Boom time for Africa investors

Cape Town - In the years ahead land prices in Africa will shoot higher owing to global food shortages.

Susan Payne, chief executive and founder of the London-based investment company Emergent Asset Management, says the demand for food will increase sharply in the coming decade.

Payne predicts that the next few years will see more of the types of uprisings dozens of countries experienced in 2008 because of food shortages.

In 2008 Emergent Asset Management, together with South African futures dealer Grainvest, started a private equity fund for land in Africa.

There are some 17 private equity funds expecting to invest $2bn-odd in agriculture in Africa in the next two years.

The next decade will bring food scarcity increasingly to the forefront because of demand from emerging markets like China with its growing middle class.

Biofuel is another reason for scarcity, because agricultural land is being used for it, and climate change is also contributing to declining food production.

The fund has bought 60 000 hectares in six African countries. About 30 agricultural products are being produced on the farms.

According to Payne, the land is being bought in countries like South Africa, Swaziland and Tanzania but, where purchase is not possible, 99-year leasehold contracts are entered into in countries like Mozambique and Zambia.

In many cases cultivated farms are bought and, in some cases, ground that has not been cultivated yet, especially for biofuel.

Payne reports that these farms' output is being boosted by modern agricultural techniques.

The fund yields an estimated 25% to 30% annual return.

Payne reckons that this projected yield is much better than that of most other agricultural funds in the world, because of the cheaper land.

- Sake24.com

For more business news in Afrikaans, go to Sake24.com.