Nairobi — The long term economic development and prosperity of the African continent, as an active national and international trading bloc, is inextricably linked to its ability to unlock its huge economic potential of feeding itself.
Despite this fact, the Food and Agriculture Organisation (FAO) estimates that sub-Saharan African countries' food import bill has increased to US$39.6 billion in 2011, a nearly 30% increase from the previous year.
To achieve this goal, investment is needed along the food value chain in local business to enable the efficient delivery of cost effective, safe food products to all.
Over the past decade, private equity has played an increasing role in unlocking private sector development in Africa.
Unlike commercial or development banks that are founded on loan interest and servicing principal, private equity investors are propelled by creating business value.
The asset class is emerging as a unique vehicle to channel much needed large scale private capital to expanding African enterprises.
It's also supporting indigenous entrepreneurship and enterprises, strengthens corporate governance and ensuring compliance with international environmental and social standards.
In 2011 private equity investors closed an estimated US$ 3 billion worth of deals in Africa, up from US$ 890 million in 2010. West Africa alone accounted for 29% of all African private equity investment with a value of more than US$ 1.1 billion, the highest across all African regions .But despite these improving figures Africa has been long on opportunities, but short on much needed capital and management expertise.
Sectors that have attracted significant private equity capital include telecoms, financial services and infrastructure.
While these inflows have been important catalysts for the growth seen across the continent over the past decade, the most glaring gap in private equity funding has been in agricultural production and related sectors that underpin food security. Of all investments made by private equity funds in Africa over the past decade, less than 5% has gone into agriculture and food production a disappointing allocation largely explained by the faulty perception held by many investors that agriculture yields meagre returns, at least compared with the returns seen in some of the major telecoms, banking, financial services and resources investments of the past decade.
Some private equity investors, however, are bucking the trend and have identified agriculture and food production as a niche sector to unlock growth and augment food security.
These investors focus not on resource extracting, but enhancing long term sustainable value along the food value chain, which creates value for the consumer and delivers attractive returns for their investors.