Agribusinesses becomes more attractive investment asset class

28th January 2016 By: Tracy Hancock - Creamer Media Contributing Editor

Agribusinesses becomes more attractive investment asset class

Photo by: Duane Daws

Agriculture was becoming a preferred investment destination, said financial services group Standard Bank secondary agriculture senior manager Bertie Hamman this week.

“By investing in agriculture, you lay the cornerstone of all economic and social upliftment initiatives by helping to ensure that food security becomes a reality for everyone.”
Investors, traditionally reluctant to consider the wider agricultural sector as an alternative to more familiar sectors, such as mining, telecommunications, fast-moving consumer goods and finance, were starting to change their thinking.
This transition, Standard Bank said, was fuelled by the increasing corporatisation of agriculture and the domination of global agendas by greening and food-security challenges.

Therefore, confidence levels were rising and the investor public was becoming more bullish, as more investment professionals focused on the sector and gained a better understanding of the risk and return possibilities.
The more conventional asset classes developed during an era when environmental issues, climate change and the influence of emerging economies on the global financial landscape simply did not exist. “Food security was taken for granted, certainly in developed economies. Now, the new global concerns are creating new markets, from both a demand and supply perspective,” highlights the bank.
Simultaneously, the greening of economies was giving investment a social conscience it did not have before. Where return on investment used to be the main and sometimes the only consideration driving investment decisions, it was being superseded by corporate social and environmental responsibility, as consumers became more sensitive to production practices. “The emphasis today is, therefore, on impact investing, in which measurable social and environmental impact ranks alongside traditional financial returns.”
In most countries, agriculture was the custodian of the bulk of natural resources, making it a crucial partner in the greening of economies, such as through biomass used to fuel renewable-energy solutions. “It can, therefore, make a significant contribution towards mitigating climate change.
“Investing in agriculture is true impact investing. It creates an impact at all levels of importance to human endeavour,” Hamman emphasised.
Agriculture was a vast new investment frontier with virtually unlimited growth potential. The major governments of the world were pouring funding into agricultural operations inside and outside of their national borders, all aimed at securing food supply for their citizens.
“So, by investing early in an appropriate investment vehicle, investors can ensure a rapid and high rate of return,” Hamman reasoned, adding that Standard Bank believed that such investments were also sustainable over the longer term.
However, potential target companies were on the lookout for more than capital from investors. “Their objective is to grow and to deepen integration into the value chain. So, nonlisted companies will consider investors only if they can assist in making value-chain linkages and add value beyond that of a mere shareholder.”