1. About AECF

AECF (Africa Enterprise Challenge Fund) is a leading non-profit development organization that supports innovative enterprises in the agribusiness and renewable energy sectors with the aim of reducing rural poverty, promoting resilient communities, and creating jobs.

We catalyze the private sector by surfacing and commercializing new ideas, business models and technologies designed to increase agricultural productivity, improve farmer incomes, expand clean energy access, reduce greenhouse gas emissions, and improve resilience to the effects of climate change. We finance high-risk businesses that struggle to access commercial funding; we are committed to working in frontier markets, fragile contexts, and high-risk economies where few mainstream financing institutions dare to go.

To date, we have supported over 400 businesses in 26 countries in Sub-Saharan Africa, impacted more than 30 million lives, created over 27,000 direct jobs, and leveraged US $771 million in matching funds.

1. Background Information

Program Title: Sudan Catalyzer

Duration: 18 months for Phase I

Sectors: Agriculture, Agribusiness, Renewable Energy, Digital Technology, and IT

Funding Partner: KfW

With an area of approximately 1.9 million square kilometers, Sudan is the third-largest country in Africa and home to a rapidly increasing population of 41 million. Demographic changes are characterized by rapid urbanization, with more than a third of the population now living in urban areas. Rural-urban migration is being driven in part by conflict, drought, and desertification, as well as by the search for better economic opportunities and access to basic services. The current conflict is leading to significant internal and external forced displacement.

The economic and financial sanctions previously imposed on Sudan held back the emergence of the private sector through restrictions on trade and financial transactions. Additionally, these sanctions have constrained the economic activity of enterprises by limiting their access to international markets.

In April 2023, the country was plunged into violence between the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF) militia that was in the process of being absorbed into a unified military. This has led to extensive, but so far regionally localized, destruction of economic and social infrastructure along with forced migration, human rights abuses and economic collapse. Many SMEs have been cut off from markets and access to finance and have seen key staff leave and assets destroyed. Of those that remain, many have had to relocate from their original locations to establish new operations in safer parts of the country. Both companies that are relocating and existing companies require access to finance and advisory support to assist them in re-tooling their business systems, markets, and suppliers to the new realities that they face.

Even prior to this outbreak of violence, much of the optimism of the peaceful 2018 revolution has been rolled back with the return of military rule in October 2021. The power structures of the former regime have largely returned, with the security structures dominating the business sector. As a response to this, most donors and other international partners have substantially reduced or ceased their engagement with the country, leading to external assistance being cut off and significant impediments to trade and other external engagements with the country. Despite these challenges, some segments of the private sector manage to navigate the highly politicized ecosystem without being completely subverted into the patronage networks of the ruling military elite. Any support to the private sector must, however, take into careful consideration the reality that even if the government is not directly involved there is the risk of manipulation by the existing power structures.

The removal of Sudan from the US list of state sponsors of terrorism and the normalization of the ties with the international community raised hoped of an economic resurgence that has largely been dashed by the military takeover of the civilian administration in late 2021. Most international donor partners and private investors remain unwilling to engage with the current political leadership and invest in the country. This means that the private sector and SMEs in Sudan operate within a challenging macro and micro economic environment. At the macro level, regulations of doing business continue to constrain the private sector with Sudan’s ranking in the 2020 World Bank Doing Business report being one of the lowest, 171 out of 190 economies. This is additionally complicated by a highly nepotistic business landscape where well-connected individuals and entities connected to the state dominate key sectors; a largely non-functional public administration; and collapsing economic environment of hyperinflation and currency devaluation. At the micro level, companies that are not well-connected struggle to raise formal finance, exposure to international markets and best practices is limited and staff capacity is low. Modern advisory services to address these weaknesses remain nascent.

Investing in SMEs as a short- and longer-term solution to economic development in Sudan

Despite the challenges that Sudan is experiencing in private sector development, the country presents numerous investment opportunities and there is a growing entrepreneurial perspective particularly with the youth[1]. The government of Sudan was a pioneer in the field of microfinance and banking sector legislation directs banks to provide short term funding for start-ups and early-stage enterprises. In addition, new business incubators and innovation labs have sprung up responding to a much-needed demand to solve some of Sudan’s biggest problems by connecting the country’s local talent to the global entrepreneurship community. Thus, there are opportunities for Sudanese entrepreneurs and startups in different stages to learn and attract investment. Several donors (UNDP, AfDB, UNIDO, World Bank, as well as bilateral assistance from UK, Germany, The Netherlands and others) have and/or are investing in public-private sector partnerships in the country, including supporting programmes targeted at micro-entrepreneurs and working to create a more enabling policy and operating environment for the private sector and particularly SMEs. This includes a joint initiative between UNIDO-ITPO and IFC on the development of an SME law, national SME strategy and an SME investment fund; the establishment of an Enterprise Development Committee by UNIDO and Accelerator Labs by UNDP, GIZ and the Qatar Fund. A survey conducted by UNDP in July 2019 found that youth employment and partnering with the private sector were among the key priorities for the development of the country.

