Agribusiness can play a critical role in responding to the human tragedy from COVID-19 and the resulting food insecurity
At the same time, the sector represents a key area of focus for investment: Since the onset of the pandemic, the market capitalization of many technology, energy, manufacturing companies in Africa and globally has declined by more than 30%; the commercial impact on in the agricultural sector has been lower. This repeats a pattern seen after the financial crisis in 2008 where agricultural assets performed well and were not correlated to bond markets and public listings.
Nevertheless, there are concerns that need to be addressed: there are shortages across many countries and there is a potential for prices soaring (as in 2007-8) when governments hoarded their basic commodities. At the same time, the weaknesses in many value chains are apparent; Even established chains are suffering: John Tyson, Chairman of Tyson Foods recently spoke of challenges of meat markets in the USA: “The food supply chain is breaking”.
Investors looking to respond to this trend during and post-COVID will need to focus on resilient value chains
At ImpactAgri we understand this to include:
- Balancing production of food for local food security as well as export crops in foreign currency.
- Developing transparent and shorter value chains (for example our work with shea butter ensures the women producers are much closer to the end-buyer than existing market structures)
- Incorporating storage and processing facilities to respond to price fluctuations and as a contingency for short term logistics disruption due to unplanned delays such as the pandemic
- Design businesses that are cash generative with good supplier and offtaker terms
- Using agritech and data to ensure the agribusiness is well prepared for future shocks (e.g. our businesses in low-cost, high throughput, accurate soil testing)
In summary, successful investments will be most likely to be conducted through agile, market-driven companies with a strong local and inclusive approach.
