Cape Town — Bioventures, the country's only biotechnology venture capital fund, has invested R3m in Natural Carotenoids of SA (NCSA), an Upington-based company that extracts natural carotenoids from algae.

The investment, which is complemented by a further R5m in loan funding from government biotechnology conduit Cape Biotech, will boost NCSA's efforts to tap the growing demand in the global pharmaceutical and cosmetics industries for natural carotenoids, Bioventures fund manager Heather Sherwin said.

Although the local biotechnology industry is small by global standards, it has been earmarked by government as a key investment area.

Carotenoids are a family of brightly coloured natural compounds that include the orange beta-carotene found in carrots; astaxanthin, which gives prawns their characteristic pink colour; and lutein, which makes marigolds and daisies yellow.

Beta-carotene is used by the body to make vitamin A, astaxanthin has antioxidant properties, and lutein is valued for its ability to boost eye health.

NCSA extracts a mixture of these three carotenoids from the salt-water algae dunaliella salina, using a process licensed by Mbuyu Biotech, a joint venture formed in 2003 between Bioventures and the Council for Scientific and Industrial Research (CSIR).

The process was developed by the CSIR's Bio/Chemtek business unit.

NCSA MD Bevan Jones said the dry and sunny conditions of Upington were essential for cultivating the algae in large dams. He said the Upington municipality had assisted his company with concessions on rates and taxes and favourable lease terms for its 15ha site.

Jones said NCSA planned to use the funds from Bioventures and Cape Biotech to expand the small production facility purchased from the CSIR.

He said the company had worked with the CSIR for the past four years to pilot the carotenoids extraction technology, and was confident in NCSA's ability to scale up the project.

The municipality had also helped protect the firm from pollution, which was particularly important in the manufacture of a natural product, he said.

The company planned to focus its marketing efforts on the high value pharmaceutical industry, he said. Few companies were producing natural carotenoids, he said, with the main competition coming from Australia.

NCSA was aiming for 20% of the global natural carotenoid market, he said.

Sherwin said Bioventures was impressed by NCSA's job-creation potential in a region of high unemployment.

Bioventures is backed by Sanlam, Real Africa Holdings, the Industrial Development Corporation and the US-based International Finance Corporation, a member of the World Bank group.

Bioventures has also invested more than R50m in seven other biotechnology start-ups.