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Opinion - Filling financing gap with agriculture investment funds

2020-10-15  Staff Reporter

Opinion - Filling financing gap with agriculture investment funds
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Agriculture is one of Namibia’s most important sectors and is a significant source of economic growth and industrial transformation. 
Most of Namibia’s population is dependent directly or indirectly on the agricultural sector for their livelihoods. 
As an investment asset class, agriculture offers attractive monetary returns. 
There is a positive correlation between agriculture investment and food price inflation, therefore, by investing in agriculture, you are hedging a portfolio against inflation. 

As a recent testament to this claim, during the Covid-19 restrictions, while other sectors were affected in the slowdown of economic activity, agriculture prices remained consistently robust. 
Agriculture investments have the benefit of diversifying a portfolio from public traded stocks, match the return profile of pension liabilities, and gives exposure to agricultural land, which is a finite resource. 
A growing world population and continued pressure to produce food will drive land prices and in doing so, investment returns. 

In many ways, investing in agriculture can be a strong and fruitful venture. 
There is no better asset to own than one that increases in value over the long term and keeps pace with inflation.
The social benefits of investing in the asset class has numerous advantages. 
The sector’s significance is largely because of a potential for growth, through increasing productivity to ensure food security, skills development, creation of employment and poverty eradication, export opportunities and reducing dependence on imports. In addition, agriculture is a catalyst to industrialization and encourages investment in infrastructure. 

Investment in agriculture is important because empirical evidence suggests that improved agricultural performance has the potential to reduce poverty, increase household incomes, make food affordable, and spur structural transformation, thereby contributing to overall economic growth and environmental sustainability.
Despite the importance and potential of agriculture in socioeconomic development, investment in the sector has been relatively limited. 

Multiple factors are responsible for the underdevelopment of agriculture and its low levels of investment, but risk is one common factor. 
However, with precise planning and oversight, these risks can be mitigated. 
Natural disasters can be managed through technology, greenhouses, and infrastructure. 
Hedging instruments can be implemented to manage exchange risks that directly impact inputs costs and the sale of export goods. 

Trade barriers remain a key risk but taking advantage of advantageous trade regulations should be a key input into structuring investments.
How to invest in the sector? Choose the right fund manager such as Eos Capital that will give access to a diversified agriculture fund instead of a single investment, one that is regulated and registered with Namfisa, and has the skill and experience within the agriculture sector. 

Accessibility to capital for emerging farmers is a key success factor for a strong future agriculture sector, and Eos Capital, Namibia’s leading private equity firm, is committed to the growth and development of Namibia and the surrounding region through meaningful investments and progressive impact.

The Euphrates Agriculture Fund aims to bring about an agriculture renaissance in Namibia. Its mission is to facilitate the industrialization of the agriculture sector, deliver social impact and provide medium term returns to investors. Through its patient and responsible investment in efficient local value chains it will improve food security and provide additional employment and income to farmers, entrepreneurs, and labourers alike. 
Eos Capital’s strategy and decision for launching the Euphrates Agriculture fund is to address the challenges faced by the agriculture sector in Namibia, and to focus on boosting its productivity and sustainability by means of an unlisted manager solution. Want to find out more? 

*Frederico van Wyk is a Senior Associate at Eos Capital. He has extensive knowledge and experience in the agriculture sector and is committed to the growth and development of Namibia.

2020-10-15  Staff Reporter

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