Investment in African Ag
Investment in the agricultural sector of countries in Africa has been a hot topic of discussion the last several years, although the volume of investment compared to worldwide trends seems to have been relatively small. Movement on this investment front is continuing, but there hasn’t been much of an improvement in the risk involved.
In a late June ranking of country risk, only five countries were ranked as a low risk investment country—South Africa, Ghana, Botswana, Namibia and Mauritius.
The ranking of countries on the continent was produced by Euler Hermes, which asserts itself as the world’s leading provider of trade credit insurance, monitoring risks and opportunities for agriculture-related businesses throughout the world.
“For the last few decades, Africa has lagged far behind other world zones when it comes to foreign investments due to an overly high level of risk associated with the African economic and business environment,” explained Bruno Goutard, sector economist for France-based Euler Hermes’ Americas office.
“But the trends in global commodity markets (a middle-longterm price increase) have become strong incentives for investing in Africa. Nevertheless, in addition to the noticeable technical and management issues related to the agriculture sector, investors still have to deal with the challenging business and economic environment in a number of African countries.”
TANZANIA SELF PROMOTION
Even though some African countries are strongly encouraging investment, such as Tanzania, there are concerns. Tanzania has been issuing announcements begging for investors to check out its opportunities, but Euler Hermes recently ranked the country’s political and, therefore, its investor risk as medium/sensitive.
The Southern Agricultural Growth Corridor of Tanzania (SAGCOT) is a joint public-private initiative to boost agricultural output in the country, which is a prime agricultural zone of Africa. Information explains that SAGCOT is encouraging livestock, sugarcane and rice segment investment and development.
“Commercial investors in the corridor stand to gain from complementary investments by the government, donors and other private investors in infrastructure, input-supplies, herder training, finance and so on,” according to the promotional brochure from SAGCOT. How much is hype or over promise?
The Tanzanians know what to highlight with promises and claims. Overstating reality is normal for any government. The southern agricultural corridor seems like a miracle growing area—“major river systems; ample rainfall and sunshine hours; rich alluvial valleys for rice and sugar; rolling plains for maize, sisal, oilseeds, ranching; cool highlands for tea, coffee, horticulture; lush tropics for tree crops—cocoa, palm, timber.”