Futuregrowth Sows Investment into Africa

Mike Cohen

FUTUREGROWTH Asset Management, a unit of Old Mutual that oversees R110 billion in fixed income investments, is buying farms in Africa to benefit from surging food prices.

Futuregrowth’s United Farmers’ Fund has spent R450 million buying nine fruit and vegetable farms in South Africa since December 2010.

It was considering investing in a cattle ranch in Botswana, a coffee plantation in Ethiopia and fruit and vegetable farms in Burkina Faso, Morocco and Senegal, said Duncan Vink, a managing director at the fund.

“There is a big pipeline coming” with the fund planning to grow its assets to about $500m (R4.1bn), Vink said last week.

“The investment thesis is there. There will be increasing food scarcity long term, a growing worldwide population.”

Maize surged to a record $8 a bushel (R2 580 a ton) in Chicago last week as the worst drought in 50 years scorched crops in the US, the largest grower, increasing concerns about grain shortages. World demand will total 878 million tons this year, more than the expected harvest of 864 million tons, the International Grains Council estimates.

Futuregrowth seeks to generate returns of at least 10 percent more than South Africa’s annual inflation rate, which was 5.5 percent in June, from its farms, which are leased out.

The company’s move to buy agricultural land in Africa tracks an investment push led by China, India, Malaysia and Indonesia that is being driven by concerns about food security and rising grain prices.

About 45 million hectares of farmland were leased in the two years to 2009, compared with an average pre-2008 rate of 4 million hectares a year, the World Bank said in a September 2010 report.

More than 70 percent of the deals were in Africa, most of them in Sudan, Mozambique, Liberia, Ethiopia, Nigeria and Madagascar.

The sales of large tracts of land to foreigners has sparked protests in Madagascar and accusations from advocacy groups such as the Oakland Institute in California that African communities are inadequately consulted and are being forcibly evicted to make way for investors.

“We do fairly small and intensive farming,” said Vink, whose fund re-insures its projects with the World Bank’s Multilateral Investment Guarantee Agency.

“It’s not large tracts of land. Governments in most countries we engage with are very open to investment.” – Bloomberg