How agribusiness adds value to the mining industry in sub-Saharan Africa
Economic development. Mining companies are some of the biggest landowners in Africa, and as such have a unique opportunity to develop economic diversification strategies based on sustainable use of land and water resources.
Social protection. Agribusiness can play a key role in managing worker livelihoods throughout the life of a mine, as the number and type of mining jobs change. Agribusiness can:create job movement flexibility for mines when there is a need to flex labour; and, absorb or redirect newly unemployed workers as part of post-mine closure strategies.
Environmental and regulatory benefits. Agriculture can avoid or reverse habitat degradation and support soil and water management. This can support the consent-to-operate and reduce compliance costs.
Financial contributions. Mining projects can develop local supply chains and agribusinesses through their role as a buyer
Different solutions for mining companies depending on opportunity and location:
Own & Operate
Agriculture can be a standalone business within the company (e.g. Alcoa Farmlands has the same financial targets as other businesses).
JV’s & Partnerships
Mining companies can form a Joint Venture or partnership (e.g. AngloGold Ashanti is turning agriculture projects into profitable and sustainable ventures).
General support
Companies can use their competencies to support agriculture development (e.g. Paladin Energy programme in Malawi).
Lease land
Pastoral leases are common in Australia to support land-access and providing options (e.g. BHP Billiton, Rio Tinto, Northern Star Resources).
However, ImpactAgri is familiar with many agricultural projects across Africa, driven by mining companies, but that have yet to succeed. So, what are the key success factors to consider?
Managing Risk
While “greenfield” investments can be seen as too risky, with the right partners a ‘greenfield’ project can be less risky than an established operation in a poor supply chain.
Consider the entire value chain
Many investors looking for opportunities in food processing often overlook associated agricultural projects providing inbound supply for the plant.
Size & Aggregation
Global capital needs to more effective in considering farms at the 500ha – 10,000ha within the portfolio. This includes developing more effective models for aggregation. It cannot focus solely on established operations at scale or farms over 50,000Ha farms; which are unlikely to be socially or politically acceptable in the long term.
Scalability
A more systematic approach for assessing plans for rapid scale-up once proof of concept has been demonstrated needs to be developed.
Blended Finance
There are many sources of finance. Often these can be overlooked. Projects need to consider the role of vendor finance, development finance institutions and impact investors among others. People need to have a holistic view of the project and consider where an additional type of funding can leverage both commercial and social impacts of the investment in agriculture.
