NEW PRIVATE EQUITY FUND LAUNCHED TO INVEST IN AGRIBUSINESS IN AFRICA

A new R700-million private equity fund has been launched with the aim of investing in the buoyant agribusiness sector across sub-Saharan Africa. The Agri-Vie Fund, formed by Sanlam Private Equity and the investment group Strategy Partners, will focus on entrepreneurs involved in the agribusiness value chain, rather than directly in the farming industry. It offers an opportunity for potential investors to tap into this growing African market and gives strategic assistance to the owners of agri businesses.

The fund recently had its first close at R330-million, with initial investments from the insurance industry and development finance institutions such as the Development Bank of Southern Africa (DBSA), Industrial Development Corporation (IDC) through the Risk Capital Facility - a fund established by the European Community and the government of South Africa and managed by the IDC - and the US-based Kellogg Foundation. The fund is open to other investors until May 2009.

Pieter Kriel, chief executive of Sanlam Private Equity, said that agribusiness is the mainstay of the economy in most sub-Saharan countries. “On average the gross domestic products in sub-Saharan Africa have grown between six and seven percent in the past three years and the number of democracies has more than doubled since 1999. The resultant effect is that these countries offer exceptional opportunities for investors.”

The fund will look at businesses which offer value-added components along the agri-business value chain. “We will not invest in farms, but rather in the processing and marketing of farming outputs such as food, certain beverages and fibre products. By following the route of expanding the industry, it will ultimately create new growth opportunities for existing and emerging farmers. In addition, Agri-Vie's mandate includes investment into ecotourism in the context of integrated rural development,” said Kriel.

Emile du Toit, the divisional executive for private equity at DBSA said, “Agribusiness is an important contributor to economic growth in the region and is poised for significant expansion. Given the significant lack of equity risk capital to finance agribusiness transactions, the DBSA’s participation in this fund allows it to play a catalytic role in developing financial infrastructure to provide access to much needed long-term risk capital in this critical sector.”

Du Toit added that sustainable investment in agriculture can make a significant contribution to socio-economic development, in keeping with DBSA’s development mandate. “I believe that several countries on the continent have comparative advantages in agriculture, which provide a logical base for economic growth.”

Agri-Vie investors have appointed an active management structure, led by Herman Marais of Strategy Partners, which comprises members from Sanlam Private Equity and a women-led agricultural investment group, Makotulo Agricultural Company, among others.

Marais said that Agri-Vie is a true business partner for agribusiness entrepreneurs. “The fund contributes risk capital and management know-how to fully unlock the potential of businesses.”

He said, “Over and above the opportunities associated with the prevailing global food and commodities cycle, there is growing demand globally for various African exports such as organically grown vegetables, fruit and flowers, processed natural fibre for industrial applications as well as natural supplements and health products. However, there are numerous existing agri-enterprises across the African continent which are not performing to their potential - mainly as a result of lack of access to capital, limited market knowledge and infrastructure limitations.

“Agri-Vie aims to be a catalyst to unlock this potential to the advantage of the enterprises concerned, their host communities and the fund’s investors. Agri-Vie believes that sustainable development is best brought about by the disciplines of investment rather than aid grants.”

Kriel said that the fund had a strong empowerment focus. “Our involvement was partly spurred by the Financial Sector Charter which designates agri as an area of ‘targeted investment’. Both Sanlam Private Equity and Strategy Partners truly believe in the business and investment potential of agribusiness in South Africa and on the continent and are delighted to be playing a role in realising it. The South African portion of the fund was started with the express purpose of empowering agri-businesses and playing a key catalyst role for BEE in the agribusiness sector.”Agribusiness women such as Ntombi Msimang and Jean Davidson are among the directors of the Makotulo Consortium. Kate Moloto, a shareholder in Agri-Vie’s investment management structure, says “Women are far behind with regard to participation as owners and managers in agribusiness. Through Agri-Vie, we intend to make a meaningful contribution to empowering women in this sector.”Marais said the fund had found a niche in Africa and was already experiencing healthy transaction flow. “We have had significant interest from international investors and have formed a parallel structure to the South African portion of the fund – a separate entity domiciled in Mauritius which is focused on investment in sub-Saharan countries outside of South Africa. We are already evaluating more than 20 possible investments in South Africa and the Mauritius structure of the fund is looking at a similar number in countries such as Botswana, Tanzania, Uganda and Kenya.”

