The Voxtra East Africa Agribusiness Fund (Voxtra) has completed an investment of US$ 1.5 million in Mtanga Farms Limited (MFL), a commercial farm engaged in seed crops, arable farming and livestock. The investment marks the first of a projected 8 to 10 investments targeting companies with pivotal roles in improving the livelihoods of smallholder farmers. Voxtra’s investment will enable MFL to take its seed potato business to a commercial scale, triple its farmed acreage and significantly ramp up its budding livestock operation.
Mtanga Farms is an integrated agri-business based in Iringa, Tanzania. Its operations extend over 2,600 hectares, previously farmed but long neglected when MFL secured its long-term lease of the land in 2009. MFL has since made significant strides to rehabilitate the land and put in place essential infrastructure to support the further growth of the business. MFL focuses on high value seed crops and the protein value chain. Its seed activities are centred around the establishment of a seed potato operation providing clean seed potatoes to smallholder farmers across Tanzania. The protein business includes the growing of animal feed, a livestock breeding business and downstream processing of meat. The company is run by a dedicated team of farmers and business developers, and is now well-positioned to become the leading integrated farming operation in the Southern Tanzanian Highlands.
Core to the company’s strategy is the provision of improved seed material to local smallholder farmers. In partnership with the Tanzanian government, MFL recently announced the registration of four new potato varieties – the first varieties to be released in Tanzania in 30 years. Whilst potatoes are a major cash and food crop for Tanzanian smallholder farmers, the lack of clean seed material has long been a major impediment to farmers’ productivity. MFL’s clean seed potato will enable a tripling of smallholder farmers’ yields: whereas the national average yield is 5-7 tonnes potatoes per hectare, smallholders have demonstrated yields of 15-20 tonnes per hectare when planting clean seed. By scaling up its production of clean seed potato, MFL could provide a pathway out of poverty for a sector employing an estimated 150,000 smallholder farmers. Voxtra intends to make use of its technical assistance facility – funded by the Norwegian Agency for Development Cooperation (NORAD) – to evaluate, support and increase the social impact made by MFL.
African agriculture needs a green revolution that is powered by an emerging class of sustainable small and medium enterprises (SME). SMEs are best placed to increase local food production and integrate local farmers into value chains and create employment. Through its investment in MFL, Voxtra joins forces with a strong partnership of existing investors comprised of Thirty Degrees East, a Mauritian investment company, UK-based Lion’s Head Global Partners, U.S.-based Calvert Foundation, Nigerian investment firm Heirs Holdings and its philanthropic arm, The Tony Elumelu Foundation, as well as the African Enterprise Challenge Fund.
9 July 2012
20 June 2012
Food security: Countries need right kind of investment
In today's Financial Times there is an article titled Food security: Countries need right kind of investment on the contribution commercial agriculture can make to food security and poverty reduction. The article quotes AgDevCo:
“If you can secure the markets for farmers, that puts you in a good place. But you need to do more than that. You need to help farmers become more productive . . . Unless you bring in private investment, technology and skills, it’s going to be very difficult for the agriculture sector to move beyond where it is today".
18 June 2012
African Land Fertile Ground For Crops And Investors
US National Public Radio ran a story last week on agriculture investment in Mozambique, putting the other side of the "land grab" debate to explore how commercial farming can benefit local farmers and communities. AgDevCo gets a brief mention. You can listen to the story and read the accompanying article here.
7 June 2012
More thoughts on patient capital
Farming is a tough business. It is especially tough in Africa where infrastructure is often weak, there is a shortage of experienced (commercial) farm management and the wider agribusiness ecosystem – from the availability of inputs to spare parts for machinery – is underdeveloped or missing.
That makes the costs of doing agribusiness in many parts of Africa high. Combine that with the largely uncontrollable risks common to all farming – weather, pests, market price fluctuations – and it is not surprising that few banks will lend to the sector.
But one needs to put this in the context of long term trends which point towards a massive increase in the demand for food. Farming is likely to be a more profitable activity in the future as the world’s population increases towards nine billion. If African countries can clear the first hurdles and establish a competitive farming base the rewards – financial and social – are potentially very significant.
How to do this? There has to be a recognition that building a competitive agriculture sector takes time and requires a lot of investment in things like roads, power lines and irrigation systems which will not pay a commercial rate of return. That requires 'patient capital' ie long-term low cost finance which can only come from governments or development agencies.
Moreover, AgDevCo believes there is a case for providing patient capital (alongside private capital) to support start-up commercial farming operations as long as they commit to supporting smallholder farmers and local communities. We see enormous potential for public-private partnerships (PPPs) where irrigation infrastructure is shared between commercial and smallholder farmers.
The land grab debate has highlighted cases where investments have gone wrong. There have been situations, including here in Mozambique, where investors have leased large areas of land and made unrealistic promises to their financial backers and to local communities about what can be achieved and how quickly.
But it would be a disaster for Africa, as Professor Calestous Juma of Harvard has written, if concerns about land grabbing led to a moratorium on new investment in African agriculture. The sector badly needs more resources, human, financial and technical to help create jobs, address food insecurity and tackle malnutrition.
