August 30, 2017

UK-based, sub-Saharan-focused social impact investor AgDevCo announced it has invested $5.05 million in Katito Farming Enterprises Ltd. – a key part of the firm’s Northern Zambia Agricultural Hub (NZAH). Through its NZAH project, AgDevCo aims to establish an irrigated farm, bulk storage, and agricultural processing operations that will catalyze commercial agriculture in the remote northern regions of Zambia.

This investment by AgDevCo represents the second investment by the fund in Northern Zambia following its $4.5 million investment made in June of last year in partnership with Saise Farming Enterprises – a seed potato project that is working toward modernizing the supply chain through the inclusion of irrigation systems and climate controlled warehouses for crop storage until distribution to farmers the following season.

This deal also marks the firm’s third investment in the country after the it announced a $1.1 million investment in Zambian feedlot business, Ilobezi Limited – a growing business that is expected to purchase 8,200 head of cattle from the region’s smallholders each year.

Between Katito Farming and Saise Farming, AgDevCo expects that these large-scale commercial farming enterprises will provide the “critical mass” needed to attract ancillary businesses along the supply chain including input suppliers, aggregators, value addition processors, off-takers, and logistics providers.

“I am delighted with this additional investment in Northern Zambia and am optimistic of the impact it will have on the Province, both directly and indirectly by attracting other investors,” said Nigel Seabrook, AgDevCo Zambia Country Director. “Other players in the agricultural value chain should look at the regional food demand as a huge opportunity for Northern Province.”

Through the farming project, AgDevCo plans to produce seed maize, soybeans, wheat, groundnuts, commercial maize, and seed potatoes – all of which will contribute to strengthening food security for the region as well as Burundi, Rwanda, and Eastern DRC through greater exportation via barges on Lake Tanganyika and by rail via Tanzania.

Future plans at the site include an in-grower scheme, demonstration farming, and the provision of extension services.

“We as the community are looking forward to the establishment of Katito Farming Enterprises Limited so that they can employ members of the community,” said Edward Simfukwe, the Katito community representative.

Going Bananas

Within days of announcing its investment in Katito Farming, AgDevCo also announced it was partnering with Mozambican investor group, Nika, to invest $1.5 million in Citrum SA for the rehabilitation of a banana plantation in the country.

Currently producing a variety of citrus fruits, the capital from AgDevCo will be used to fund irrigation and operation costs associated with transitioning and expanding the hectarage on the plantation to banana production. Once operational, the Citrum farm will be one of the only Mozambican-run banana farms in the country, and all fruit produced on the plantation will be marketed on both domestic markets and exported to South Africa.

“I believe in the success of this investment because there is a growing market close to us, an experienced team managing the business and the two farms have very good growing conditions for bananas,” said Arnaldo Ribeiro, director, Nika. “Moreover, the Mozambican investors grouped in Nika and AgDevCo all have a sound experience in managing agribusinesses in Mozambique.”

Other Investments

AgDevCo has been highly active in working toward a reduction in poverty and increasing food security through its investments across Africa. Currently managing investments in six countries, and with plans to extend its investment reach to another four, AgDevCo sees the surest way out of poverty as the development of profitable agriculture with strong links to markets, according to the firm’s website.

Toward this end, in March of this year, AgDevCo announced it had partnered with UK development financial institution CDC on an investment of $11.5 million in Jacoma Estates – a Malawian farming company specializing in the production of macadamia nuts, chillies, and paprika.

Under the terms of the investment, which will be structured as debt and preference shares, CDC will provide $8 million, while AgDevCo contributed the remaining $3.5 million in funds. Jacoma plans to use the capital to help expand its farming operations at its Tropha Estates located in Northern Malawi, and also to strengthen Jacoma’s existing outgrower schemes that will enable more than 1,000 farmers to participate in a project that will support greater ability to reach export markets, gain access to higher-yielding seeds and valuable agricultural inputs, and will provide up to 100 hectares of year-round irrigation to local smallholders.

AgDevCo also has targeted the Malawian nut sector as having potential for growth. In September 2016, the firm made an investment in Malawi when it committed $1.5 million through a debt and equity deal to peanut processor Agri-Oils Limited.

At one point Malawi exported more than 50,000 tons of peanuts per year, but at the end of the 1980s the country’s exports plunged due to a combination of factors according to the report Monitoring African Food and Agricultural Policies – Analysis of Incentives and Disincentives for Groundnuts in Malawi, published by the UN’s Food and Agriculture Organization (FAO).

However, smallholders began switching to tobacco as their main cash crop; furthermore, the state-owned Agricultural Development and Marketing Corporation (ADMARC), which was the only trader of groundnuts in the country, became ineffectual after its disorganized takeover by the private sector and the dissolution of its monopoly. And thirdly, higher levels of aflatoxin in Malawian peanuts clashed with tighter global quality requirements.

“We are backing Afri-Oils to tackle the aflatoxin challenge and put Malawi back on the map as a major international peanut producer,” said Jim Henderson, AgDevCo’s Malawi’s associate director, in a statement at the time.

The aforementioned investment was preceded by AgDevCo partnering with the African Agricultural Capital Fund managed by Pearl Capital Partners to each invest $2 million as part of a $6 million financing round in Malawian macadamia nut producer Tropha Estates Ltd. The remaining $2 million was contributed to the round by Jacoma Estates Ltd. – Tropha Estates’ parent company.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.