INSEAD | 2013
Duxton Asset Management and its Investment in Tanzanian Rice Farming
A specialist agribusiness investor is evaluating an equity investment in rice farming and processing in Tanzania, Africa. Duxton Asset Management has a business strategy of investing in and operating agricultural assets, many of which are in developing or even frontier markets. The case discusses the complexities of investing in an atypical multi-dimensional asset and allows for an exploration of the fast-growing space of impact investing.
This case touches upon several relevant aspects of alternative private equity (PE) strategies:
• Agriculture has been an underinvested asset class for some time. It is currently not well understood by mainstream investors yet is becoming increasingly important in the context of a growing world population facing resource constraints. In addition, direct investments into farmlands require specialized knowledge and expertise.
• Farmland investments are intricately connected to environmental, social and corporate governance (ESG) issues, which the case highlights through references to SRI (socially responsible investment) and Duxton’s approach to ESG. One of Duxton’s strengths lies in its responsible and proactive management of ESG risks.
• The destination here is Tanzania, a frontier market for private capital investments. Local dynamics are promising and rewards can be high, yet many challenges exist. Few investors have the ability to spot and manage operating assets in this part of the world. Foreign investors are intrigued but not completely convinced of Africa’s potential to compensate for the risks involved.