New Investment Models for Agric in Africa

Agricultural projects take more time to mature and investors are developing new models to encourage businesses to appreciate a longer bottom line.

 

Investing in agriculture takes patience – not something a lot of investors, eager for quick returns, have in ready abundance. However, a new investment model is gaining traction, using professional fund managers to invest donor funds as 'patient capital' in small and medium-sized enterprises (SMEs).

UK-based social venture capital firm AgDevCo has become one of the model's pioneers after investors chose it to manage a catalytic fund for the Beira Agricultural Growth Corridor in Mozambique.

AgDevCo has $28m under management; $23m of that consists of funds for investment in the Mozambique catalytic fund, from donors including the UK, Dutch and Norwegian governments. So far, it has made nine investments in SMEs plus three larger investments with its own capital. Unlike some venture capital investors, AgDevCo invests in both primary agricultural production and agribusinesses.

Chris Isaac, business development director of AgDevCo, says the lack of bankable projects is the main constraint facing private equity funds and commercial banks looking to invest in African agriculture. "Our role is to invest to create a pipeline of bankable agriculture businesses which can attract third-party investment," says Isaac.

AgDevCo deems an investment successful if it can exit by replacing its investment with private capital. Any profits from the Beira catalytic fund will be reinvested back into the country. For other investments, profits will be reinvested back into AgDevCo projects.

The average SME investment is $200,000-$500,000 and the management approach – which it sees as project incubation – is very hands on. Sometimes strategic partners are brought in from the outset, such as with banana company FrutiManica when AgDevCo's $150,000 was matched by a private investor.

Another investee company – extension and marketing company Empresa de Comercialização Agricola – will soon sell grain to the World Food Programme and is about to sign a contract with a large brewer.

AgDevCo is also investing in the livestock sector, as demand grows. Founded in 2009 by executive chairman and principal sponsor Keith Palmer, a former vice president at investment bank Rothschild, AgDevCo was modelled on InfraCo, an infrastructure fund also run by Palmer.

But there is a difference in the size and timeframe of the projects: whereas a typical InfraCo project could go through the project development cycle in two to four years, it could take six to seven years for an agriculture project.

No shortcuts

"Where one has seen investment fail in the agriculture sector in Mozambique, in the biofuels sector for example, is because that process of developing the project was not done properly and there were short cuts taken,"says Isaac.

AgDevCo has made "significant process" in Mozambique, says Patrick Guyver, managing director of Prorustica, which advised on the blueprint for agricultural corridors in Tanzania and Mozambique. He says the jury is still out on the catalytic fund model, which is not a "silver bullet" approach but shows potential as a means of supporting the development of smallholder farmers.

Outside of Mozambique, the company has investments in five large irrigation projects in Tanzania and Ghana, and is working on more in Zambia.

In Ghana, it is investing in three projects involving irrigation and food crops, each requiring $30m-$40m. AgDevCo expects to commit the first $2m-$3m, according to Isaac, and hopes the World Bank will step in as a source of patient capital. It is also waiting for the launch of a tender process to run a catalytic fund that will invest in the Southern Agricultural Growth Corridor of Tanzania.

Source: The Africa Report

Rural Dwellers must adapt to Climate Change, says workshop

ABIDJAN -  Researchers in Côte d'Ivoire have called for villagers across the region to be made aware of the negative effects of climate change and encouraged to pursue adaptation measures. 

 

The calls came at a workshop held at the Regional Unit of Higher Education of Korhogo, in the north of the country earlier this year (18 May), at which researchers presented recent work on the impacts of climate change in the region. 

"Data from 1970–2000 show that rainfall during the period decreased by about 12 per cent in northern Côte d'Ivoire," Bama Koné, coordinator of the research, told SciDev.Net. He added that annual temperatures increased by almost one degree Celsius during the same timeframe.

Koné said that the rainy season has shortened, while the dry season has become longer. 

"Conditions in the region have become harsher and longer, vegetation has been damaged, many species are endangered, and many rivers and streams have dried up," he said. 

