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Africa: Development of Agricultural Projects Attracting Investors

Edward West

Johannesburg — THERE has been a large positive shift in global investment perceptions towards agriculture in Africa, driven by the global race for resources and food.

In addition, many African countries have reformed their economies and have now opened the doors to foreign investment in agriculture.

Recently, London-based Silk Investment’s Patrick Lundi says they are investing in agri-processing businesses in seven Africa countries.

“Africa is by far the most exciting destination for the people that we talk to, and among those are pension funds in Europe and the US.

These were perhaps the key factors that emerged from a recent two-day summit about investing in agriculture in Africa, held in Durban under the auspices of the African Investor magazine and the Department of Agriculture, Environmental Affairs and Rural Development in KwaZulu-Natal.

While these findings are certainly good news for African countries, the elephant in the room – that only a few delegates would speak about in the broadest terms – was the investment risks associated with land tenure and ownership.

KwaZulu-Natal’s MEC for agriculture, environmental affairs and rural development, Lydia Johnson, touched on the issue in reply to a question from the audience. “Land ownership is an emotive issue,” she said, without elaborating.

Futuregrowth Asset Management portfolio manager James Howard was more direct, saying land ownership remained a risk when investing in agriculture in Africa. He cited the government’s goal of transferring 30% of land ownership to local communities. But 90% of the land already transferred had become unproductive.

Anton Scheepers, MD of the Agricultural and Industrial Marketing Company, said SA’s large commercial farming sector felt “polarised”, as though it was “not being supported anymore”.

He said a third of commercial farmers had been “lost” since 1995. Commercial farmers were increasingly looking north (in Africa) “with interest”, because they felt unwelcome in their own country.

According to KwaZulu-Natal Premier Zweli Mkhize, commercial farmers need to establish “win-win” linkages with their surrounding communities as such an approach would in turn help broaden the security blanket around the farm.

The financing of agricultural projects in Africa has also become easier with the greater transparency being adopted in many African countries.

Lodewyk Meyer, partner of Johannesburg-based law firm Bowman Gilfillan, said financial institutions had changed their outlook on the ability of underlying producers to repay loans, and increasingly banks were using the underlying commodity as collateral.

But there was no silver bullet when dealing with the different laws and regulations across Africa. “It is fairly complex, but not undo-able,” he said.

Source: Businessday SA    Images:

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