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Thursday, June 5, 2008

The global food crisis could catalyze Africa's Green Revolution

The global food crises could trigger massive investment inflows into Africa's struggling agricultural sector.  A battery of big private investors plan to consolidate small plots of land into more productive large ones, to introduce new technology and to provide capital to modernize and maintain grain elevators and fertilizer supply depots. These new investments will accelerate the modernization, technology transfer and enhance the efficiency of Africa's agricultural production systems. This could herald a green revolution in Africa.

Perhaps the most ambitious plans are those of the london based Emergent Asset Management. Emergent is raising $450 million to $750 million to invest in farmland in sub-Saharan Africa, where it plans to consolidate small plots into more productive holdings and introduce better equipment. Emergent also plans to provide clinics and schools for local labor. The money will go into Emergent’s new African Land Fund (ALF), to be managed in a joint venture with South Africa-based Grainvest.

The fund's aim is initially to invest in 12 countries including South Africa, Namibia, Mozambique, Botswana, Zimbabwe, Angola, Tanzania, Zambia and Kenya and grow a variety of crops including wheat and maize. The fund also plans to invest in jatropha, an oil-seed plant useful for biofuels that is grown in sandy soil unsuitable for food production. This will be a source of fuel for farming operations.


BlackRock fund group in New York is also planning to invest hundreds of millions of dollars in agriculture, chiefly farmland, from sub-Saharan Africa to the English countryside. Last October, the London branch of BlackRock introduced the BlackRock Agriculture Fund, aiming to raise $200 million to invest in fertilizer production, timberland and biofuels. The fund currently stands at more than $450 million.

Why Africa? Land values in Africa are very low, compared to other agriculture-based economies. There’s accessible, cheap labour. Africa has a broad range of agro-ecologies. This provides a diverse range of microclimates which permit cultivating a large diversity of crops. Logistics will present some huge challenges. But there is opportunity here to improve and expand road and railway networks as well as modernize Africa’s sea ports.

These big investors could bolster food production at a time when the world needs more of it.

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