Many of these initiatives have ceased or been scaled back with the return of the military regime and the return to open conflict in 2023, leaving SMEs at all levels with very limited access to finance and constrained abilities to source the kind of advisory support necessary to build a thriving modern economy. Given the importance of SMEs in the private sector to bring modern technological and business innovations to a society that has been closed for a generation, it is essential that those companies with the potential to scale and which are not connected to the military regime are supported.

The Sudanese private sector landscape can be split into four broad categories:

Survival or traditional micro enterprises providing subsistence style existence for their owners. These businesses are often formed from traders moving to simple manufacturing using outdated technologies to produce low quality outputs for local markets. Despite being the largest proportion of SMEs in the country, they are self-financed and operate largely independently of the regulatory structures. They have little capacity and willingness to expand and would be unable and unwilling to take on external concessional capital from the Sudan SME Catalyzer.

Independent SMEs driven by the middle class and operating emergent, professional enterprises that are unconnected to the ruling elite and face unfair competition from other businesses that are able to exploit these connections. They have solid education and business acumen but still lack access to the structures of a functioning market economy, such as formal finance. This group represents a key target for the Sudan SME Catalyser, particularly in the smaller ticket sizes.

Family conglomerates of well-established multi-generational private enterprises that have found ways of operating in the complex political environment yet managing to maintain largely free of its most pervasive effects. These businesses have large and diverse business structures and have family-based management with international exposure and access to capital and are most likely to be developing innovative business ideas. They have the potential to take on larger sized tickets and are more likely to be able to provide matching funds, but care must be taken to ensure that they are operating independently of the regime.

Politically connected companies represent most of the largest private and state-owned enterprises and parastatals in the country. They are completely controlled by the political and military elite who use public resources to generate advantages in many aspects of business, from using public assets for private gain to accessing scarce resources and navigating the political and administrative landscape. These companies are more active in key sectors of the economy that the Sudan SME Catalyser is deliberately avoiding but are also present in the key sector of agriculture. They will be explicitly avoided in the selection process through robust due diligence.

Challenges facing SMEs.

SMEs in Sudan face a broad range of challenges that can be summarized around:

• Business Environment caused principally by the underdeveloped enabling environment including poor physical infrastructure, lack of market assessment and market infrastructure, high operating costs and unequal business access;
• Legislation, where the regulatory framework does not yet sufficiently support the private sector and there is a lack of institutional structures to support SMEs and their role in the economy.
• Access to Finance in an environment of hyperinflation and rapid devaluation of the Sudanese Pound (SDG) against major currencies and with an emphasis on capex through Islamic finance, leading to high cost of capital and limited understanding of where capital can be sourced from.
• Capacity Building due to generational underinvestment in education and lack of exposure to international standards and good practice in business.

All these challenges have been exacerbated by the ongoing conflict with most if not all centrally located structures in Khartoum destroyed and only limited functionality in other parts of the country.

In response to KfW’s intention to engage in private sector development in Sudan to create employment and increase incomes and the availability of goods and services in inclusive business models, AECF will implement a two-pronged approach:

1. Recognizing the limitations in available microfinance and the distinct challenges facing SMEs without connections to the ruling elite, AECF will provide appropriate financing through the design of a context-specific Challenge Fund model – the Sudan SME Catalyser – in areas of Sudan not currently directly affected by conflict for non-repayable catalytic investment grants appropriately structured for the challenges currently facing SMEs in Sudan. This will enable dynamic businesses to bring in new technologies and services, scale existing businesses, or relocate enterprises from areas affected by fighting that will enable new sectors to develop, create employment and promote more inclusive business models.
2. Given the limited experience and capacity of SMEs to apply for and implement grant-based financing as well as adopt modern business practices and processes, AECF will provide advisory services to the SMEs that it supports. This will build the capacity of SMEs to effectively apply for and implement the financial assistance offered by the programme as well as help funded companies overcome operational and business challenges.

The Sudan SME Catalyser will be funding enterprises in two cohorts – smaller, newer businesses that are more likely to be owned by young people or women and which have a product in the market, 3-10 employees and turnover of up to €100,000; and larger, more established enterprises with 10-50 employees and turnover of up to €1m.

Key stakeholders

MFIs and banks – Although the main actors in the banking sector based in Khartoum are no longer functioning, others are operating with for example, Bank of Khartoum re-established in Port Sudan. The situation on financial transfers remains fluid and uncertain, with alternative financial structures being developed to facilitate bringing money into the country. Where possible, AECF will collaborate with a local banking partner to facilitate transactions and due diligence of grantees but will also engage with other structures as necessary.