There are ways of doing investment right. There is such a thing as a win-win where both the investor and the community benefits. But you have to do things properly and be patient for the returns to come.
That makes the costs of doing agribusiness in many parts of Africa high. Combine that with the largely uncontrollable risks common to all farming – weather, pests, market price fluctuations – and it is not surprising that few banks will lend to the sector.
But one needs to put this in the context of long term trends which point towards a massive increase in the demand for food. Farming is likely to be a more profitable activity in the future as the world’s population increases towards nine billion. If African countries can clear the first hurdles and establish a competitive farming base the rewards – financial and social – are potentially very significant.
How to do this? There has to be a recognition that building a competitive agriculture sector takes time and requires a lot of investment in things like roads, power lines and irrigation systems which will not pay a commercial rate of return. That requires 'patient capital' ie long-term low cost finance which can only come from governments or development agencies.
Moreover, AgDevCo believes there is a case for providing patient capital (alongside private capital) to support start-up commercial farming operations as long as they commit to supporting smallholder farmers and local communities. We see enormous potential for public-private partnerships (PPPs) where irrigation infrastructure is shared between commercial and smallholder farmers.
The land grab debate has highlighted cases where investments have gone wrong. There have been situations, including here in Mozambique, where investors have leased large areas of land and made unrealistic promises to their financial backers and to local communities about what can be achieved and how quickly.
But it would be a disaster for Africa, as Professor Calestous Juma of Harvard has written, if concerns about land grabbing led to a moratorium on new investment in African agriculture. The sector badly needs more resources, human, financial and technical to help create jobs, address food insecurity and tackle malnutrition.
There are ways of doing investment right. There is such a thing as a win-win where both the investor and the community benefits. But you have to do things properly and be patient for the returns to come.
18 May 2012
Agribusiness partnership to tackle poverty, Mozambique
At the G8 meetings in Washington D.C. today world leaders committed to lifting 50 million people out of hunger by promoting new partnerships with private companies. AgDevCo, a social impact investment company, is delighted to announce the launch of one such partnership in Mozambique.
Cervejas de Moçambique (CDM), part of the SAB Miller group, has signed a three year purchase agreement to buy maize grown by local smallholder farmers to use in its Chibuku beer. Until now all maize used in CDM’s beers and non-alcoholic beverages has been imported.
The three-year agreement was signed In Maputo on Friday with Empreza de Comercialização Agricola (ECA) Lda, a Mozambican marketing company, which is 45% owned by smallholder farmers. ECA will this month start producing maize grits for delivery to CDM’s factories in Beira and Maputo.
ECA works with its farmers to boost yields by providing access to improved seeds, fertilisers and affordable finance. In its first year many of ECA’s farmers have achieved maize yields of more than four tonnes per hectare.
“Linking our farmers to reliable markets which pay a fair price is central to our business model” said Grant Taylor, ECA’s Managing Director. “By increasing farmer yields 3-4 times we can help ensure families have enough food to eat and can sell their surplus for cash”.
CDM’s Adrian Mitchell, Director of Chibuku, said: “Sourcing raw materials locally is a key objective for us. Doing so makes good business sense and it contributes to the economic development of Mozambique. We are delighted to enter into this partnership with ECA and we see great potential for it to grow.”
Chibuku and other beverages made with Mozambican maize will be on sale from July 2012. ECA will buy maize from at least 750 Mozambican farmers in 2012 increasing to over 2,500 farmers by 2015.
ECA received equity investment and technical support from the Beira Agricultural Growth Corridor Catalytic Fund, which is managed by AgDevCo. A local commercial bank and a microfinance institution provided farmer loans and working capital for crop purchases.
Cervejas de Moçambique (CDM), part of the SAB Miller group, has signed a three year purchase agreement to buy maize grown by local smallholder farmers to use in its Chibuku beer. Until now all maize used in CDM’s beers and non-alcoholic beverages has been imported.
The three-year agreement was signed In Maputo on Friday with Empreza de Comercialização Agricola (ECA) Lda, a Mozambican marketing company, which is 45% owned by smallholder farmers. ECA will this month start producing maize grits for delivery to CDM’s factories in Beira and Maputo.
ECA works with its farmers to boost yields by providing access to improved seeds, fertilisers and affordable finance. In its first year many of ECA’s farmers have achieved maize yields of more than four tonnes per hectare.
“Linking our farmers to reliable markets which pay a fair price is central to our business model” said Grant Taylor, ECA’s Managing Director. “By increasing farmer yields 3-4 times we can help ensure families have enough food to eat and can sell their surplus for cash”.
CDM’s Adrian Mitchell, Director of Chibuku, said: “Sourcing raw materials locally is a key objective for us. Doing so makes good business sense and it contributes to the economic development of Mozambique. We are delighted to enter into this partnership with ECA and we see great potential for it to grow.”
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| One of ECA's farmer members with his family in front of a good maize crop |
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| The first Chibuku beer to come off the factory line using Mozambican maize |
ECA received equity investment and technical support from the Beira Agricultural Growth Corridor Catalytic Fund, which is managed by AgDevCo. A local commercial bank and a microfinance institution provided farmer loans and working capital for crop purchases.
