‘A really big opportunity’: Inside PSG’s $46m Zambian farming dealFollow @MadeItInAfrica
“We have always said that there are enough investment opportunities in South Africa at much lower risk. However, we have realised that we cannot afford to miss out on the vast opportunities that [the rest of] Africa present.”
So wrote Jannie Mouton, chairman of South Africa-based agricultural investment company Zeder, in its most recent annual report.
Zeder is the agribusiness arm of JSE-listed investment firm PSG. Up until recently, Zeder’s investments were mainly focused on South Africa, with stakes in a variety of agricultural, food, beverages and food processing businesses.
An unexpected meeting at an investment conference nearly 18 months ago, however, was the catalyst for Zeder’s foray into the rest of the continent. This was where Willem Meyer, an analyst at Zeder responsible for evaluating new investments, met Neil Crowder, founder of Chayton, which ran a large-scale commercial farming operation in Zambia.
After hearing Crowder’s presentation and chatting to him afterwards, Meyer started to become interested in Chayton’s business.
In 2010, Chayton, through its subsidiary Chobe Agrivision, acquired two existing commercial farms and a contract farming business in the Mkushi farm block in the country’s Central province. To date, it has acquired three existing commercial farms totaling just over 4,000 hectares with 1,800 hectares being farmed and 1,500 hectares under irrigation. Crops cultivated include soya beans and wheat.
Chayton made its first investment after Crowder was approached by two Zimbabwean farmers who lost their farms due to the Mugabe government’s land reforms. After losing their land, the one farmer emigrated to Australia while the other moved to South Africa. Some years later their paths crossed again. They went on a road show to England to secure funding for an agriculture project in Africa. That is where they met Chayton’s Crowder who then started raising funds and bought the first piece of land in Zambia.
Although Zeder was interested to buy a stake in Chayton, the problem was that it was a private equity fund at the time. Zeder doesn’t like to invest in funds. “Funds have a limited life span. Investors commit their money, the fund managers invest it for a certain number of years, and then need to exit the investment in order to pay the investors back their money. We prefer a company structure which is ongoing and not committed to a certain timeframe,” says Meyer.
Crowder also wasn’t interested in transforming Chayton from a fund into a company. Meyer and Crowder, however, kept in touch and updated one another on their respective companies’ activities.
As time went on Chayton began to soften to the idea of collapsing the fund into a company and receiving investment from Zeder.
An eye-opening visit
Meyer convinced all the Zeder executives to get on a plane for an exploratory visit to Chayton’s farm. “Before the trip everyone was relatively sceptical,” says Meyer.