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July 03, 2008

Escalating food prices lure investors to Africa's agriculture sector

Rising prices are luring an increasing number of private investors to Africa's food sector, where they are convinced of making profits -- for the first time in decades, a media report said today.
Commercial banks, charities and governments have set up funds worth hundreds of millions of dollars over the past few years to invest in private farm and food projects in Africa, while several major companies have expanded operations there, the leading financial daily Wall Street Journal said.

Vast lots of empty, arable land, rising food prices and, since 2001, zero tariffs for exports from poor countries to the lucrative European Union market are some of the factors that make the African food sector look like a business opportunity, the Journal quoted private investors as saying.

Rising fuel costs are also driving up cost of imported foods, making local production more competitive in Africa.

Most of last year's USD 36 billion of foreign direct investment in Africa went the continent's rich mineral resources, such as oil, copper and diamonds, while actual investment in farming was too small a fraction to count separately, it said, quoting a statement from the UN Food and Agriculture Organization.

However, the UN agency has pointed out that there is a clear upward trend in the amount.

Rabobank Group, the Dutch bank that provides loans, recently opened a USD 75 million fund to invest in developing-world agriculture, especially in Africa. Besides, French banks, including BNP Paribas SA and Credit Agricole SA, have similar plans, the Journal said.

The UK, Germany, the Netherlands and Belgium have started state-backed funds with amounts to spend ranging from tens to the hundreds of millions of dollars. The funds focus on giving low-interest loans or grants to private businesses, it added.


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