Spotting opportunity, then seizing it, is not as easy as some may think. As essayist Mark Twain wrote “I was seldom able to see an opportunity until it had ceased to be one."
At FinDev Canada, our job – in fact, our mission – is to recognize the opportunity and the potential in private sector companies in select regions of the developing world and to work with them to create win-win-win situations.
What does that mean?
One win will be for the enterprises that we partner with in sub-Saharan Africa or in Latin America and the Caribbean. Through external financial support and the counsel of local and Canadian experts to offer insightful, useful ideas, businesses in these parts of the world can thrive. I believe Canada’s demonstrated expertise and knowledge in the agribusiness sector can have a significant impact on economic growth and development in these regions.
Another win is for private investment firms, pension funds, equity investors, or other development financial institutions that join us in recognizing and supporting local entrepreneurs. The returns on their investments can be attractive, long-lasting, and socially responsible.
The most important win, however, will be for poor and otherwise disadvantaged people living in those areas where we make our investments. Maintaining or expanding employment in well-run companies, or creating new jobs or other livelihoods with suppliers, offers people pathways out of poverty. Our support can also enhance women’s economic empowerment, build strong and resilient communities, contribute to national economic and social growth and stability, and have a significant impact on mitigating or adapting to climate change.
Demographics and a rich potential in agriculture
While sub-Saharan Africa, along with Latin America and the Caribbean, offers such opportunities across a variety of sectors, we have a special interest in agriculture and its potential to drive positive change while reducing poverty.
The challenges in agribusiness in these regions are well-known: low farm productivity, unnecessary post-harvest loss, unreliable logistics and infrastructure, fractured supply chains, erratic markets, and unstable or non-existent financial services. And, because of these many issues, most financial institutions shy away from financing this sector.
Yet these challenges must – and will – be overcome because the world is witnessing, and will continue to do so, an unprecedented demand for food. By 2050, with the United Nations predicting a world population of 9.5 billion people, food requirements will rise by 70% compared to today. The Food and Agriculture Organization (FAO) expects that grain production alone will need to double to keep pace. At the same time, more and more people in developing countries are entering the middle class, increasingly seeking higher-value agricultural products.
To meet these challenges, US$ 80 billion annually will be needed globally for agri-investments mostly coming from the private sector. This funding will serve multiple purposes in emerging economies, ensuring not just a continued supply of food but also that of feed, fuel, and fibre. The investments will unlock doors that:
- Increase productivity and efficiency on existing farms and help to develop new arable lands, largely in sub-Saharan Africa and Latin America;
- Reduce post-harvest and post-production food loss, estimated at 1/3 of all food produced in the world today;
- Develop agri-finance institutions and services, employing people who understand the needs of those working in agriculture, including smallholder farmers (an estimated 500 million globally and, with their families, representing 2.5 billion people);
- Build in climate adaptation to ensure that crops are not adversely affected by changing climate conditions and can even contribute to mitigation;
- Create new, intelligent technologies (i.e. advanced irrigation and precision fertilizing systems) that benefit agricultural value chains in each national or local market; and
- Support generational renewal in agriculture, with a greater inclusion of women and youth to ensure the sustainability of agriculture producers as the current average age of farmers rises.
To be sure, risk and uncertainty have always been and remain inherent to agriculture. The most common risks are well-known: severe weather, changing climates, crop or animal disease, volatile markets, and erratic public policy, regulatory, or political decisions.
We have made Agribusiness a priority to help meet these challenges by focusing investments across the value chain - enhancing food security, supporting sustainability and promoting inclusive development. We focus on supporting businesses that will meet the rising domestic demand for food with quality management teams, and invest in commercially sustainable companies that can have a real impact on development.
Despite those risks, we see enormous potential in part because of what some entrepreneurs and private sector businesses have already been able to achieve in sub-Saharan Africa and Latin America and the Caribbean.
For example, we recently made an investment in the Peruvian agricultural producer Danper Agricola La Venturosa, a leader in environmental and sustainability management which has implemented international best practice throughout its operations as it has grown. We expect this loan to contribute to a stronger and more inclusive agribusiness sector in Peru by supporting 300 high-quality permanent and temporary jobs, of which a significant proportion is expected to go to women.
In short, we believe that agribusiness in sub-Saharan African and Latin America and the Caribbean can offer real opportunities to everyone, provided there is the right combination of committed investment partners and their resources, timely and relevant advice from seasoned experts, and the patience to manage risk while “playing a long game” to create important and lasting benefits for all.
Our doors are open for discussion. We’d like to hear from you.