Care, the company felt that other buyers may come in once with
higher prices but they wouldn’t be able to afford to keep those prices high with the
export tariffs etc. and Honey Care are planning to be there for the long term; and
(ii) trees used to make traditional hives in decline, Honey Care explained that
there are large quantities of traditional hives already in existence and they are
helping the farmers utilise them all while also trying to encourage modern hives.
AECF experience and financing
 In last year annual review it was noted that Honey Care expected to break even in 2015
with their projected volumes. Their full year report has not yet been received but from
discussions on progress it is unlikely they will have achieved the level required. Honey
Care is not yet profitable in either South Sudan or its original operation in Kenya which
started 15 years ago. In South Sudan, they believe they will need to buy 85 metric tonnes
of honey to break even and the original projection they expected to achieve that level in
2017.
 They have been able to get other funding including debt funding from Root Capital, this is
for the operation as a whole, not just for the South Sudan project. They are continuing to
face difficulties obtaining funding for the South Sudan activities.
 The company is very happy with the support received from the FM, they have appreciated
their understanding of the context in South Sudan and flexibility agreeing the new strategy
that Honey Care have developed to adapt to the situation in South Sudan.
 They did raise the number of reviews taking place (Fund Manager monitoring, evaluation,
donor annual review) at the moment and while they understand why they are taking place
it does place considerable burden on the company.

Century Seeds
This project was set up to provide farming communities with high quality seed varieties to promote food
security – multiplying seed (for seed not grain). They originally intended have smallholders as
outgrowers but this has proved not possible due to lack of capacity / professionalism. The inclusion of
larger farmers as outgrowers is likely to have negatively affected the poverty impact of this project. In
2014 they managed to shell, clean and treat 92MT of seed (93 MT in 2013, reported in the 2014 annual

x
 review). Century Seeds have been distributing locally which will deliver impact but this hasn’t been
captured in the way they are reporting at the moment, the FM believes they could get secondary data
from the NGOs who are their clients and will work with them on this. The project is already profitable and
it believed to be a viable business model with lots of opportunity given large areas of uncultivated land
but in order for them to scale up they would need more fiscal investment (they are currently cleaning the
seeds by hand).

South Farmers
This project aimed to establish a day old chick hatchery for commercial chicken rearing. They have
suffered with difficulties sourcing foreign exchange, being dependent on imports of fertilised eggs and
chicken feed. South Farmers are trying to set up a parent facility to fertilise the eggs and reduce the
imports. Some NGOs are now starting to make orders and they are also exploring other markets in
discussion with the Ministry of Defence and opportunities in Rwanda where there is a deficit. The project
is trying to balance benefitting the poor in South Sudan and keeping the business alive. Results to date
are not fully reported as the project has not had time to complete their report while trying to keep the
business afloat. The FM is closely monitoring the situation.

Frontier Microfinance
This company was set up to launch an agriculture based micro-finance product, in a second tier town in
South Sudan called Torit. They have only succeeded in attracting 500 clients in 2 years of operation and
have struggled to raise matched funds. The organisation has been faced with capacity constraints and
no reporting has been submitted in June 2014. It is possible that the AECF will withdraw funding.

Garden of Eden
Garden of Eden proposed to produce maize on its farms and also buy from smallholder farmers trained
and supported by the company to feed its proposed milling facility. The company intends to process,
package and take the finished products to the market. The project has been delayed following the
conflict which led to the need to relocate the proposed maize mill. The new site has raised some due
diligence concerns to do with inappropriate political links, until they are resolved the AECF will not be
able to provide any further funding to them.