AGRI-AFRICA 2018-19 - RESEARCH - FARMLAND INVESTMENT OPPORTUNITIES IN AFRICA - Knight Frank
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RESEARCH
AGRI-AFRICA
2018-19
FARMLAND INVESTMENT OPPORTUNITIES IN AFRICA
AGRI-AFRICA 2018 RESEARCH
A GROWING OPPORTUNITY
Agricultural Economist for the World Bank,
says private investment into Africa, if done
in conjunction with local farmers, should be
Knight Frank’s Head of Rural Research Andrew Shirley encouraged. “The bank in general believes
that the private sector is key to overall
looks at the case for investing in African agriculture development. A thriving private sector
creates jobs and goods.”
I had a farm in Africa. This simple yet and population growth are driving a 5%-8%
evocative sentence opens Out of Africa, the CAGR in domestic demand for food, whereas Food security
memoir of Karen Blixen (immortalised by growth in most of the developed economies
is quite flat at 0%-2% CAGR.” says Tim Those investing in African agriculture are
Meryl Streep in the film of the same name)
Pollock, CEO of agribusiness investment motivated by a number of factors. For
that charts her life in Kenya between the two
world wars. Blixen’s coffee farm in Karen, advisor, AgCap. some, an increase in capital values is seen
now an affluent suburb of Nairobi, failed as the main priority, while others are more
Africa certainly has the resources to deliver focussed on operational returns. A third
to prosper due to poor planning and basic
the food required to feed its growing group is driven by food security issues in
agronomic mismanagement.
population – the continent has more their own countries. Each choose to deploy
Today, the allure of African agriculture uncultivated land suitable for crop and their capital in several ways with varying
remains strong, attracting private, institutional livestock production than any other region degrees of risk.
and sovereign capital from around the world, of the world and utilises only 2.5% of its
but the lessons of Out of Africa remain as renewable water sources, compared with Food security is the primary concern
salient as ever. Expert advice and preparation 5% worldwide – but agricultural productivity of Gulf states. These tend to operate at
are key to success for those who want has largely been flat-lining and food self- a governmental level by striking deals
to benefit from the myriad opportunities 2008
2008 sufficiency
2008
2008 has declined with food imports Roots &Roots & tubers with countries such as Sudan and South
WorldWorld World World Sub-Saharan
Roots Roots & tubers
& tubers tubers
Sub-Saharan Africa
Sub-Saharan Africa Africa Sudan – generally inaccessible to private
offered across this vast continent. This report rising. This, despite the Maputo Declaration Sub-Saharan Africa
2009 2009 2009 2009
highlights briefly some of those opportunities of 2003 and the Malabo Declaration of 2014 Other Other
foods foods
Other foods
Other foods individuals and non-sovereign funds – that
Africa Africa Africa Africa
and illustrates how Knight Frank can help 2010 when
2010 African nations pledged to commit
2010 2010 involve leasing huge tracts of land.
investors to make the most of them. 10% of national spending to agriculture. Latin America
Latin America Latin America
Latin America Milk & dairy
Milk &Milk
dairy& dairy
Milk & dairy It is, however, still possible for private
2011 2011 2011 2011 Asia
Asia Asia Asia
So why choose African farmland? Few countries have come close to achieving investors to access large blocks of
2012 Cereals CerealsCereals
Cereals undeveloped land at relatively low prices.
