From agric to real estate: Investor shares insights on opportunities in Africa

MARIS Ltd is an investment holding company with a diversified portfolio across five sectors in nine African countries. Betsy G Henderson speaks with Charlie Tryon, CEO and co-founder of Maris, about investment opportunities in sub-Saharan Africa and doing business in frontier markets such as Zimbabwe and South Sudan.

Agriculture is a key investment sector for Maris, through its subsidiary company Agris. From an investment perspective, which agribusiness sub-sectors in Africa offer the best opportunities?

We have two primary areas of focus in the agri sector: agricultural production and what we call agri services. On the production side, we see good opportunities in the high-tech or more intensive end of the primary production agriculture spectrum — floriculture, horticulture and plantation crops — with a particular interest in highermargin crops for global export.

On the agri support and services side, we see increasing opportunities in East Africa, particularly in Kenya, Uganda and northern Tanzania. We are looking at a few acquisitions to provide services (input supplies, technical services, etc) to the horticulture sector in Kenya; it’s a big sector and so we see a consolidation opportunity among the smaller agri-service elements there.

Agris is a holding company for our diverse agricultural and forestry interests, and was established in March this year. Overall, our philosophy to investing in agriculture is to take a more scientific and perhaps financial investor approach; to us, the idea of large-scale, rain-fed, outdoor agriculture is a risky investment proposition.

When we invest in production, we seek to minimise or remove some of the inherent risks one faces in agriculture through using available technologies.

Are there any African agribusiness sub-sectors in which you are hesitant to invest?

Forestry is a complex investment piece in Africa, even though it is an area in which we have invested. Forestry involves very long-term time horizons, significant scale, and faces the ever-present challenge of logistics and the high cost of doing business. It’s extremely costly to move things by road in Africa and the distances are huge, so we have found it difficult to build viable, commercial forestry enterprises unless they are well situated and relatively close to large markets.

In terms of overall agribusiness, we are not keen on lower-value commercial row crops, such as rice, wheat and maize. The high cost of transport, unstable markets, government intervention, and land use issues are further deterrents, as you need thousands of hectares of land. It is a very difficult business model to get right.

However, if one is looking for cereal crop opportunities, Zimbabwe is perhaps an exception to the rule. There is a large amount of uncultivated land in Zimbabwe, and while there are some serious land issues, if you can overcome them the country has excellent large-scale arable landholdings, along with the skills and the infrastructure needed to support intensive agriculture, which you don’t see in many other African countries.

Describe some of the agribusiness trends you see in sub-Saharan Africa

In terms of specific crops, avocados are still the trendy crop, alongside macadamias. Despite being hailed as “green gold”, I believe there are challenges ahead in Africa’s avocado sector. Avocado demand is growing (particularly from Europe and the US), but you are also seeing very large-scale, professional, and high-tech avocado cultivation in South America, South Africa, and elsewhere around the world.

Avocado developments in South Africa have been pretty considerable over the past five to 10 years, and in South America, countries such as Peru, Chile, Colombia and Argentina have lowercost operating environments and are now posing competition in the market. Plus, as overseas consumers become increasing discerning on the size, quality, colour and texture of avocados, it will become harder for small-scale African farmers to deliver. Avocado production in Africa will need to centre on scale, efficiency, and quality, and I’m not sure if in five years smallholders producing avocados in a semi-subsistence way will have a place in the export market.

Kenya’s Evergreen Herbs, a Maris portfolio company

Maris has investments in South Sudan and Zimbabwe, countries which some investors may view as risky investment environments. What is it like to do business there?

South Sudan offers very select opportunities for investors who are looking to make a huge impact investing there involves a lot of hard work, risk and resilience. The only area where we can see a reasonable risk-return profile is in the forestry sector. We have invested in tropical hardwoods and teak plantations there; teak takes 25 years to grow, so if the country is stable for five years, we can manage our tree crop accordingly.

In Zimbabwe, we have invested in gold mining and I think Zimbabwe offers one of the best global opportunities in that sector. Political and economic risks are very real there, good governance is a key challenge, and we have seen a lot of currency instability and a heavily restricted flow of forex, which is not ideal for foreign investment. The country is very isolated from the international community at the moment, and while we have looked at agricultural opportunities there, mining is the only sector we are comfortable investing in right now.

What about Zimbabwe?

Zimbabwe is also fantastically wellendowed with minerals and natural resources, has a wonderful climate, and good water resources, dams, and soils. I think one of Zimbabwe’s greatest assets is its human capital it has some of the most well-skilled, well-educated, and hard-working people I have ever met. We employ Zimbabweans across a wide range of our business across Africa, and I cannot speak highly enough of their capabilities.

In addition to agribusiness, in which other sectors do you see opportunities?

The world is facing an unprecedented challenge due to the coronavirus pandemic, and while Africa has been relatively unscathed perhaps with the exception of South Africa there has been a general contraction in economic growth across all of the markets we are working in and it’s very difficult to invest at the moment.

If one is looking with a mediumterm view beyond the agriculture sector, however, there are great opportunities in the real estate space. We invest in industrial warehousing, and I think the growth of e-commerce another interesting investment sector to look at in Africa interplays well with these investments. I anticipate there will be fairly substantial growth in online retailing, with a progression from routine retail towards either big-box retail or ecommerce and distribution platforms (like Amazon) on the continent in the years ahead. It’s only a matter of time.

There are also great opportunities in the infrastructure space; Africa is still urbanising, and populations are still growing at a dramatic rate, so infrastructure is always a necessity. Renewable energy is another space where we are invested and have seen a lot of growth even throughout the COVID-19 pandemic. However, when you look at all the complications in the world today, Africa is well-positioned, if you take a long-term view.

— howwemadeitinafrica.com