7 May 2012
Let's get down to business: the three Cs of agricultural development
As African political and business leaders gather in Addis Ababa for the World Economic Forum meetings, agriculture will again take centre stage. In fact there’s a new initiative this year – Grow Africa – sponsored by WEF and the Africa Union which aims to broker partnerships between businesses, governments and donors. A full day session on Wednesday 9th May will be attended by three African heads of state, the CEOs of major African companies and top officials from international development organisations.
No doubt, these conferences are helpful in building momentum for change. Since the food crisis of 2008 there has been a remarkable reshaping of the debate around agricultural development with a consensus that the public and private sectors need to work in partnership for maximum impact. Some new models are showing promising results – for example local sourcing of cassava by SAB Miller in Mozambique. But overall there are still not enough examples of words translating into action on the ground.
In Addis this week I will be saying that three things must happen to move from grand plans to transactions which deliver real benefits for farmers:
Firstly, the private sector must come forward with multi-year contracts to source their agricultural raw materials locally. As argued by Zahid Torres-Rahman of Business Action for Africa, companies who source locally derive a whole range of business benefits such as reduced risk, reduced costs and better supply chain management. In the early years companies should be willing to pay a premium over the cost of raw material imports as an investment to achieve these long-term gains.
Secondly, donors must be willing to provide patient capital (i.e. long-term low cost debt or equity) to support investment in primary production. The economics of farming in Africa with high upfront investment needs, especially in irrigation infrastructure, means entrepreneurs cannot access (or afford) fully commercial capital from day one. Patient capital should come with strings attached: recipients must demonstrate they are supporting local smallholder farmers and delivering meaningful benefits for local communities.
Thirdly, there needs to be an entity on the ground responsible for coordination. This involves coordinating demand with supply and developing "hub and spoke" farming models which combine large and small-scale farming systems. This a role being played by AgDevCo which has a presence in four African countries and has the expertise in investment and agribusiness to ensure that deals are commercially viable and socially equitable.
It is not particularly complicated. When all three Cs are in place – contracts, capital and co-ordination – remarkable things can happen quickly. Read for example about the ECA smallholder farmer extension and marketing business in Mozambique, which is partnering with a major brewery. AgDevCo has similar initiatives underway with other large buyers of grains and tropical fruits.
Grow Africa’s success will be measured not by the number of investment plans drawn up or new funding announcements made but by the number of transactions that are executed and make a difference to the lives of farmers on the ground.
No doubt, these conferences are helpful in building momentum for change. Since the food crisis of 2008 there has been a remarkable reshaping of the debate around agricultural development with a consensus that the public and private sectors need to work in partnership for maximum impact. Some new models are showing promising results – for example local sourcing of cassava by SAB Miller in Mozambique. But overall there are still not enough examples of words translating into action on the ground.
In Addis this week I will be saying that three things must happen to move from grand plans to transactions which deliver real benefits for farmers:
Firstly, the private sector must come forward with multi-year contracts to source their agricultural raw materials locally. As argued by Zahid Torres-Rahman of Business Action for Africa, companies who source locally derive a whole range of business benefits such as reduced risk, reduced costs and better supply chain management. In the early years companies should be willing to pay a premium over the cost of raw material imports as an investment to achieve these long-term gains.
Secondly, donors must be willing to provide patient capital (i.e. long-term low cost debt or equity) to support investment in primary production. The economics of farming in Africa with high upfront investment needs, especially in irrigation infrastructure, means entrepreneurs cannot access (or afford) fully commercial capital from day one. Patient capital should come with strings attached: recipients must demonstrate they are supporting local smallholder farmers and delivering meaningful benefits for local communities.
Thirdly, there needs to be an entity on the ground responsible for coordination. This involves coordinating demand with supply and developing "hub and spoke" farming models which combine large and small-scale farming systems. This a role being played by AgDevCo which has a presence in four African countries and has the expertise in investment and agribusiness to ensure that deals are commercially viable and socially equitable.
It is not particularly complicated. When all three Cs are in place – contracts, capital and co-ordination – remarkable things can happen quickly. Read for example about the ECA smallholder farmer extension and marketing business in Mozambique, which is partnering with a major brewery. AgDevCo has similar initiatives underway with other large buyers of grains and tropical fruits.
Grow Africa’s success will be measured not by the number of investment plans drawn up or new funding announcements made but by the number of transactions that are executed and make a difference to the lives of farmers on the ground.
6 May 2012
The Africa Report: How to feed Africa's two billion
AgDevCo is referenced in this month's edition of The Africa Report. The editorial titled How to feed Africa's two billion discusses the global food crisis and how governments and donors have so far failed to live up to their promises to boost funding to the agriculture sector. The article describes innovative private sector partnerships to promote food security, such as the catalytic fund managed by AgDevCo in Mozambique. A lot more investment - public and private - will be needed to grow agricultural production 70% by 2050 to keep up with the world's population. With water scarcity increasing and a rapid shift to meat-based diets in the developing world, the article concludes that even bigger challenges lie ahead.
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