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Financial institutions sceptical about Africa agriculture investment - legal expert

Mar 28 2019 19:24
Carin Smith

Financial institutions remain sceptical about investing in Africa's agriculture industry, according to Mitchell Presser, a legal expert at US firm Freshfields Bruckhaus Deringer.

"There is a much bigger value chain to think about when we think of how to grow investment in agriculture in Africa," he said at the African Agri Investment Indaba in Cape Town earlier in the week. 

"It is one thing to see to improving productivity in agriculture in Africa, but the challenge is often not being able to get produce to market."

He emphasised that private sector capital investors need stability, predictability, vision and confidence when they decide to invest their money.

For MD Ramesh of agri-investment company Olam International it is possible to do business in Africa and be profitable. During a panel discussion he emphasised the importance of approaching the different African countries differently and not in a pan-African way.

"About 80% of farming in Africa is on a small scale. If a farmer has less than two hectares, he barely produces enough for himself for the year," said Ramesh.

"One must, therefore, increase the farmers' efficiency and yields to help Africa achieve food security. The average age of farmers in Africa is 63. Therefore, unless we make farming attractive and sexy, it is likely that rural youth will head to towns to try and find a steady income."

He said long-term consistency in government planning is needed to lure investment to the agriculture sector.

"Governments in Africa should make it safe and peaceful and possible to have a dialogue about policy," said Ramesh.

"It is also very important to get 'buy-in' from local communities when you decide to invest in agriculture in Africa - this is critical for the investor. It is not just about getting a government licence."

Herman Marais of agri-investment fund Agri-Vie, said during the panel discussion that the challenge for most business founders and managers in the agriculture sector in Africa is that, to be successful, they must attend to the whole value chain. He said it is not easy to achieve scale in organising small-scale farmers on the continent.

It is a pity, in his view, that there is still so much red tape and taxation in the agriculture sector on the continent, which hampers entrepreneurs.

"In my view, it is not enough just to pass another law. We have to educate officials on ground level on how to work effectively with the business community to create an enabling environment," said Marais.

"There is not a shortage of human talent in the agriculture sector. It has more to do with the quality of management and the creation of an enabling environment from the side of the public sector," he said.

Access to adequate financing is often identified as one of the key inhibitors to achieving long-term sustainability for Africa’s agricultural practitioners, particularly small-holder and subsistence-level farmers who typically must resort to borrowing from community members or pooling resources in order to make ends meet, according to Antois van der Westhuizen, managing director of John Deere Financial in Johannesburg.

"Africa’s farmers require a holistic financing solution that focusses on the entire agricultural value chain."

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