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October 24, 2011

UK's CDC to invest in African agribusiness


Farming and agribusiness in sub-Saharan Africa will receive a significant boost as CDC, the UK’s development finance institution, announced a $20 million investment in the sector. CDC’s investment will back farming businesses in Zambia, Tanzania, Malawi, Mozambique and Uganda and help them expand agricultural production and improve food security in the region.

CDC, which invests in promising businesses in Africa and South Asia, is committing $20 million to the Silverlands Fund, an investment fund which will go on to provide capital and expertise to locally-run, commercial farms which often struggle to raise the necessary backing to help them grow.

The Silverlands fund will largely invest in primary agriculture by targeting farms producing crops such as grains, soya, fruits, vegetables, sugar, tea, and coffee. Capital will also go into the processing and marketing of produce as well as into businesses making agricultural machinery and equipment.

The fund also operates a pioneering scheme which supports local small-scale farmers by linking them up to the operations of Silverland’s bigger farms giving them access to larger markets, as well as seed and fertilizer, education and technical assistance.

Rod Evison, CDC’s Acting CEO and Managing Director, Africa said, “Increasing financing for farms and making the commercial agribusiness sector more efficient are vital if African countries are to increase food production and move away from being net importers of staple foods. While global demand for food rises, the amount of agricultural land in production in Africa has barely increased since the mid-1960s.”

The Silverlands fund, which is managed by SilverStreet Capital, is aiming to raise a total of $300 million for investment in up to 15 agribusinesses across the main fertile growing areas of Central and Southern Africa. The fund, which is one of only a tiny number of private equity fund investing in African agribusiness, has attracted backing from other development finance institutions such as Finnfund, as well as large European pension funds.

While the main investment focus of the fund will be on primary farming, CDC’s capital may also back businesses that process and market farm produce; provide farming services and equipment and offer agricultural financial services in order to support the wider agricultural sector.

Evison added, “For countries in Central and Southern Africa it is often possible with the help of better irrigation to have two crops a season. We’re encouraged that Silverlands will focus on improving irrigation systems which will mean higher yields and will provide insurance against drought.”

Silverlands is also pioneering a new way of supporting cooperation between neighbouring small-scale farmers and existing large, commercial farms. Commercial farms will function as hubs where local small-scale farmers can receive crop fertilisers, education, technical assistance, and compensation for their harvest. The fund’s goal is to reach 100,000 small farmers in each country of operation over 10 years, which would lead to an estimated increase in total food production of 2.8 million tons per year.

CPI Financial

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