Specialist investment company Futuregrowth Asset Management has identified aquaculture as a strategic play to enhance returns for its shareholders, setting aside around R200-million for investment in sustainable aquaculture projects, particularly those that earn the majority of their revenue from abalone farming.
Futuregrowth investment analyst Amrish Narrandes said in a statement on Thursday that aquaculture showed significant long-term growth prospects with “very high” export potential.
The sector was a component of the ocean economy – one of the key sectors identified under Operation Phakisa, a government initiative to deliver on some of the priorities encompassed in the National Development Plan.
According to a report by the Centre of Excellence in Natural Resource Management (CENRM) at the University of Western Australia, aquaculture was one of the fastest-growing food producing sectors in the world. The report indicated that aquaculture now provided almost half of all fish for human consumption, a share that was projected to rise to 62% by 2030.
CENRM data showed that South Africa was the third-largest supplier of farmed abalone in the world with an estimated production of 1 450 metric tonnes (mt) in 2015. In comparison, 50 000 mt of abalone was farmed in China and 10 000 mt in South Korea.
Futuregrowth managed more than R150-billion on behalf of retirement funds, with this investment falling within the Futuregrowth Development Equity Fund. To date, the fund had invested about R1.7-billion in development projects with exposure to sectors ranging from infrastructure to pharmaceuticals and transport.
“Our investment meets the mandate of the Futuregrowth Development Equity Fund thanks to the socially responsible, sustainable nature of abalone aquaculture, a sector that remains under-invested in South Africa despite ongoing poaching of wild abalone populations,” remarked Narrandes.
Co-analyst of the investment Dolf van Wijngaarde said Futuregrowth had no specified timeframe in which it planned to invest its capital and would evaluate projects on their merits. The fund, which financed selected projects primarily through equity stakes, could also opt to increase its investment allocation to aquaculture should it find appropriate opportunities in the sector.
“We could invest it all in one year but it could take longer; it all depends on the quality of the investments that are available to us at the time,” he said. The aim was to look for the most profitable investments for Futuregrowth’s pension fund clients provided they adhered to the sustainable, developmental mandate of the fund.
Narrandes said the fund, which was open to South-African domiciled institutional investors, preferred to take a minority stake in multiple businesses.
“That gives us sufficient scale to exert some degree of stewardship over the business but without taking control,” he explained, adding that businesses that earned the majority of their revenue from abalone aquaculture were preferable not only because of the growth prospects of that sector but also because of the strong contribution this made to relieving pressure on wild abalone populations.
President Jacob Zuma has said South Africa needed to do more to unlock the vast potential of its oceans, which government believed could contribute R177-billion to the country’s economy each year and create as many as one-million direct jobs. South Africa’s oceans contributed about R54-billion to its gross domestic product in 2010 and accounted for around 316 000 jobs.