More than two thirds of farmers have experienced a decline in crop productivity — particularly of highly prized crops such as sorghum, yam and millet — while 60 per cent have had their farms flooded during the rainy season. 

Traditional practices have also been affected. For example, traditional doctors have been affected by the paucity of medicinal plants. 

According to the deputy mayor of Korhogo, Salimou Coulibaly, villagers sow crops such as cotton, maize and rice, according to the lunar month. When the rains do not come, they worship fetishes and pray in mosques, all the while ignoring the negative effects of climate change, Coulibaly said. 

Sidiki Cissé, director general of the National Agency for Rural Development (ANADER), is clearly concerned. "The despair of farmers is evident. Many farmers feel clueless about the [growing] uncertainty of the seasons." 

Marc Kouame, a farmer — from northern Cote D'Ivoire — who cultivates okra, peanuts and cassava, said: "Because of the changing seasons, last year I lost half my peanuts. I had not planted them at the right time". 

Coulibaly said that he hoped the results of the study would be disseminated to villagers to encourage them to change any negative habits and adapt to climate change. 

Changes in practice recommended by the researchers include the reduction and regulation of charcoal production, sensitising people about the need to protect forests, encouraging reforestation, and digging clean water wells, in conformity with draining and hygiene standards.

Trees 'boost African crop yields and food security'

Planting trees that improve soil quality can help boost crop yields for African farmers, an assessment shows. 

Fertiliser tree systems (FTS) also help boost food security and play a role in "climate proofing" the region's arable land, the paper adds.

 

Researchers from the World Agroforestry Centre say poor soil fertility is one of the main obstacles to improving food production in Africa. 

The results appear in the International Journal of Agricultural Sustainability.

"In Africa, it is generally agreed that poor soil management - along with poor water management - is most greatly affecting yields," explained co-author Frank Place, head of the centre's Impact Assessment team.

He said that despite chemical fertilisers having been on the market for more than half a century, farmers appeared reluctant or unable to buy them.

"Therefore, there have been a lot of attempts to bring in other types of nutrients from other systems - such as livestock and plants" he told BBC News.

"We have been working quite a lot on what is broadly referred to as 'fertiliser tree systems'."

Although it has been known for centuries that certain plants, such as legumes, "fix" nitrogen in the soil and boost food crop yields, Dr Place said that the centre's researchers had been looking to develop a more active management approach such as FTS.

"Some farms, for example in Zambia, where the farms are larger, it is possible to rest arable land and allow it to lie fallow," he observed.

"But in place such as much of Malawi, where population densities are higher, they cannot afford to fallow their land; so we came up with alternative management systems where they could intercrop the trees with the (maize)."

While the technique is not new, Dr Place said that some of the nitrogen-fixing species used by farmers were probably not the most effective.

For example, farmers in East Africa had been using Cajanus cajan (also known as pigeon pea).

"A lot of the nitrogen was being stored in the trees' seeds; so there was an effort to use other trees that put a greater volume in the soil, such as Gliricidia sepium (one of its common name is mother of cocoa)," he said.

"A really nice thing about G. sepium is that we have been coppicing some of those trees for 20 years and they still continue to grow back vigorously." 

However, he acknowledged that there were a number of challenges that had to be addressed in order to maximise yields.

For example, some systems suggested planting rows of trees between rows of crops with mixed results.

"We realised that there were a few management problems with that sort of system - what tended to happen was that there was too much competition between the crops and the trees," Dr Place explained.

"We developed a new management system where the trees were cut very low to the ground at the time you are planting the crop so then there was no light competition. 

"The trees go into a dormant state when you cut them like this, so the root system is not competing straight away for the nutrients, so the maize is free to become established.

"The trees only really start to come out out of the dormant phase when the maize is already tall."

Another challenge was to provide enough seeds in order to have mass-scale planting. He said that balancing the provision of high-quality seeds with large local engagement was another hurdle that had to be overcome.

But the rewards in improved yields were noticeable, he added.

"Some of the studies have shown that in TFS across Africa as a whole, yields are doubling or more in two-thirds of cases."

