Why this private equity firm is betting on agriculture in Namibia

Eos Capital, a Namibian private equity firm, announced the first close of its Euphrates Agri Fund in December last year. Eos has so far raised N$ 90 million (US$ 5.9 million) for the fund and has already made its first investment into Cherry Irrigation Namibia. To find out more about the growth potential of Namibia’s agriculture sector, Jeanette Clark spoke to Nicole Maske, CEO at Eos Capital.

Why has Eos decided on an agriculture sector-specific fund?

We see opportunities that originate with food security and import substitution. Namibia, according to 2019 statistics, still imports around two-thirds of the fresh produce consumed within its borders. If the country can start producing more of its own food, limiting the reliance on outside producers, we can unlock opportunity.

However, for local production we have to acknowledge the domestic market is still quite small. So, for scale we are looking at projects that could result in exports into the region. Within the Southern African Development Community, there are hundreds of millions of people who need to be fed and Namibia has the available land.

Our blueberries and table grapes are examples of produce already being exported globally. It is possible and we have a couple of investment opportunities under consideration that would have international off-take. The ability of a company to export is a big component in our decision-making process; it allows us to de-risk the projects and earn foreign currency.

If exports is an important consideration, are you concerned about the current logistics crisis post-pandemic?

It is definitely a concern and it is why we would look at the regional market first, before looking at companies producing for the global market. If you keep it regional, you have a little more control over logistics. In the current environment, as soon as you bring ships and containers into the mix, it becomes more difficult and raises the export cost substantially. I believe the situation will normalise at some stage – where there is opportunity, market forces come into play – we just don’t know when.

You said the need for food security is a growth opportunity and that Namibia has the available land. However, for outsiders, an arid country does not seem like the answer. You would have to look at the innovative use of water. Is this why your first investment was into a company like Cherry Irrigation?

Our investment thesis is around the entire agri-value chain: from production all the way to logistics and distribution. Cherry Irrigation falls within that scope. It is a service company within the agriculture sector. An overarching principle for Euphrates, however, is that we will invest into climate-smart agri-projects.

Yes, Namibia is a dry country and with the impact of climate change, we foresee the possibility of even less reliable water and rainfall in the country, and the region. Even this year, while we have had good rain and the dams are full, it has been more sporadic and contrary to the normal rainfall pattern.

If you were just focusing on rain-fed agriculture, it will not work in the long run. We are seeing a shift to new methods and approaches and an investment into irrigation is working with this shift. We believe as people move away from reliance on only rain, this business can grow and give our investors good returns. We also feel Cherry Irrigation could help us get some primary agriculture projects up and running.

If you ask me whether you can farm in Namibia? Yes, you can. Believe it or not, there is more than enough water in Namibia, it just needs be used efficiently, and in a climate-smart way.

Can you provide any examples of the type of agriculture opportunities that could work in Namibia?

We are looking at alternative crop cultivation, not just focusing on the normal, permanent staple crops such as maize and grain.

When it comes to primary agriculture production, I believe there are opportunities across all segments: fresh produce, crops for animal feed, etc. Projects like Mashare blueberries on the Orange River has shown that cultivating fruits and vegetables can be successful.

Tomatoes and lettuce, a lot of that is still imported. Namibia is also still importing oranges, which we can definitely grow here. In addition, with the worldwide trend and climate requirement to look for alternative protein sources, we are investigating alternative crops for that purpose.

There is definitely space to bring technology into agriculture and we are looking for tech-driven investments. Anything from drones for crop spraying, crop monitoring and animal counting to using digital platforms for increased access to agriculture services and information for small-scale farmers could work.

The vast distances between Namibian towns are cited as a challenge when fresh produce and primary agriculture products are imported into Namibia. With your approach of looking at the entire value chain, would cold chain management and distribution be considered for investment?

Yes. It is definitely something we are looking at.

Have you found international investors willing to provide funding for the Euphrates fund?

Unfortunately not for primary agriculture projects; the interest lies further down the value chain with processing. The reasons are understandable. It is high risk, from land issues to drought and pest concerns. Many of the big development finance institutions (DFIs) we have spoken to have had bad experiences on the continent with primary agriculture. Because the community is so small, if one or two DFIs have had a bad experience, suddenly you have a lack of interest all-round.

With the initial N$90 million, we want to prove that primary agriculture operations can be a solid investment opportunity, if done the way we envision it. We are looking at it differently to prove how we can be climate-smart by using progressive technology. Once the international investors see this, I believe they will be more comfortable to come onboard.

Eos Capital CEO Nicole Maske’s contact information

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