Incubators and BDS providers – through this tender and others, AECF will engage with local BDS providers that retain capacity and operational presence in the country after the start of hostilities in April 2023. They will also provide hosting arrangements that will facilitate recruitment of AECF staff in Sudan, support delivery of some components of the programme, provide access to the SME marketplace, provide training and enable AECF to have a visible presence in the country without formally registering or without putting headquarters staff into the country. Given the shorter duration of the emergency financing window, implementation of some tasks related to competition and investment management as well as the provision of business advisory services (the latter the subject of this tender) will also be undertaken together with locally recruited partners.

National and regulatory authorities – AECF will operate at arm’s length from the national and regulatory authorities. The lack of diplomatic missions and general inaccessibility of Khartoum should limit the level of engagement needed with state structures.

Industry representative bodies – AECF will operate at arm’s length from industry representative bodies which are likely to be compromised by some form of engagement with the state and the current military regime. It is also important to maintain the perception of independence from formal governance structures in the country.

Diplomatic structures and donors – AECF will rely on key diplomatic missions when they begin to become available to both provide credentials to the institution in its operations in Sudan but also as a conduit for engaging with government on regulatory issues that may be affecting grantees. These organizations also represent technical implementing partners and could well be interested in also engaging in the fund with their own capital. Seeking to leverage the KfW financing with other donors is an important early priority for AECF.

1. Program Approach

AECF will deliver an integrated financing solution for enterprises and business models that have the potential to catalyse job creation and the provision of improved products and services to low-income households in Sudan. In this section, we outline the delivery model for this Challenge Fund including:

– Type and structure of investment finance offered.

– The competition approach and the process to select and on-board grantees.

– Technical assistance at pre-competition, pre-investment and post investment points.

– Performance management, including risk mitigation and inclusion.

Financing of SMES through the design of a context-specific Challenge Fund model for catalytic investment grants.

The AECF’s main delivery model, the Challenge Fund, identifies market failures within a given context and engages the private sector to provide market-based development opportunities for underserved communities. AECF will select and invest in Small and Growing Businesses that do not have privileged access to financing and will bring a high potential to provide innovative solutions aimed at addressing the challenges to the ongoing emergency, sector growth and contributing to improving lives through job creation, increased incomes and increased access to products and services. The emergency financing facility will last for an initial 18 months and will therefore utilize relatively small ticket sizes to allow for effective absorption.

Given the need to rapidly mobilise funding and minimize administrative demands, AECF will offer only non-repayable grants for this initial phase with an intention to establish the systems and structures to be able to offer repayable grants in future financing rounds. Repayable grants offer a greater level of flexibility and reduce the potential to distort markets but require a substantial additional operational infrastructure.

For this component of investment financing, which considers only the first phase of €12.5m, AECF will establish two Funding Windows which will operate through a single competition on a rolling basis as detailed below:

1. Emergency Working Capital Window (SBW): AECF proposes to use this Funding Window as an emergency financing initiative to support at least 60 small businesses with investment grants of between €50,000-€250,000 (average of €100,000) using a milestone-based funding approach. The objective of these grants will be to provide much needed capital to small businesses who have not been able to access formal sources of capital in the past and incentivize them to relocate, rebuild and scale-up operations to bring private sector benefits to their communities.
2. Growing Business Window (GBW): This Funding Window will target existing growing businesses that require larger sums of money for investment in new operational capital as well as working capital to scale or re-build existing enterprises with the potential for significant job creation or reshaping key sectors of the economy. The Growing Businesses Window will be a milestone-based financing and will offer at least ten grants ranging between €250,000-€750,000 (average of €400,000) based on the size of the businesses (revenues and employees), their ability to absorb funds, scale of proposed project and validated impact potential.

Below are the desired outputs for the programme (based on the projected initial contribution of €12.5m):

• At least 60 small businesses and 10 growing businesses funded to scale creating economic opportunities in the priority sectors of agriculture, renewable energy and information technologies.
• At least 100 applicants from cohort B will be provided with pre-competition assistance to help them construct quality proposals;
• At least 50 of the 60 small businesses will be provided with post contracting TA from programme staff, AECF Academy or other forms of advisory support available under the programme;
• All 10 growing businesses are supported with wholesale technical assistance as either a sequential or concurrent advisory support to the AECF Academy;

Surfacing innovative enterprises

The Sudan SME Catalyser will be open to SMEs from targeted areas across Sudan that are free of conflict at the time of the competition launch. This indicatively includes areas in the East of the country such as Kassala, el Gadarif and Port Sudan that have access, high potential for the target sectors (particularly agriculture) and availability of SMEs, BDS providers and other support structures. The initial competition process will inform AECF of levels of interest in different parts of the country. This will allow for both the concentration of investments in particular regions for efficient management and the direction of additional support to surface applications from areas that are underrepresented.

