Afgri Group Holdings (AGH) on Monday announced the creation of a strategic grains storage platform, in collaboration with a consortium of South African institutional investors, to enable growth of grain storage capacity in South Africa, and on the continent, to strengthen food security in the region.
The effective date of the transaction is March 31, and all suspensive conditions to the transaction have been fulfilled, AGH confirmed.
The strategic storage platform, Afgri Grain Silo Company, has the clear objective of expanding its current storage capacity from 4.7-million tons to six-million tons in the near future.
This will allow AGH to not only cater for grain storage, but to expand into the storage of other types of commodities, AGH CEO Chris Venter explained.
This investment consortium will initially own storage facilities with a total value of R3.6-billion at inception.
Three new institutional investors have committed to invest alongside the group and its current black economic empowerment employee partner, Izitsalo Employee Investments, in the platform and to support Afgri’s strategy for growth and food security.
The three institutional investment partners are Stanlib Infrastructure Investments, Wiphold, and the Land Bank.
Afgri Operations will manage the storage facilities on behalf of Afgri Grain Silo Company in terms of an evergreen management agreement. This arrangement provides the strategic benefit of Afgri’s record in managing storage operations, and deep experience of the sector, Venter added.
Afgri Operations will continue to be a JSE-approved storage operator for all the grain silos, while the grain silos will continue to be JSEsapproved silos and JSE-registered delivery points.
This transaction will assist Afgri in achieving four strategic objectives, namely: the creation of a strategic storage platform with a focus on expanding across Africa; partnering with reputable South African institutional investors; unlocking the value of Afgri’s grain storage assets, the proceeds from which will be used to further expand Afgri’s financial services reach and support for farmers; and entrenching Afgri’s reputation as the foremost long-term services provider to farmers and the agricultural industry.
AGH’s current 4.7-million-tonne storage footprint comprises grain silos and bunker complexes throughout six provinces in South Africa.
“High-quality commodity storage and related services is in demand by our customers, and through the consortium, we aim to ensure that we enter new areas across South Africa and simultaneously grow capacity,” said Afgri grain management MD Jacob de Villiers.
He further indicated that for clients currently making use of the company’s silo and bunker facilities, it is “business as usual”.
Since 2011, when the Afgri Group sold its debtors’ book to the Land and Agricultural Bank of South Africa, the group has increased its debtors’ book more than fivefold in value.