Access to investments

For farmers all across Africa, accessing capital to improve yields is a constant frustration. As business solutions to poverty and food security have come to the fore in international development, the plight of Africa’s farmers seeking capital is nothing new. At the same time, while not capturing nearly as much attention, investors on the other side of the table face the very same obstacles.

Stung by recent financial turmoil related to opaque and complex investments with weak if any ties to real value creation, a growing body of investors are looking for simpler opportunities that create real value on the ground—social as well as financial value. Institutional Investor magazine recently featured SilverStreet Fund, a London-based private equity fund looking to create value on the ground by helping cultivate more value from the ground:

Although Africa possesses roughly one third of the world’s arable land and some of its best soil, it suffers from chronic food shortages. Most farmers have little access to high-quality seeds and fertilizer and don’t know how to prevent erosion and nutrient depletion. More-sustainable practices, [Founding Partner Gary] Vaughan-Smith contends, can produce tremendous yields: On commercial farms in parts of Zambia, corn output rivals that in the U.S.

To make the most of their investments, SilverStreet is also funding agricultural training centers, in partnership with an NGO, to complement financial capital with local intellectual capital—a poignant example of business and civil society coming together to solve problems. Besides addressing chronic food shortages, it’s also a pretty sweet investment deal for SilverStreet—“A hectare in Zambia sells for $1,500, says Vaughan-Smith, compared with $9,600 for a comparable-size plot in the U.S. corn belt.” That’s land with potential for globally competitive yields, at one-sixth the cost.

Yet even at such a bargain price, deals remain difficult to find. Corrupt and dysfunctional business environments render formal property systems ineffective in many countries, adding significant obstacles to the search for land or landowners prepared for long-term investment in agricultural capacity.

“Buying land in Africa is very inefficient,” [Vaughan-Smith] says. “There is no way to go into a central database and see which farms are for sale, and for what price — you have to have a very good network of contacts in the country and an ability to source potential acquisitions.”

While farmers need access to capital, investors need access to investments. Dysfunctional and opaque business environments hinder access to either side of the investing table; reserving investment opportunities for the most corrupt or politically-connected, and discouraging many others. As much capital as foreign investors or international donor organizations are willing to make available, capital won’t go far if it must navigate such muddy waters.

Wealthy foreign investors and poor African farmers clearly share a stake in improving the business environment. Perhaps in supporting the grassroots advocacy work of African private sector organizations, they can also share a voice in doing so. How’s that for international solidarity?