Managing risk in African agribusiness
Part 2: Managing Risk: African Agriculture offers huge potential but has not yet been realised. Now is the time for action.
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 500 Ha – 10,000 Ha within the portfolio. This includes developing more effective models for aggregation. It cannot focus solely on established operations at scale or farms over 50,000 Ha 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.
Author, David Lyon of ImpactAgri which creates and improves large scale, sustainable agricultural value-chains. ImpactAgri acts as both principal and project developer, also working globally, acting as advisors to major companies, investors and governments.