An Integrated Portfolio Approach to Secure Viable Long-Term Investment in Commercial Farming in Africa

    While it is acknowledged that Africa has enormous potential for commercial agricultural development as the continent with the greatest amount of available arable land in the world, the major limiting factor has been the generally low number of viable enterprise proposals over the past 15 years to attract and secure adequate investment levels from a range of sources (venture capital, private equity, sovereign wealth funds, and development finance institutions /commercial banks). It is now widely accepted that capital availability per se has not been, and is not, the overriding constraining factor to investment in either large scale, or intensive medium scale, commercial farming.

    Investors and agricultural experts agree that, apart from land, labour and capital, one of the most critical missing components to build confidence in undertaking such investments has been in the area of farm management – the professional management and technical skills to oversee and manage large-scale farm enterprises and workforces competently and cost-effectively to achieve required outputs, margins and sustained returns on investments. Case studies of effective current commercial farming performance in African countries underscore the crucial importance of skillsets and proven competencies in farm management.

    “There is a shortage of commercial managers to oversee operations. 70% of companies felt their investment was not supported by effective national policies for trade, agriculture and investment. Too often, policies have not been sufficiently anchored with the private sector”                  

    Grow Africa Survey, Enabling Environment for Agriculture, 12 African Countries. 2016

    In the SADC region, there are a number of countries with large areas of arable land that have yet to be brought into viable commercial production despite rapidly growing populations, stagnant outputs from smallholder subsistence farming, and perennial risks to assuring national food security. Private investors will only commit to commercial enterprises where there are effective national policies for trade, agriculture and a wider enabling environment for investment in business.

    Countries confronting those challenges include Angola, Mozambique, Malawi, and Zambia. Over the past decade, Zambia has successfully encouraged ex-commercial farmers from Zimbabwe (150 plus) to come and farm there where they have contributed very significantly to increasing the production of the national staple – maize by 1.5 million tonnes per annum — as well as other crops such as soybean and wheat. Case studies on the performance of the productive and profitable commercial farms established have been demonstrated and documented.

    2. An Integrated Investment Portfolio Combining Finance, Farm Plans and Management Capabilities

    The International Agricultural Consultants (IAC) Group based in Harare, Zimbabwe are currently engaging with some SADC countries to introduce capabilities for modern commercial farming.  It is envisioned that a portfolio of long-term investments will enable those countries to utilize land resources more productively; create employment in improved and new value chains; assure national food security through self-sufficiency and self-reliance in major staples; and realize export markets for some crops and livestock.

    Once large scale farms have been identified and agreements reached with Governments (leasehold arrangements) for contracting proven commercial farmers, IAC will formulate a comprehensive portfolio of farm management and investment plans (5-10 years with detailed outlays, costs and income projections) for individual farms. A separate investment portfolio is envisioned for each country with all farm plans, budgets, cash flow projections and overall investment envelopes prepared by IAC.

    Where IAC will add unique value for investors will be in the inclusion of proven commercial farm management expertise – profiles and statements of capability – for each individual or group farm investment included in the portfolio. IAC has a vetted register of over 30 proven commercial farmers (ex-Zimbabwe) who will be assigned to farms based on their specific enterprise proficiencies, experience, performance and accomplishments.

    This approach builds on the individual experiences in Zambia over the past decade but crucially, in addition, the lessons arising from insufficient focus and provision for key farm management capabilities in many investment efforts and programmes to date. It seeks to overcome one of the key risks – lack of proven farm management and practice expertise — that investors have keenly felt but not always articulated as the reason for shying away from substantial commitments to funding commercial farming in Africa. It proposes a practical risk mitigation approach that lays a foundation for future investor confidence.

    3. A partner to promote and secure support for this portfolio approach

    IAC is seeking investment partners to collaborate, promote and secure commitments for this approach i.e. investment & asset management companies as advised by the African Private Equity and Venture Capital Association (APEVCA). Prospective partners would preferably have direct expertise and experience in agricultural investment and capital markets, initiatives/programmes in Africa, and be interested in partnering with IAC to secure investment in the portfolio.

    For further information please contact:

    Michael Connolly
    Senior Consultant
    International Agricultural Consultants (IAC) Group

    30 Windmill Lane
    Borrowdale
    Harare
    Zimbabwe 

    E mail: farminvest.africa@gmail.com

    Tel: +263 783910447

    Skype: Michael Connolly