Africa: Agri-projects at 'unprecedented' levels

Buiness Day (South Africa) | 1 September 2010

Africa: Agri-Projects at 'Unprecedented' Levels

Edward West

Johannesburg — THE number of investment projects in the agricultural sector in sub-Saharan Africa is at "unprecedented" levels, Paul Runge, the MD of Africa Project Access, said at an agriculture investment conference in Durban yesterday.

"I have never seen a project flow as we have it now," he said. His company provides assistance to greenfield and brownfield projects in sub-Saharan Africa.

Mr Runge said it is inexplicable that agriculture investment forms such a low component of the average development finance institutional portfolio, at about 7%, given that there is such a high demand for investment.

He said countries should adopt a more targeted approach and agricultural investment should be focused on products and areas where the country has the ability to add value.

Agricultural & Industrial Marketing Company MD Anton Scheepers said international buyers are constantly seeking agricultural products in the region, but most production is locked into sale agreements.

"There is huge demand for agricultural products from all areas of Africa," Futuregrowth Asset Management portfolio manager James Howard said.

There is also "huge availability of funding" for agricultural products through development finance institutions, private equity investments, pension funds and other investment vehicles.

He said the right structure of investment funds - which includes having a specific mandate, good governance, a business model with targets that can be proven and a strong investment team - is essential to attract funding, "otherwise the money won't flow".

London-based Silk Invest investment director Patrick Landi said Africa is not a must for overseas investors, but they do find it their "most exciting investment". He said a great deal of apprehension about investing in Africa is unfounded, based on stereotyping of problems on the continent in the 1980s and 1990s.

He said while corruption is a problem in Africa, it is "manageable" and is just as prevalent in Russia, Brazil, China and parts of Europe.

Mr Landi predicted there will be a lot more investment in agriculture in Africa, while Dalberg Global Development's Angela Hansen said agricultural commodity prices are likely to remain strong over the long term in spite of a volatile exchange rate market.

Neil Crowther, CEO of investment firm Chayton Capital, said private equity investment in Africa's agriculture sector generated among the highest returns last year. The opportunities are not hard to understand, he said, and there is a relative abundance of projects to invest in, but few of these have structures that meet the needs of overseas investors.

Investors need to be continuously educated about Africa, he said, citing himself as an example of a well-educated US citizen who four years ago would not have been able to locate Zambia on a map.
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Source: Business Day

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