Private Equity and Agriculture: Challenges Private Equity and Agriculture: Challenges and Investment Opportunity in Africa and Investment Opportunity in Africa

October, 2010

Financing agriculture in Southern Africa

Malawi

SOUTHERN AFRICA REGIONAL DEVELOPMENT BRIEFING N° 3

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Private Equity: Securitisation of Private Equity: Securitisation of agriculture as a salable product and agriculture as a salable product and

as a business.as a business.

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Presentation Structure

• Introduction

• Challenges

• Opportunities

• Capital formation.

• Conclusion.

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Introduction

• Joint venture between Emergent Asset Management of UK and Grainvest of South Africa.

• Private equity fund management business.

• Sub-Sahara Africa focus.

• Value chain-Primary producer, food distribution, food processing.

• Products include: grains, banana, tea, macadamia, livestock, fruit & vegetables.

• Unique structured operational model.

• Asset Manager

• Agriculture operating company

• Regional hubs-shared resources

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Challenges • Risk aversion translating to high financing costs.

• Market imperfections.

• High cost of doing business.

• Institutional voids.

• Unpredictable geo-politics

• Government and policy inconsistency

• Land tenure systems

• Poor infrastructure

• Community involvement

• Technology, skills transfer, education & literacy

• Blending all stakeholders -private, public, communities and channelling funds to grass roots level

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Opportunity• Taking the lead to extract value and on sell.

• Innovative strategic partnerships utilising existing equity, structural capacity and value chains.

• Transmission of technology and best practise.

• Full endorsement of a sustainable agenda.

• Participation on the whole value chain

• Social Responsible Investment funds

• Trade liberalisation and Regional integration and harmonisation

• Entrepreneurship- Spotting and filling institutional voids

• Entrepreneurial approach to farmer organisation-ability to execute outgrower schemes.

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Capital Formation

• Take the lead utilising own equity creating collateral and track record.

• Brings together multiple financial participants with larger investment appetite.

• More hybrid structures inclusive of all stakeholders such as NGO’s, communities and government.

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Conclusion • Key role of intermediating financial players role initiating and

stimulating further investment and funding from other players.

• Private equity as a credible transmission mechanism:

o Attracts and fosters agriculture investment and participation.

o Economic development.

o Accountability corporate government.

o Capacity building.

o Generates economies of scale

• Smallholder access to inputs and to markets.

• Community upliftment and poverty alleviation.

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Zikomo

Thank you