Delivering on Africa's Pressing Food Needs
May 31, 2012—In Zambia, where incomes and living standards are on the rise, there is ample evidence of growing consumer demand for meat and poultry products. Trucks and advertisements from the country’s beef and poultry producers are a persistent site on Zambian roads. According to a World Bank and UK AID study, Zambia's beef and dairy industries offer unrealized potential for wealth and job creation, but their success hinges on a variety of factors, including access to affordable, high-quality feedstock. MIGA client Chayton Africa, a producer of maize, wheat, and soya is helping Zambia realize its potential and is setting a standard for sustainable agricultural production in sub-Saharan Africa.
"Zambia has massive potential," says Neil Crowder, Chief Executive Officer of Chayton Africa. "But right now, only 1.1 percent of the potential fertile Guinea Savannah agricultural area is cropped. We believe that with more efficient agricultural practices such as crop rotation and zero tillage, soil and water management, and technological improvements, Zambia—and indeed all of Africa—can capitalize on an abundance of sunshine and fertile land to feed its growing population."
These ambitions resonate strongly with the Zambian government's efforts to diversify the economy away from mining. One government minister noted the country--too dependent on copper—needs to reinvigorate interest in the agriculture sector. He said Zambia would like to be the breadbasket for the region. The government increased the agricultural budget by almost 40 percent in 2012, but the sector still faces output constraints such as low productivity and dependence on rain-fed agriculture.
Chayton Africa, through its subsidiary Chobe Agrivision, made its first investment in Zambia in 2010, acquiring 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 six existing commercial farms totaling just over 4,000 hectares with 1,250 hectares being farmed and 430 hectares under irrigation. The farm operates a fully-irrigated model, which allows double cropping: it achieves two harvests a year by growing wheat during the winter and a rotation of maize and soya in summer. Philip Nicolle, Chayton's Head of Agricultural Strategy, notes, "With the abundant availability of water on the farm and pivot irrigations systems, we can enhance yields and optimize on planting times, which leads to phenomenal long-term sustainable output." He adds, "We feel that the yield potential is what will bring long-term security to food production in this region."
Chayton started as a private equity vehicle and approached MIGA in 2009 to help mobilize resources for their investment in what remains a very challenging fundraising environment. "We had a vision for a sustainable agricultural business in Southern Africa and our challenge was to convince investors that there was a strong and viable market in the region," says Nicolle. "We sought MIGA’s cover to assuage any concerns investors may have had about political risk." In 2010, MIGA signed a conditional guarantee with Chayton Capital LLP in support of its planned investments in Zambia and Botswana. Under this contract, MIGA would provide political risk cover for the fund’s planned investments. MIGA covered Chayton’s first investment in Zambia in June 2011. And this year, MIGA is planning to provide an additional $9.5 million in investment guarantees covering Chayton’s expansion and capital expenditures.
With the farms in Mkushi in their second year of production, Chayton is hitting its stride and looking toward the future. Zeder Investments Limited, the Johannesburg Stock Exchange listed South African agricultural company, has committed $46.7 million in funding to help the company achieve its vision. In addition to expanding production to 10,000 hectares under irrigation, Chayton has big plans for the community, including the construction of a new school. Elias Phiri, Chobe's accounting officer, previously worked on the farm, and decided to return when he heard about the improvements Chayton had made since they began managing the farm. "People told me a lot of things had improved, so I decided to come back. And when I came back, I saw the working conditions and the management of the farms had improved a lot. New houses are being built and there is a lot more training for staff. You even feel happy to come to work."
Nicolle says that supporting and equipping the local community with skills is an important part of Chayton's model. "What we look forward to as we grow from a grass-roots start up, is to developing staff and skills—training young men and women who start out operating equipment on farms and move in to managerial positions. To us, this is really very important and some of the most satisfying responsibilities we have."
Indeed, the need for skilled farmers and increased yields could not be more pressing. The United Nations has estimated that food production in Africa needs to increase by 70 percent to keep pace with the growing population and the rising demand for meat and poultry products resulting from Africa’s economic transformation. Gift Kachenja, Chobe’s head of stores is ready to take on this challenge. "I'd like to have my own farm. With what I've learned here, I think I can do it," he says.