December 4, 2014

By Shahnaz Mahmud

The Ebola outbreak in West Africa has ravaged its people and caused widespread fear not only in the region but across the globe. As of November 11, 2014, The World Health Organization reports that there have been 5,504 deaths and 14,413 cases, though unofficially there may be as many as three times as many unreported deaths.

And what of its impact on the agro-community? Agriculture plays a diverse role in West African nations. Sierra Leone, for example, has experienced double-digit economic growth since 2007 and it is 7th in the world for food production, according to Dr. Joseph Sam Sesay, the nation's Minister of Agriculture, Forestry and Food Security. The Ebola outbreak, however, has surely impacted this. Press accounts across the region have detailed how migration to safe zones has affected domestic agriculture and its exports. The abandonment of small farms across West Africa will undoubtedly result in a food shortage crisis.

Ebola has also affected agriculture investments in West Africa, as a variety of news sources, including Brookings and CNBC, report foreign investors are postponing or cancelling investments altogether. The whole of the West African economy is expected to suffer. However, despite initial World Bank estimates that Ebola could set West Africa back US$32 billion, in mid-November estimates were downgraded to US$3-4 billion.

Phatisa, a private equity fund manager that invests in sub-Saharan Africa, has implemented a strategy to cope with the deadly outbreak. Phatisa’s African Agriculture Fund (AAF) is an African private equity food and agri-focused fund. Its goal, from inception in 2010, has been focused on food security and housing the poor. At present, it has committed investments in excess of $123 million in 13 investments (excluding a follow-on deal) across the continent, ranging from Sierra Leone in West Africa, to Mauritius and Madagascar off the east coast of southern Africa. They are involved in primary farming, protein production, processing, inputs, fertilizer, mechanization and FMCG beverages. The fund targets 20-40% of its investments in both West and Central Africa.

Responsibility As Fund Manager

AAF’s first deal was Goldtree, an early-stage investment in post-conflict Sierra Leone, building a new palm oil mill, which would buy its inputs from thousands of outgrowers in the eastern part of the country, says Duncan Owen, Senior Managing Partner at Phatisa. Construction and commissioning of the mill took 18 months under challenging circumstances. With a capital injection from multinational investors, the long-abandoned palm oil plantation and mill in Daru, Sierra Leone, have been successfully rehabilitated. A nursery and irrigation system are up and running, resulting in the improved condition of seedlings. The plan is to replant 300 hectares by the end of 2014 and 550 hectares in 2015, he also says.

But, now the challenge is battling West Africa’s worst case of Ebola in its history.

“The AAF’s investors are conscious of the difficulties around the fund’s Goldtree investment, its remoteness and the lack of secure data on Ebola outbreak,” says Duncan Owen, Senior Managing Partner at Phatisa. “It is our responsibility as fund manager to keep them abreast of the latest developments and address any queries and concerns promptly and to the best of our ability.”

Owen puts Phatisa’s efforts into context. The Goldtree plantation and mill is situated in Daru in the Kailahun district on the eastern border of Sierra Leone. The Kailahun district shares its border with Liberia’s Lofa province and Guinea’s Guéckédou province. “As the borders between these countries are very porous and people move freely between the different regions, the virus has spread rapidly,” he says. “The Sierra Leone government has introduced quarantine areas in the Kailahun district to reduce the movement of people. The quarantine procedures prevent any unessential movement between areas; only health workers are allowed to travel between the quarantined areas. This has understandably created operational issues.”

Implementing an Action Plan

To address this, Goldtree has developed and implemented an action plan to provide guidance during the Ebola outbreak. Médecins Sans Frontières (MSF) and the SL Ministry of Health and Sanitation (MHS) both endorsed the plan in late June and have recommended that the plan stays in place until the outbreak is over, Owen notes.

“Goldtree Management, headed by Pieter Van Dessel, has remained committed to operating the mill during the outbreak; with the support of many health organizations and the Department of Health and Sanitation, as it facilitates a sense of normality in the traumatized communities,” he also says.

The company has reached out to affected communities by making a palm oil donation to MSF and the World Food Programme (WFP). “Phatisa has also made a donation to the MSF ear-marketed for the Sierra Leone Ebola outbreak, challenging our investors to follow suit,” adds Owen.

Owen makes clear that the intention is to press on with its investments. “The common goal is to build long term sustainable value that will continue far beyond the life of the fund – leaving a tangible legacy for a more prosperous Africa,” he says.