Where the systems were not delivering such good results, Dr Place said that scientists were looking to refine current practices and modify them to suit the local conditions.

'Climate proofing'

As well as helping to boost yields, the use of trees in agriculture has other benefits - such as helping to "climate proof" agriculture land.

One example, Dr Place said, was the use of Faidherbia albida (common names include winter thorn and apple-ring acacia) in West African arable landscapes.

"It has a deep penetrating tap root, and it can secure a good water supply even in dry years," he explained.

"Generally speaking, tree roots do go much deeper than crop roots, so it is recycling nutrients and water from deeper reaches. 

"There are also studies showing that these roots act as conduits and bring up water to surface root systems (such as those belonging to crops)."

The editor-in-chief of the International Journal of Agricultural Sustainability, Professor Jules Pretty from Essex University in , said the study illustrated that there was a growing movement of agricultural innovations across Africa that were increasing yields and at the same time improving the environment. 

"Trees and shrubs in agricultural systems seem to break some of the rules of agriculture - in this case, farmers are using shrubs to create a diverse rotation pattern rather than year-on-year maize," he told BBC News. 

"The trees fix nitrogen and improve the soil; the leaves can be fed to livestock; the crops then benefit greatly in subsequent years."

Source: BBC

US firm to invest in $100 mln Tanzania farms JV

U.S. firm, AgriSol Energy LLC, and its joint venture partner in Tanzania will invest more than $100 million over the next 10 years to develop a large-scale commercial farming project in the east African country, a company director said on Tuesday.

AgriSol, led by well-known Iowa farming and ethanol executive Bruce Rastetter, has joined with Serengeti Advisers, a Tanzanian investments and consulting firm, to invest in crop and poultry production in western Tanzania.

"Our initial project in Lugufu involves approximately 10,000 hectares -- a tiny percentage of the overall available land in Tanzania -- but large enough to have a meaningful impact on the country's agricultural industry," Bertram Eyakuze, one of AgriSol Tanzania's directors, said in an e-mailed response to questions submitted by Reuters.

"We project that it will cost in excess of $100 million over the next ten years to develop Lugufu fully," Eyakuze said, adding the focus would initially be on the growth of maize and soy, which would in part be used to produce feed for livestock and cooking oil.

Poultry production would also be a focus of the project, to eventually wean Tanzania off importing chicken from Brazil and other countries.

"Tanzania has 43 million hectares of arable land, of which only about 10 million hectares, or 23 percent, is currently being farmed, leaving more than 30 million hectares available to produce food for the people of Tanzania and eventually the rest of Africa," Eyakuze said.

He said investors would look into expanding farming activities once the Lugufu project was completed.

AFRICAN LAND-GRAB DENIALS

Tanzanian prime minister Mizengo Pinda said in June the country would offer over 1.6 million hectares of land for lease to investors to set up large-scale projects.

Companies have already injected about 1 trillion shillings in free trade zones since 2007 and exported goods worth 525 billion shillings in the same period, Pinda said at the time.

AgriSol denied allegations it was among wealthy U.S. and European investors accumulating large swathes of African agricultural lands in deals that have little accountability and give them greater control over food supply for the world's poor.

A report by Oakland Institute, a think tank in California, said in June some U.S. public universities, pension and hedge funds and speculators were among those in on the land rush, eyeing returns of 20 to as much as 40 percent.

"Some recent news accounts and reports have inaccurately portrayed our intentions ... Our project is about partnering with world-class agricultural experts and putting Tanzanian farmland to its best and fullest use," Iddi Simba, a director at Serengeti Advisers, said in an open letter to the public posted on AgriSol's website last month.

"(Tanzanian) government made AgriSol aware of three tracts of land in western Tanzania that were previously used as camps for refugees, but were, at the time, either closed or being closed. The decision to close these camps was made well before AgriSol became involved and was based on a model program agreed to with the United Nations."

Eyakuze said Agrisol's farms in Tanzania would generate thousands of jobs and improve food security in the country.