What investment trends do you see within the African agriculture sector?
There is a heightened focus on the intent of a business – is it agriculture for export or for local markets? What is more and more attractive is agriculture in Africa for local markets. Food and agriculture are linked. If you look at vegetable production in Tanzania, there is not a single business that is producing high-quality, reliable vegetables for the domestic economy. You have a growing hospitality industry and a growing middle class that has no access to vegetables other than those provided by smallholder farmers. There is a real opportunity to build a business in order to serve the growing local market. Or poultry for that matter.
You maintain a unique position within the space, working with impact investors and socially-conscious investors, as well as with African companies. What role does impact play in those relationships, and how do you work with African companies on impact measurement?
Although Surya Capital does not have an impact agenda, from a personal value basis we tend to be most attracted to opportunities that have impact. From an opportunity standpoint, there are great investable businesses within the education, food and agriculture sectors, and in other sectors such as energy, healthcare or insurance. Recognising their potential, we develop these deals, many of which we believe will have significant impact.
For three of the deals we are looking at – one in education, one in agriculture, and one in waste-to-energy – we would be very interested in exploring whether we can realistically develop a genuine impact story around them. Ultimately if a deal meets impact criteria and doesn’t require drastic changes to the business model or strategy, then it is in our interest and in the interest of the business to facilitate its attainment of impact criteria. If it does meet specific criteria we can then socialise the deal with impact investors.
Why do you think African companies that are having impact haven’t started measuring it or don’t articulate it when they are seeking investment?
It’s a matter of available resources. If you are an SME businessman, driven by profits, and don’t have the bandwidth or time and resources to meet different criteria, why would you do it? In order to increase uptake and usage the case has to be made directly to businesses why it is important to their long-term interests and not just a question of principle.
This article was originally published on the Initiative for Global Development (IGD) website: www.igdleaders.org