Presentation on theme: "The world faces enormous issues and needs huge solutions. If mankind can resource war, let alone US$1trillion (a thousand billion) of bank bail-outs, it."— Presentation transcript:
The world faces enormous issues and needs huge solutions. If mankind can resource war, let alone US$1trillion (a thousand billion) of bank bail-outs, it can also resource US$13.3billion to deal once and for all with food security and the transformation of Sub-Saharan Africa. Our investment approach is beyond ethical, beyond socially responsible: this is Transformational Investing.
The Good News AFRICA-Agri Asset Management is a wholly owned brand of cru Investment Management plc
What is the role of investment in the world? “The more I see of investment markets and the more I meet with the people in them there is definitely something amiss. Money is so centre stage that it has become the only reason for investing. Whatever faith you hold it supports a belief mechanism to yourself – rarely will this belief system focus on accumulation of money as the key value driver. So investment has to reflect you, your values, your life goals, your obligation in faith.” The current motivation for the vast majority of investors is to gain a return on their capital in order to secure their financial futures and meet their financial obligations. However, a growing number of people are concerned that their investments are not used to support causes that they see as unethical We believe that there is a greater role for investment in the world, and that investors can use their wealth for a greater purpose – not only to secure their own financial future, but also to transform the world around them. Reward is more than just the monetary return on your investment Business enterprise is key to addressing global poverty. When we invest in the stock market, we are usually simply transferring wealth from one wealthy individual to another, however, when we invest in business enterprise, we have the potential to transform the immediate and long term future of a generation
Sub-Saharan African statistics make grim reading Sub-Saharan Africa population: 806 million Rural population:580 million Number of rural population in absolute poverty (income below $1.25 daily):403 million Number of malnourished180 million Under-5 mortality rate:16% (4.7 million deaths annually) (Children that die before 5th birthday) Infant mortality rate:10% (Children that die in infancy) Neonatal mortality rate5% (Mothers that die in childbirth) UN Human Development Report measures all 177 countries in the world on life expectancy, educational attainment and adjusted real income. The bottom 22 countries are all in Sub-Saharan Africa. Source: UN; World Bank; UNICEF 2008 “Worse still, there may come a time when there simply is not enough food to cope with an African disaster. Can we really cope with images of millions dying of starvation, not for lack of money, but because there physically is no food for money to buy. I want to impress on you Africa’s vulnerability to climate change. The farmer sows his seed, the rains come, but stop. The seed germinates, but then dies. This is the simple beginning of famine, and believe me, the world has no answer to this.”
Aligning our agricultural enterprise to global issues 1. Global Food Security The issue of food security is now uppermost in the global community. For too long we have believed that the food will just be there. As the chart shows, demand for food is rising rapidly. The demand side issues are not going to reduce and can only strengthen. Over 400,000 births take place everyday and life expectancy around the world is rising. By 2030, the global population is estimated to have risen by 3 billion, an increase of 50% on today’s population. Urbanisation is rising just as fast, with 50% of the world’s population currently urbanised, and this forecast to increase to 80% by 2030. The world needs very big ideas on food supply. “The world has now discovered it is running out of food. The problem runs even deeper. The world is actually clueless as to what food is being grown and where it is. This is because the produce of 400 million little farmers is only known to those farmers. There is no central plan, there is no co-ordination of farming. Food production is in a state of anarchy. This supports the need for mega farms, because through them, we regain certainty of the availability of food.”
Aligning our agricultural enterprise to global issues 2. Africa’s potential in food production Sub-Saharan Africa is blessed with massive land, plentiful access to sufficient irrigation, and year round sunshine. She has the agricultural potential to become one of the world’s leading providers of food. Our aim is to help establish her in this light, where she is seen as a contributor to the world, rather than a burden. 3. Africa’s poverty Tony Blair referred to this as the scar on the face of mankind – he is right. The need for Africa to step up to the role as contributor to global food security, is, by its very nature, poverty reducing on a large scale. 4. The rising cost of staples in poor African countries Many African countries lack internal food security, and have to import food. Because of the rise in the oil price, the cost of these food imports have rocketed to the point where they are beyond the reach of the African poor who need to buy them. Agricultural development to replace these imports, by growing this food in- country, has tremendous benefits. It takes the oil price out of the food price, and thus lowers the food price in-country. It acts as a catalyst for agricultural economic development, including processing. It improves the foreign exchange position of the country involved. Over time, it leads to export potential to the developed world, or to the developing world. “Estimates vary as to how much of the food price now relates to transportation of food imported into African countries. When you are shipping rice from the Far East into, say, Rwanda, probably 40% of the import price is actually transport. I think it is safe to say that some 20-40% of all imported staple costs are to do with transport. So when we say we would like to take the oil price out of food, it is a very big issue. If we assume that the cost of transport is US$150 a tonne, then the cost to Africa is over US$5billion.”