Biotech Crops Experience Remarkable Dozen Years of Double-Digit Growth

After a dozen years of commercialization, biotech crops are still gaining ground with another year of double-digit growth and new countries joining the list of supporters, according to a report released today by the International Service for the Acquisition of Agri-biotech Applications (ISAAA). In 2007, biotech crop area grew 12 percent or 12.3 million hectares to reach 114.3 million hectares, the second highest area increase in the past five years.

In addition to planting more biotech hectares, farmers are quickly adopting varieties with more than one biotech trait. These “trait hectares” grew at a swift 22 percent, or 26 million hectares, to reach 143.7 million hectares – more than double the area increase of 12.3 million hectares. New crops were also added to the list as China reported the plantation of 250,000 biotech poplar trees. The insect-resistant poplar trees can contribute to reforestation efforts.
Further, 2 million more farmers planted biotech crops last year to total 12 million farmers globally enjoying the advantages from the improved technology. Notably, 9 out of 10, or 11 million of the benefiting farmers, were resource-poor farmers, exceeding the 10-million milestone for developing countries for the first time. In fact, the number of developing countries (12) planting biotech crops surpassed the number of industrialized countries (11), and the growth rate in the developing world was more than three times that of industrialized nations (21 percent compared to 6 percent.)

“With increasing food prices globally, the benefits of biotech crops have never been more important,” said Clive James, chairman and founder of ISAAA and the report’s author. “Already those farmers who began adopting biotech crops a few years ago are beginning to see socio-economic advantages compared to their peers who haven’t adopted the crops. If we are to achieve the Millennium Development Goals (MDGs) of cutting hunger and poverty in half by 2015, biotech crops must play an even bigger role in the next decade.”
According to the report, biotech crops have delivered unprecedented benefits that contribute toward the MDGs, particularly in countries like China, India and South Africa. The potential in the second decade of biotech crop commercialization (2006-2015) is enormous.

Studies in India and China show Bt cotton has increased yields by up to 50 percent and 10 percent, respectively, and reduced insecticide use in both countries up to 50 percent or more. In India, growers increased income by up to $250 (Rs 10,000) or more per hectare, increasing farmer income nationally from $840 million to $1.7 billion last year. It is noteworthy that for the six year period 2002-2007, there was a 125 fold increase in Bt cotton in India – this is four times the 67 fold increase for global biotech crops during the 12 year period 1996-2007. Chinese farmers saw similar gains with incomes growing an average of $220 per hectare, or more than $800 million nationally. Importantly, these studies showed strong farmer confidence in the crops with 9 of 10 Indian farmers replanting biotech cotton year on year, and 100 percent of Chinese farmers choosing to continue utilizing the technology.
While these types of economic benefits are well substantiated, the welfare benefits associated with biotech crops are starting to emerge. A study of 9,300 Bt cotton and non-Bt cotton-growing households in India indicated that women and children in Bt cotton households have slightly more access to welfare benefits than non-Bt cotton growers. These include slight increases in pre-natal visits, assistance with at-home births, higher school enrollment for children and a higher proportion of children vaccinated.

