Farms Of Sub Saharan Africa Are The New Frontier For Brave Investors

Farms Of Sub Saharan Africa Are The New Frontier For Brave Investors

Written by Anne White | From The Telegraph

For private equity houses, pension funds and family offices, the sprawling farms of sub Saharan Africa are the new land of plenty.

Supply is limited, due to patchy infrastructure and transport coverage, and the risks are high, but for those brave enough the long-term rewards could be bountiful.

Investors such as Duxton, a private equity-type fund that was spun off from Deutsche Bank, SilverStreet, CVC and Altima Asset Management, have already ploughed money into Zambia, Tanzania and Kenya, where speculators can reap an income yield of 15pc to 20pc in five to seven years, in some cases.

British farmland attracted global money in the 1970s, followed by Denmark and Ireland, but these mature markets have become increasingly expensive. UK agricultural land costs $25,575 per hectare, for example, having risen 270pc in ten years, compared to $1,800 in Zambia. The African continent holds the world’s largest proportion of agricultural land, with 1.2m hectares and 94,500 farms, although a much smaller proportion is investable.

“Sub Saharan Africa is the final frontier of commercial market development,” explains James Cairns, an international agent a property group Savills. “It gives investors the chance to buy in at a low entry price and pioneer the creation of new farmland and develop large- scale operations from an early stage.”

Both the yield and underlying capital growth, as a result of improving farm facilities, and long-term increase in land values, are also a draw.

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The south-easterly strip of Africa provides enough land for the growing global appetite for meat, with investors picturing large-scale operations that will cater for firstly domestic demand, as the lower middle class in Africa expands, and then the export potential to the rest of the world.

By the year 2020, the global population is expected to reach the 8bn mark, by 2050 the 9bn mark [UN Medium Projections], as the world grows by 80m people a year, pushing up food consumption.

Urbanisation and increasing incomes in highly-populated regions, particularly in China, have led to a drift towards a more protein-based diet. But with it taking 21 times more farmland to produce the same amount of meat compared to rice, the need for farm-quality land in areas close to emerging economies is greater than ever.

“The surge of interest in global farming is being driven by a change in the diet in south-east Asia, the macro population boom and an increase in the global consumption of premium meat,” explains Cairns.

Read more at The Telegraph