About the investment – A quick look at our Malawi Project US$18million invested 8 Farms 2500 Hectares under irrigation 4000 hectares managed and owned by outgrowers 10,000 employee’s under fair trade principles 100,000 families impacted directly Communities impacted indirectly Food available Money exchanging hands in community for the first time 2000 vulnerable children and elderly fed daily Close political interest and support Good forecast on investment returns (30%) Ownership of value chain Opened up opportunity in other African states “Food is the new gold. As with any commodity, it is not possible to predict food price in the next 6 months, that said, I can tell you that they are unstoppable over time. There is an obvious price flaw at the cost of production, so the break even position is the worst that you can do. Any attempt to push food prices below production costs will be cataclysmic as existing supply will be removed, and investment into new supply will collapse. I have often said that I would rather be a food baron than an oil baron and history will prove me right.” *Source: UN (2008)
About the Africa Transformational Agri investment opportunity cru and the Commonwealth Business Council (CBC) are going to work together to establish Investment Agreements with multiple Sub-Saharan African governments. These seek to achieve staple self sufficiency allied to in-country processing. By the end of 2008 we aim to have the committed support of 12 African governments, with a target of 17 by mid-2009. CountryImport Tonnage Status Benin378,222 Cameroon752,256 Côte d'Ivoire976,697 Ethiopia1,844,393 Gambia51,252 Ghana475,674 1 Guinea227,118 2 Kenya1,338,425 Lesotho18,108 Liberia183,130 Madagascar364.723 Malawi144,122 2 Mauritius323,257 Mozambique919,358 1 Niger340,652 Nigeria4,772,973 Rwanda119,478 3 Senegal490,443 Sierra Leone97,903 3 Sudan1,952,717 Tanzania539,611 Uganda435,072 Zambia127,413 2 1 – Discussions opening 2 – Positive discussions underway 3 – Letter of commitment received “Benefits to African governments of staple self sufficiency through this initiative, are substantial. The Investment Agreement costs them nothing, and their agricultural sector receives a substantial injection of investment capital. Furthermore, the Investment Agreement insists on jointly mobilising community development. Millennium Goals will then be taken seriously.”
Summary of finance required and social impact No. smallholder families / millions No. Employees* managing smallholder schemes / million Megafarming hectarage / million No. Employees** for megafarming / million 184.108.40.206.6 Extended family size10 Total population directly impacted367266 * 70 per 1000 smallholder ** 1 employee per 2 hectares Smallholder financeUS$ 8.5 billion Megafarming financeUS$ 4.8 billion Total financingUS$13.3 billion Estimated 399 million people directly impacted Agriculture multiplier effect of x3 would impact 1.2 billion people – greater than the entire population of Sub-Saharan Africa This is a one off cost, unlike aid. Actually it is not even a cost, it is an investment that will grow in value. “This is a powerful page. Using our financial experience in Malawi, we have been able to break down the financing of over 21 million tonnes of staple imports into Sub- Saharan Africa. The solution is not so big that the world cannot step forward and resolve it. So the answer is US$13.3 billion. The US and UK Governments combined suggested spending over US$1 trillion to save some banks. US$13.3 billion may or may not be the precise answer, but in the absence of any other solution, it has to be the best answer for now. Certainly, we will have made massive strides if we both raise, and invest to this level.”
Summary of the investment approach 1. Investing into smallholders – improving their financials to create food security and to fast-track them to financial independence 2. Investing into megafarms under irrigation – create certainty of food supply – allow for investment into food processing 3. Investing into food processing to add value in- country and provide additional returns for our investors 4. Invest into the human capital of rural Sub-Saharan Africa to see the tide of poverty retreat, and allow her to contribute to the world and no longer be a burden “I have had the steepest learning curve in farming. I have lived in rural England all my life, but it is tough to enter commercial farming with zero experience. To attempt this in the middle of Africa, may well be viewed as almost suicidal. Farming is a very difficult sector of an economy to operate in. The challenges are non- stop, and I well understand why investment managers would prefer to invest in farming, through anybody other than themselves. Anyway, I now manage a large farming enterprise and am looking forward to its rapid expansion. ”
Addressing development goals Three stages 1.From feeding to self sufficiency 2.Create Economy 3.Intentional Development Targeting achievement of Millennium Development Goals in all our communities before 2015 deadline “Community development and fulfilling Millennium Development Goals is not a side show. It is what took me to Africa and remains my primary goal. I believe that investment- led enterprise is the only answer to rural Africa, but business models that seek to maximise profit at all cost, are never going to make an impact on poverty.“ END POVERTY 2015
Africa Transformational Agri Fund terms Institutional terms Initial charge 0% Annual management charge 1.0% Minimum investment £280,000 (US$500,000; €350,000) Retail terms Initial charge 1% Annual management charge 1.5% Fees to intermediaries Initial charge loading to 4% available Annual management fee loading of either 0.5% p.a. or 1% p.a Guernsey company (IC) fees To cover marketing and distribution costs a discounted sales charge of 1% will be levied. There is no annual management charge except to deal with the services of the administrator. SPVs and International Funding Special purpose vehicles with management outsourced to AAAM; minimum US$50m, term as per institutional terms for Africa Transformational Agri Fund International Agencies / Government Investment Funding by negotiation to incorporate; set up fee, term of finance, interest rate, surplus returns to boost fulfilment of Millennium Development Goals “Charges are a tricky thing. My whole experience of Africa is that it is vital to make a profit because, if you do not, you cannot deal with a setback and investors will not support you. I have tried to price the Fund to ensure we make a profit, but not super- profits. Operating a financial underwriting business on a global basis needs a lot of financing. Getting the balance right is a matter of judgment but our experience in capital raising gives us, we hope, a certain touch.”
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