Demographics are an obvious starting point. 2012 this 2012 target
2012and a number are increasingly
Latin America Latin America
Latin America EastAsia
East Europe/Central Europe/Central
East Europe/Central Asia Asia
The world’s population is growing and, by looking at overseas investors to drive the Latin America East Europe/Central Asia In Zambia, for example, the government is
2013 2013 2013 2013 Pulses, Pulses,
dry dry
and large, becoming more affluent. By 2050 it required increase in food production and Pulses,Pulses,
dry dry opening up areas of tribal land to investors,
is predicted that there will be over two billion 2014 reduce
2014 their 2014
2014 reliance on imports. A number, NorthNorth
America North America
North America
America but the risks are greater due to the cost of
more people on the planet than there were in Sugar Sugar & sugar &Sugar
sugar&crops
Sugarcrops sugar crops
infrastructure creation and often distance
as shown on page 6, offer tax and other MiddleMiddle Middle Middle
AfricaEast/North
East/North
East/North
East/North Africa Africa Africa & sugar crops
2015. However, this growth will be far from 2015 incentives
2015 2015 2015 from market. “The challenge for investors
to promote inward investment. Oceania OceaniaOceania
Oceania
uniformly spread. The population of Europe, Meat Meat Meat Meat is in identifying and acquiring established
2016 2016 2016
2016 Despite accusations of land grabbing from
for example, is set to decrease. Africa, by Rest ofRest Rest of World
Rest of World
of World
World
large scale farming businesses with proven
contrast, is forecast to account for over half 2017 some quarters, Willem Janssen, a Lead Europe Europe Europe Harvest time – oilseeds
Vegetable Agriculture
andinproducts
Africa is becoming increasingly sophisticated and mechanised
2017 2017 2017 Europe Vegetable
Vegetable Vegetable oils,
oils, oilseeds
oils, oilseeds and andoils, oilseeds
products
products and products
management teams and good provenance
of the rise with 1.3 billion new mouths to feed 80 in respect of former ownership rights, rather
2009
10
012 2010
132011
2013
2014 2011
2012
2014
2015 2012
2013
2015
2016 2013
2014
2016
2017 2014
2015
2017 2015
2016 2016 2017
2017 0 0 1 10 2 021 3 132 4 243 5 354 6 465 5 6 -0.56 -0.50.0 0.0 0.5 -0.5
-0.5 0.01.0
0.5 0.0
0.51.5 0.5
1.0 1.02.0 1.0
1.5 1.52.5 1.5
2.0 2.0
2.5 2.0
2.5 0 2.5 0 5000050000 050000
0 100000
10000050000
100000100000
150000
150000 150000150000
200000
200000 200000200000
250000
250000 250000
2500000 0
10 30100 30
20 0 20
10 10 40
4020 20 50
5030 30 60
6040 40 70
7050 50 80 70
8060 60 70
80
over the next 30 or so years. than high risk start-ups converting farmland
FIGURE 1 FIGURE 2 FIGURE 3 FIGURE 4 from bush,” points out Pollock.
In addition to this significant rise, a far higher Africa GDP Growth Population growth by 2050 Potential availability of Estimated % change in food demand
proportion of people will be living in cities and Annual % change (bn) uncultivated land (1,000ha) in Sub-Saharan Africa 2015 to 2030 Investors also have the choice of producing
unable to grow their own food. The annual for export or home markets. There is a
retail value of food and beverages consumed 6% 6% 6% 6% 2.5 2.5 2.5 2.5 250,000 250,000250,000
250,000 80% 80% 80% 80% growing, mainly European, demand for
in Sub-Saharan Africa is set to rise to one high-value crops such as flowers, citrus and
trillion dollars by 2030, up from around 300 70% 70% 70% 70%
5% 2.0 2.0 2.0 2.0 out-of-season vegetables like mangetout,
5% 5% 5%
billion in 2010, according to figures from the 200,000 200,000200,000
200,000
but Janssen says producing for domestic
60% 60% 60% 60%
World Bank. Of that total, well over 50% consumption, at least to begin with, can
1.5 1.5 1.5
will be spent in urban areas. In 2010 it was 4% 4% 4%
1.5
50% 50% 50% 50% make more sense. “You are exposed
4%
around a third. 150,000 150,000150,000
150,000
to fewer risks such as issues around
1.0 1.0 1.0 40% 40% 40% 40%
Not only are higher-value food stuffs like 1.0 phytosanitary management and volatile
3% 3% 3% 3%
meat set to see the biggest rise in demand 100,000 100,000100,000
100,000 international commodity markets. If you are
30% 30% 30% 30%
as living standards increase, but consumers 0.5 0.5 0.5 0.5 able to do well in a domestic market the
are increasingly looking for value-added 2% 2% 2% 2% 20% 20% 20% 20% next step into exporting is easier.”