Mrs. Aakkapalli Ramadevi, is a woman subsistence farmer from Andhra Pradesh, who laboriously tills 3 acres (1.3 hectares), and is typical of a small and resource-poor farmer in India who has benefited from Bt cotton. Before the advent of Bt cotton she said “The yields were very low and we used to incur losses, so we were perpetually losing money – my entire family had to stay in the farm and we had to spend 50% of the yield on pesticide alone”. After planting Bt cotton for two years she says, “Finally, cotton cultivation has actually turned profitable.”
“It’s these types of benefits that will make crop biotechnology a vital tool in achieving the U.N. Millennium Development Goals of cutting hunger and poverty in half and ensuring a more sustainable agriculture in the future,” James said. “To reach these goals, a continued broadening and deepening of biotech crop use is crucial to meeting food, feed, fiber and fuel needs in the future.”

In 2007, the United States, Argentina, Brazil, Canada, India and China continued to be the principal adopters of biotech crops globally. While the United States continues to be the largest user of the technology, its biotech crop area represents a declining share of the global area due to a broadening adoption. [Editor’s note: see ISAAA Country Fact Sheet for additional detail on specific countries.">

“With a dozen years of accumulated knowledge and significant economic, environmental and socio-economic benefits, biotech crops are poised for even greater growth in the coming years, particularly in developing countries that have the greatest need for this technology,” James said.
According to the report, Burkina Faso, Egypt and possibly Vietnam are the next mostly likely countries to approve biotech crops in the near term. Australia is field-testing drought-tolerant wheat and two states recently lifted a four-year ban on biotech canola.

The story of Bt cotton in India is remarkable. In 6 years from 2002 to 2007, the productivity of cotton almost doubled, insecticides use cut in half and the country was transformed from a cotton importer to a significant exporter. India has recognized the importance of using biotechnology to make the country self-sufficient in food grains with the first biotech food crop, biotech eggplant, expected to be approved in the near-term. The Indian Finance Minister recently articulated the strong political will in India for biotech crops. Dr. P. Chidambaram said, “It is important to apply biotechnology in agriculture. What has been done with cotton must be done with food grains.”

Future prospects for biotech crops globally look very promising. “I predict the number of biotech countries, crops, traits, area and farmers will all grow substantially in the second decade of adoption,” James said. “More developing countries are likely to approve the technology as it’s now possible to design regulatory systems that are rigorous without being onerous given their limited resources. The current delay in timely approvals of biotech crops like golden rice with benefits for millions is a moral dilemma where the demands of regulatory systems have often become the end and not the means.”

The report is entirely funded by the Rockefeller Foundation, a U.S.-based philanthropic organization associated with the Green Revolution; Ibercaja, one of the largest Spanish banks headquartered in the maize growing region of Spain; and the Bussolera-Branca Foundation from Italy, which supports the open-sharing of knowledge on biotech crops to aid decision-making by global society. For more information or the executive summary you may contact ISAAA South Asia office at b.choudhary@isaaa.org or log on to www.isaaa.org.

The International Service for the Acquisition of Agri-biotech Applications (ISAAA) is a not-for-profit organization with an international network of centers designed to contribute to the alleviation of hunger and poverty by sharing knowledge and crop biotechnology applications. Clive James, chairman and founder of ISAAA, has lived and/or worked for the past 25 years in the developing countries of Asia, Latin America and Africa, devoting his efforts to agricultural research and development issues with a focus on crop biotechnology and global food security.

ISAAA Country Fact Sheet
• India: For the third consecutive year, India experienced the highest proportional increase in 2007 of any country in the world with a 63 percent gain to total 6.2 million hectares of Bt cotton, grown by 3.8 million resource-poor farmers – this is an increase from 3.8 million hectare of Bt cotton area grown by 2.3 million farmers in 2006. These gains have taken India from having one of the lowest cotton yields in the world to being a net cotton exporter, potentially 5 million bales in 2007/2008. At a national level, Bt cotton is a major factor contributing to higher production which is increased from 15.8 million bales in 2001-02 to 31.0 million bales in 2007-08, almost a doubling in a short period of 6 years. In addition, India overtook the USA to become the second biggest cotton producing country in the world, after China. Subsistence farmer Mrs. Aakkapalli who grows 1.3 hectares of cotton in Andhra Pradesh said that before the advent of insect-resistant cotton, “We were badly off and unable to afford anything properly. Finally cotton cultivation has actually turned profitable.”

