Investment in sub-Saharan Africa’s agriculture has seen tremendous growth recently, with several private equity funds injecting large amounts in the agribusiness sector. Jon Maguire, chairman of the UK-based Africa-Agri Asset Management, shares his experience farming in Malawi under Africa-Invest Malawi, an award winning project of commercial farms which support small-scale farmers.
Tell us about your investment in Malawi.
Africa Invest Malawi (AIM) is a commercial agricultural business that produces high quality crops for export from its seven farms and an ever expanding outgrower base. Our main export produce are chillies and paprika, though we also produce staple crops such as maize, rice and potatoes. Our consumers are well established multinational fast food, food additive and spice companies. The
investment is worth US$8.5 million, employs 1,000 Malawians and engages a further 5,000 through an outgrower scheme. We have won international recognition for the concept and business model and continue to strive to prove the case for investments as an answer to poverty, rather than aid.
Has the global financial downturn affected your operations?
The effect has been marginal so far. We produce high quality produce that have little direct competition. The market has however softened slightly but buyers are still
prepared to pay good prices for high quality product.
Investing in Africa’s farmers is instrumental in the global response to the rising prices of food. Please comment.
Africa is the only huge mass of land that has agricultural potential that is not being effectively used. The shortages of food and the impact of the price of oil on the cost of imported food demonstrated to African Governments that they could no longer afford to ignore the agricultural potential that their countries have. Other countries looked to Africa as a solution to their problem of food security. However farming in Africa is not that simple because if it were it would already have happened. The basic problems are the lack of knowledge of ownership of land and the lack of sizable farms or farming companies to transform African farming capacity. There is substantial investment available for farming in Africa but there are not the companies actively farming in which
to invest. This is ironic especially as Africa and the world needs its agricultural production. Farmers, farming and agricultural training need to expand rapidly to utilise the current investment effectively. The change required is not something that can happen overnight, but at long last the pressure for change, and the opportunity that it offers, should mean that this will become the start of the African Green Revolution.
In your opinion are investments in agri-business helping small-holder farmers in Malawi to adopt agricultural science and innovation to get more yields?
We cannot answer for all farming operations in Malawi but our priority is to work closely with local smallholders who get a range of benefits from the scale of our activities and who also learn modern farming practice. They
are already benefiting from increased yields and increased income. It is our policy to train smallholders and employees to ensure that our business is fully sustainable. We require local managers and employees skilled in farming to help expand our business and bring benefit to the local community.
What challenges do agri-business investors like you face doing business in sub-Saharan Africa, and how can they be addressed?
Large scale farming in Africa is much the same as large scale farming on other continents. With mechanisation and modern farming practice including irrigation it can be very productive. It tends to be more capital intensive because the infrastructure and service support is not there as it would be outside Africa. Labour shortage is a problem from time to time and
there is a continual need to train the workforce to ensure that we have a reservoir of skilled labour / managers for the future. Land tenure / ownership are the single most difficult problem related to investment in agriculture . Whilst our main investment is in large farms we extend our production capacity through ‘Outgrower / Small-holder Schemes.’ Ultimately we are looking to smallholders to produce more than the large farms. This increases the wealth of the rural community and progressively increases farming capabilities. In view of this it is essential to work closely with smallholders so that they receive the appropriate guidance, the required inputs and receive a fair market price for their produce. The management and communication process is absolutely key to success.
Should potential investors
be looking at African agri-business with renewed interest?
Agriculture in Africa is one of the biggest opportunities that there are in the world today. There is a huge demand for food which will not diminish and Africa has the capacity to provide this. The African Green Revolution has to happen and when it does there will be a huge demand for processors who transform the crops into food. There will also be a huge demand for a range of services that farms require. Storage and transportation are two areas that will be high on the list for any farming enterprise.
In your opinion, is the traditional African family farm economically viable? How can this farmer have a profitable stake in the export market?
It is not viable, but adoption of modern farming practice will improve the viability. To absorb the extra costs associated with exporting, a farmer must have an excellent quality product or one that is in a niche market so that it can command a high price. If it does not have the price then it must have the volume to absorb the higher costs associated with exporting. It also helps if the producer is aligned with the buyer so that the cost of exporting can be shared. Also, marketing is a high and mainly unaffordable cost for a small producer. It will be necessary to share the costs of
marketing by establishing a cooperative, or some form of partnership that reduces the costs on the individual producer whilst increasing the sales opportunity. Africa Invest provides this cooperative approach and guarantees a good market price.
What major developments are taking place in Africa’s agribusiness?
Food security is currently the major focus. This is both a challenge and an opportunity for Africa. As Africa is the one relatively untapped potential source of food it is attracting a wide variety of investors. Africa must ensure that the developments that take place because of this investment are beneficial to the rural population and the country as a whole. If farming in one country is undertaken to achieve food security for another country then there should be adequate safeguards in place to ensure that the supplying countries own food security is adequate and that the production gives adequate benefits to the supplying countries
rural community.
Dragline irrigation in the Malawi farm
The need to address food security has never been greater with the world’s population expected to increase to 9 billion by 2050. Do you think Malawi and indeed governments in the continent are showing adequate commitment to facilitate the application
of science and technology in agriculture?
There is a lot of enthusiasm to move in this direction but the lack of sizable farms and agricultural skills is a significant limitation. Both scale and skill have to be increased rapidly to ensure that Africa and the World benefit from the development of African agriculture. Africa Invest has the model approach that should be adopted to ensure all key stakeholders in agricultural production and the rural community benefit from the African Green Revolution.