and branded products across all food 50,00050,000 50,000 50,000
0.0 0.0 0.0 0.0 Local commodity prices, particularly in
10% 10% 10% 10%
categories. As illustrated on page 9, this
1% 1% 1% 1% landlocked nations, can also be higher,
trend offers opportunities
North for investors
North
Western Western
North North
Western Western -0.5 -0.5 -0.5 -0.5 0 0 0 0 0% 0% 0% 0% notes Wigle Vondeling, Food & Agriculture
across the entire food chain, not just primary
Vegetable oils,
World
Africa
Asia
America
America
Oceania
Europe
Sub-Saharan
Africa
America
East Europe/
Asia
Middle East/
Africa
Rest of World
Roots & tubers
foods
dairy
sugarCereals
pulses
Sugar &
crops
Meat
oilseeds & products
oils,
World
Africa
Asia
Latin America
North America
Latin Oceania
Europe
Sub-Saharan
Africa
Latin America
East Europe/
Central Asia
Middle East/
Africa
World
Roots & tubers
foods
dairy
Milk &Cereals
pulses
pulses&
crops
Meat
oilseeds & products
Vegetable oils,
World
Africa
Asia
NorthAmerica
North America
Oceania
Europe
Sub-Saharan
Africa
America
Europe/
Asia
Middle East/
North Africa
Rest of World
& tubers
Milk &foods
Milk & dairy
DryCereals
Dry pulses
&
sugar crops
Meat
oilseeds & products
Banking Advisor at ZANACO. “Take
Vegetable oils,
$2,300-$2,500
World
Africa
Asia
Latin America
North America
Oceania
Europe
Sub-Saharan
Africa
Latin America
LatinEurope/
Central Asia
East/
North Africa
of World
& tubers
Milk &foods
dairy
DryCereals
Sugar &
sugar crops
VegetableMeat
oilseeds & products
$2,300-$2,500 $2,300-$2,500
DrySugar
$2,300-$2,500
Sugar
crop or livestock production. 0%
Central
0% 0%
Central
0% Zambia, both soya and wheat go for
Other
sugar
RestNorth
RootsOther
North
East of
Other
Middle
$850-$1,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Other
$850-$1,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
$850-$1,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
$850-$1,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Rest
Latin
Latin
East
Roots
“Sovereign and family office investors are around US$400/t, which is much more
attracted to African$250-$300 $250-$300
$250-$300
agricultural and$250-$300
food than the world market price. Especially on
Source: World Bank Source: UN World Population Prospects Source: World Bank derived from Fischer and Shah Source: World Bank derived from Alexandratos and Bruinsma
chain assets as rising standards of living wheat a gross return of 50% is possible.”
2 Please refer to the disclaimer at the end of this report 3
AGRI-AFRICA 2018 RESEARCH
DUE DILIGENCE So how does FIT work? The starting point in value during the 2000s while Polish land comparative notional land value is still a
Jonathan Scott-Smith introduces the new Knight Frank is crop yield potential, for which data is climbed steadily, with barely a slowdown useful measure, particularly if it can be based
Farmland Investment Tool that helps investors make available from several sources, covering even after the beginning of the global on reliable yield crop potential. Consolidated
many countries. Potential yield is more financial crisis in 2008. risks scores across Africa are generally
informed decisions on where to grow their money important than current average yields, which comparable with the better parts of South
We have modelled only those countries with
may be limited by inputs, skill and capital – America and much of Central and Eastern
significant foreign ownership or investment
The previous article made the investment value that can be compared with market most developing countries, such as those in Europe, and better than Russia and Ukraine.
interest, and globally the overall picture is
case for farmland, but choosing where Africa, have a significant ‘yield gap’. Rain-fed
LOCAL to invest is a complex process, with
prices or assessed against leasehold
offerings. Knight Frank has developed wheat or maize (corn) yields are used in
largely as expected. Land prices in densely
populated Western European countries
Two countries with similar overall risk scores
are Brazil and Zambia. Individual scores are
PERSPECTIVE many factors that need to be considered.
