African agribusinesses seek stable investment environments

While many African agribusinesses are keen to expand their operations into other countries on the continent, they reportedly remain wary of doing so.

African agribusinesses seek stable investment environments

The recently released 2017/2018 PwC (PricewaterhouseCoopers) Africa Agribusiness Insights survey found that CEOs and owners of such agribusinesses reported “inefficient and bureaucratic governments, as well as corruption, crime and theft” as the most significant deterrents to expanding their operations on the continent.

“Inadequate infrastructure and political instability are further concerns. Africa possesses unrivalled [agribusiness] opportunities if policymakers can remove some of these challenges,” said a PwC statement on the results of the survey.

Representatives of the Southern African integrated poultry production company, Astral Foods (Astral), expressed similar sentiments.

“When we are looking at investment opportunities in other African countries, we first look at what risk there is, such as political risk and macroeconomic factors. A poultry business like ours had added risk because it needs access to raw materials, and it needs to make sizeable investments in infrastructure,” explained Gary Arnold, managing director of Astral’s agriculture division.

“Risk versus reward is a constant consideration for us,” he added.

Daan Ferreira, Astral’s CFO, said that the company also looked at the strengths and weaknesses of the currencies of African countries that held potential for investment because these also had an impact on the company’s profitability.

PwC’s survey said that, based on interviews with heads of agribusinesses across Africa, the top five countries currently favoured for potential investment were Angola, Botswana, Ethiopia, Malawi, and Namibia.

The survey also found that despite the concerns highlighted by African agribusinesses, the sector was confident for its growth prospects in the short to medium terms.

“Most [African agribusiness] CEOs expect revenue growth in the next 12 months to be between 6% and 10%, with a significant number of CEOs expecting an optimistic 20%+ growth rate in the short to medium terms. This response is more bullish from the one received a year ago, but [is] certainly underpinned by the necessary level of caution,” PwC’s statement said.

Frans Weilbach, leader of PwC Africa Agribusiness Industry, said that the main reasons for this expected growth was “better penetration of existing markets on the African continent”.

“[African agribusiness] CEOs are looking for diversification within their current commodity value chain before moving into new commodities,” he said.