11 Feb Is Impact investment the way forward for Africa's Agricultural sector?
Impact investing is fast becoming an important vehicle for economic development in South Africa. A 2015 report by the Global Impact Investing Network (GIIN) indicates that South Africa has emerged as the hub for social impact investments within the SADC region.
Linda Ensor on a Business Day article, says “The global market for impact investing has grown considerably over the past decade. According to one study, assets under management for impact investing at the end of 2018 were estimated at $502bn. Further, it showed that out of 1,340 investor types, 64% were asset managers, with only 20% foundations and 2% development finance institutions.
Furthermore, about 50% of impact capital was from asset managers, indicating a shift from traditional donor and development finance institutions to asset managers, who traditionally sought financial returns only.”
The country accounted for three-quarters of all impact capital invested in Southern Africa, amounting to almost $5 billion. Among the key sectors, investors are interested in are smallholder agriculture commercialization schemes. This is ample testimony of the promise and potential smallholder agriculture holds for both investors and small scale farmers.
Nevertheless, there is an apparent lack of nexus between investor appetite and the types of investments on the ground; usually early-stage businesses. Investors looking to venture in agriculture in South Africa have to appreciate that it is a very viable sector to invest in, despite its nascent state. Early-stage businesses also need to prepare in terms of capacity and scalability to embrace the exponentially growing interest in the sector. This is the future opportunity Bokamoso Impact Investments has strategically positioned itself to seize in the medium to long term.
Impact investment examples abound. One of such is the Futuregrowth Agri Fund SA. The PIC invested R700m in agricultural land together with Old Mutual (R762m) through a fund managed by Futuregrowth. The fund seeks to give investors solid financial returns by investing in farmland and agricultural infrastructure while creating jobs and alleviating poverty.
The growth of impact investing is unprecedented and cannot be ignored for the impact it is bound to have on the future of Agriculture in Africa.
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