• China increased Bt cotton production by 0.3 million hectares to total 3.8 million hectares, 69 percent of the country’s cotton area. A total of 7.1 million resource-poor farmers planted the biotech crop. Further, China has 3,500 hectares of virus-resistant papaya and 250,000 Bt poplar trees which can contribute to reforestation.

• Brazil experienced the greatest absolute growth at 3.5 million hectares to total 15 million hectares of herbicide-tolerant soybeans and Bt cotton. These numbers are predicted to climb with the expected final approval and planting of biotech maize in 2008/2009. Brazil is fast emerging as a global leader in biotech crops with significant potential of applying the technology to sugarcane for ethanol production. Brazil has the largest area sugarcane globally at 6.2 million hectares.
• South Africa, the only country in Africa planting biotech crops, increased plantings 30 percent in 2007 to total 1.8 million hectares. Notably, nearly all growth came from white maize for food. Chief Mdutshane of Ixopos calls Bt white maize “iyasihluthisa” meaning “it fills our stomachs.” “For the first time the Ixopos have produced enough to feed themselves.”
• Europe surpassed 100,000 hectares of biotech crops for the first time in 2007 with 77 percent growth. In EU, 8 of the 27 countries planted biotech crops in 2007, up from 6 in 2006. Spain led the way with 70,000 hectares of Bt maize, up 40 percent over 2006 to reach 21 percent of the country’s total maize area. The collective Bt maize area in the 7 other countries – France, Czech Republic, Portugal, Germany, Slovakia, Romania and Poland – increased four-fold from 8,700 hectares in 2006 to 35,700 hectares in 2007, albeit on modest areas.
• Poland planted biotech crops for the first time and Chile joined the list to total 23 countries enjoying the benefits of these crops in 2007.

Biotech Crops’ Contribution to U.N. Millennium Development Goal
and a More Sustainable Agriculture

As the U.N. Millennium Development Goal nears, it is useful to look at biotechnology’s contribution toward the goal of reducing poverty and hunger by 50 percent by 2015, and to a more sustainable agriculture in the future.

o Increasing global crop productivity to improve food, feed and fiber security and sustainability: In the first 11 years of biotech crops, yield gains in the key commodities were valued at $34 billion. Production increases will continue with the introduction of the very important drought-tolerant crops in the next decade, as well as more nutritious crops like soybeans enhanced with omega-3 oils and rice with enriched vitamin A content.

o Contributing to the alleviation of poverty and hunger: 50 percent of the world’s poorest are small farmers and another 20 percent of the rural landless are dependent on agriculture. Already biotech cotton and biotech white maize are contributing modest socio-economic benefits to these groups. The expected near-term approval of Bt eggplant in India and potential for biotech rice in China would substantially further these efforts.

o Reducing the environmental footprint of agriculture: Already biotech crops have cut pesticide use, decreased carbon dioxide emissions and saved fossil fuel use due to less tillage and spraying. In 2006, biotech crops saved 14.8 billion kg of carbon dioxide, equivalent to removing 6.5 million cars from the road. In the next decade, crops with increased drought tolerance will help limit water use and greater nitrogen efficiency will help improve use of this important nutrient.

o Mitigating climate change and reducing greenhouse gases: Biotech crops already contribute to reduced carbon dioxide emissions. Biotech crops that can be developed faster to meet more rapid changes in climate are in development. Further, use of biotech poplar trees, already planted in China, and faster growing trees that are in development can make a substantial contribution in the world’s need for quick re-forestation to help mitigate the effects of global warming.

o Contributing to the cost-effective production of biofuels: Biotech crops help optimize the crop and biomass production per hectare to help supply the world’s demands for more affordable food, feed fiber and biofuel products.