Agriculture punted as a ‘viable’ African asset class
Food independence for Africa could be supported through investment by local institutional investors in the continent’s agriculture sector, for which the investment case is very compelling with significant investment capacity, says Old Mutual Investment Group.
Director of strategic projects Craig Chambers said at a recent briefing that food imports by Africa, with over 60% of the world’s arable land, were in excess of $25-billion a year.
Compounding the situation, a 70% increase in agriculture production was needed to feed the world’s population, which is expected to be more than nine-billion in 2025, of which 25% is estimated to reside in Africa.
On the positive side, UFF Agri Asset Management joint MD Duncan Vink, who also spoke at the briefing, advised that investors with a long-term horizon were looking to increase their allocation to real assets, such as farmland, owing to economic turbulence globally, a low interest rate environment and a search for safety as well as yield.
As global food supply demands increased, Africa was the greatest opportunity for profits in agriculture, he emphasised, adding that on the continent 39-million hectares of agricultural land were suitable for irrigation. However, only 7% of this arable land was irrigated, with 3.7% in sub-Saharan Africa.
“Agriculture in Africa is compelling for inter- national investors seeking stability and high risk-adjusted returns, as a result of the availability of low-valued, premium farmland and agribusinesses on the continent, and the shortage of locally available capital,” Vink said.
The case for bolstering Africa’s agriculture sector is also supported by retailers and traders increasingly looking to secure their supply lines. Consequently, the balance of power is moving upstream to the supplier of food – the farmer.
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