1. Scope of Work

A key area of operational support to AECF’s investees, beyond financing, is capacity building. The companies that AECF funds are likely to have relocated from other areas of the country and will need significant advisory support in re-establishing operations, re-building production, finding new suppliers and new markets. Local companies will also have to re-design business models that have relied on exporting raw materials to processing infrastructure in Khartoum that is no longer available.

AECF invites applications from experienced implementing partners in Sudan to collaborate on providing business development advisory services to the companies selected for financing by AECF. This work is separate to, but in support of, the already contracting management support that is being provided to assist AECF with the in-country delivery of the competition and investment management process.

As part of the due diligence process in investee selection, AECF will undertake a detailed training needs analysis of each company. Those that are approved for investment will be required to enter into an intensive capacity building programme to help them overcome critical challenges in their business operations. This training will take a mixture of one on one and group training services in a wide range of business sectors, including:

• Financial and credit management and control systems, including internal audit
• Human resources management
• Product Market Fit – Marketing and product development (Business Model) including Go-To-Market Strategies
• Sales and Marketing Strategies
• Customer Management Strategies
• Sourcing of inputs and establishment and management of robust supply and distribution channels including related logistics
• Inventory and procurement management.
• Data Management
• Regulatory, compliance and legal issues
• Import/export processes and procedures.
• Management and governance
• ESG and Gender inclusion

Applicants should make provision for an average of 20 days of one-on-one technical assistance with each of the 70 investees that will be contracted under this element of the programme. This assistance will be provided at the premises of the recipients. There should also be provision for at least eight group training sessions of one day each, including training facilities.

1. Duration of the Contract

The service will last 12 months, with the possibility of cost-based extension.

1. Qualifications and Experience
   • A legally registered entity in Sudan with a minimum of 5 years of experience in the provision of business advisory services to SMEs
   • Able to show that they can recruit and deploy a range of administrative and technical competencies, including financial due diligence, business advisory services, communications & marketing, legal, ESG/Gender/Impact and agricultural, renewable energy and information technology advisors.
   • Able to operate in the target regions of Sudan.
   • At least 5 years of experience in working with donor funded economic development, agriculture/rural development programmes funded by donors.
   • Comprehensive understanding of the local political and operating environment, including appreciation of practical and pragmatic operational processes in the current unstable conditions
   • Flexible and able to react quickly to a rapidly changing environment.
   • The team leader should have at least 10 years’ experience in advising SMEs on business development, administration, financial systems etc, including managing teams of experts. They should have at least a first degree.
   • Business development advisors should have at least 3 years’ experience providing financial and administrative support to SMEs and should have a degree in accounting, finance, economics, business or similar.
2. Evaluation Criteria

The consultant(s) or firm will be evaluated based on the below preferential point system scoring. An evaluation committee will be formed by the AECF and shall include employees. All members will be bound by the same standards of confidentiality. The bidders should ensure that they fully respond to all criteria to be comprehensively evaluated. The AECF may request and receive clarification from the bidding firms when evaluating a proposal.

In deciding the final selection of qualified bidder, the technical quality of the proposal will be given a weighting of 70% based on the evaluation criteria. Only the financial proposal of those bidders who qualify technically will be opened. The financial proposal will be allocated a weighting of 30% and the proposals will be ranked in terms of total points scored.

NO

CRITERIA FOR ASSESSMENT

SCORE

TECHNICAL PROPOSAL

70

An understanding of the TOR

Demonstrate understanding of the service

5

Demonstrate understanding of the current operating environment and challenges

5

Experience

Demonstrate understanding of the local SME ecosystem, challenges faced and mechanisms for addressing them

10

Demonstrate relevant experience of providing similar services to donor partners (minimum 5 years)

10

Demonstrate the ability to recruit a range of technical competence to support implementation

10

Methodology and work-plan that will deliver the best value on the assignment

Outline a methodology that illustrates how services will be provided in an effective and efficient manner

10

Qualification

Qualification and experience of the team that is executing the assignment

20

FINANCIAL PROPOSAL

30

Clarity, relevance, reality to market value/ value for money of cost of services

30

1. Proposal submission
   • Registration and other relevant statutory documents with the Sudan government.

Interested and qualified institutions and individuals are invited to submit their proposal(s) including of the following:

• The financial proposal clearly showing the budget cost for the scope of work (to be submitted in a separate document from the Technical proposal
• The Financial proposals shall be in EUR and should include all applicable taxes quoted separately.
• If taxes are not mentioned in the financial proposal, The AECF shall consider that they are included in the prices provided.
• Technical and Financial proposals will need to be submitted as separate documents. Financial proposals will not be opened until the conclusion of the technical evaluation and then only for those proposals that are deemed qualified and responsive.