VENTURE: Sanlam Goes for Agri-Business
Recent Western Cape Business News
IT would seem Stellenbosch-based PSG’s venture into agri-business investment (via Zeder Investments) has caught the institutional imagination.
Last month Bellville-based financial services giant Sanlam launched a R700 million private equity fund – the Agri-Vie Fund - that will target agribusiness opportunities in sub-Saharan Africa. The fund will be operated in conjunction with investment group Strategy Partners.
Strategy Partners – headed by turnaround expert Johann Pieterse – has been involved in agri-business ventures in the recent past, including New Farmers Development Company, Tuinroete Agri and Agri1 Agribusiness Investment Fund.
Like Zeder’s CEO Antonie Jacobs, Pieterse also has a wine industry background – albeit short-lived in the form of Cape Coastal Vitners (whose American ambitions never quite came off as envisaged).
The Agri-Vie fund differs somewhat to PSG’s popular Zeder initiative. While Zeder takes strategic stakes in agribusinesses (like KWV Limited, Pioneer Foods and Capespan), the Agri-Vie Fund will focus on entrepreneurs involved in the agribusiness value chain rather than directly in the farming industry.
This means Agri-Vie will chase opportunities in value added components of agriculture like the processing and marketing of farming outputs such as food, beverages and other products.
Agri-Vie will also focus on opportunities outside SA, which - to date - Zeder has not done.
According to a press statement, Agri-Vie offers an opportunity for potential investors to tap into this growing African market.
The fund kicked off with some strong support collecting R330 million from institutional investors as well as development finance institutions (including the Development Bank of Southern Africa and the Iindustrial Development Corporation).
The fund will remain ‘open’ to investors until May 2009.
Some observers, though, may feel that Agri-Vie has missed out on the cream as seemingly Zeder/PSG has snapped up the most attractive agri-businesses opportunities over the last four years.
Not so reckons Sanlam Private Equity CEO Pieter Kriel. He points out that agribusiness remains the mainstay of the economy in most sub-Saharan countries.
He adds that on average the gross domestic products in sub-Saharan Africa have grown between six and seven percent in the past three years and the number of democracies has more than doubled since 1999.
“The resultant effect is that these countries offer exceptional opportunities for investors.”
Agri-Vie’s management will be led by Herman Marais of Strategy Partners with executives from Sanlam Private Equity and a women-led agricultural investment group, Makotulo Agricultural Company, filling the other board seats.
Marais believed that Agri-Vie is a true business partner for agribusiness entrepreneurs. “The fund contributes risk capital and management know-how to fully unlock the potential of businesses.”
He says that over and above the opportunities associated with the prevailing global food and commodities cycle, there is a growing demand globally for various African exports.
These included organically grown vegetables, fruit and flowers, processed natural fibre for industrial applications as well as natural supplements and health products.
He stresses, though, that there are numerous existing agri-enterprises across the African continent which are not performing to their potential - mainly as a result of lack of access to capital, limited market knowledge and infrastructure limitations.
“We aim to be a catalyst to unlock this potential to the advantage of the enterprises concerned, their host communities and the fund’s investors. We believe that sustainable development is best brought about by the disciplines of investment rather than aid grants.”
Marais suggests the fund has found a niche in Africa and is already experiencing healthy transaction flow. “We have had significant interest from international investors and have formed a parallel structure to the South African portion of the fund – a separate entity domiciled in Mauritius, which is focused on investment in sub-Saharan countries outside of South Africa.”
Marais says Agri-Vie is already evaluating more than 20 possible investments in SA and the Mauritius structure of the fund is looking at a similar number in countries such as Botswana, Tanzania, Uganda and Kenya.
While Agri-Vie and Zeder have taken very different tacks, CBN wonders whether there could be scope for co-operation (or even a merger) down the line. Naturally it will be fascinating to see at the end of May 2009 who the mainstay investors are in Agri-Vie. Perhaps PSG will be amongst that number? After all, Sanlam already holds a significant minority stake in Zeder…
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