Agricultural land is a more complex
its Farmland Investment Tool (FIT) to do our model, depending on which gives the
highest output based on global average
are higher than their output and risk scores also very close, the main differences being
exactly that. would suggest, reflecting demand factors that Brazil fares better on Ease of Doing
On-the-ground knowledge asset class than say office blocks or prices, but any other globally-priced crop
outside of agricultural production such as Business and Inflation but less well on GDP
is also crucial. Tanya Ware retail property, and this explains why it Risk perception and business limitations could be used. Output is then capitalised,
lifestyle and tax planning. The exception is Growth. Potential maize yields as assessed
accounts for a relatively small percentage all affect values. The developed markets the initial rate being based on a typical gilt
shares her checklist for or bond rate plus an illiquidity premium,
France due to its inheritance rules and local by the Yieldgap.org Global Yield Gap Atlas
of institutional property portfolios, despite in Western Europe and the US, for
potential farmland purchases and the resulting figure is then adjusted by
sales approval process. Less developed are also comparable.
performing well – if you bought the right example, have low risk profiles and high Central and Eastern European countries
land in the right place. land prices. Russia has poor risk scores a multiplier made up from a combination of As a result, the model indicates land
Check the title and do due diligence trade at a discount, again as one might
risk factors. values should be similar, but FIT indicates
on all documents. Land ownership and correspondingly cheap land, yet expect although risks scores indicate the EU
How does an investor decide where to
varies considerably across the continent. Argentina, regarded as one of the riskiest These currently consist of financial freedom, members in Central Europe are still priced comparable Zambian land can be acquired
invest, and what to invest in, and what tools
For example, Zambia offers 99-year countries in South America, is priced at a ease of doing business, investment at a discount. New Zealand is expensive for around half the price you would pay
are available to help the process? What
leasehold, while South Africa is freehold. similar level to the US Corn Belt. A detailed freedom, corruption perception, property and Australia may be cheap although that in Brazil.
is needed is a model that incorporates
Assess water availability from rivers, published risk scores into a comprehensive model allows all the relevant factors to be rights, logistics, political assessment, credit may be as a result of climate issues. South
Maize yield potential is also similar in
dams, lakes, rainfall and underground formula and capitalises yield potential at considered both individually and as a total rating, inflation, GDP growth, corporate tax America is a mixed bag, with Argentina
Ethiopia and the US. There is no hiding the
supplies. Irrigation is key to the success rates and trade freedom. Each one can be and Brazil overpriced, according to FIT,
a risk-adjusted rate to give a notional land risk adjuster. fact that Ethiopia has poorer risk scores
of both winter and summer crops. individually weighted according to the with land bargains to be had in Uruguay
across the board, resulting in a notional
user’s preference, and others can easily be and Paraguay. The US is neutral, being the
Know your soil. Testing is essential land value of less than half that in the
added if considered relevant, assuming the benchmark, and Canada is cheaper due in
as African soils vary considerably Head to head US, but with land values at less than a
How countries compare using the Knight Frank FIT calculation
data is available. part to restrictions on ownership.
and different crops like maize, soya, tenth, this could present opportunities for
wheat, tobacco, sugar cane, coffee, Published risk scores need to be treated Africa is a continent of diverse countries and investors confident of being able to manage
Brazil Zambia
tea and increasingly citrus, nuts, carefully, as ‘risk’ can mean a lot of different similar diversity in risk scores. Comparisons those risks.
Rain-fed Maize production things – expensive land in a low-risk
vegetables and essential oils all have between notional and actual market prices
specific requirements. Global price ($/t) 227 227 country may be more likely to fall in value tend to be difficult as land is typically Jonathan Scott-Smith is a member of
Current yield (t/ha) 4.67 2.32 than a properly researched investment in available on long leases at nominal annual Knight Frank’s Rural Asset Management
Watch the weather. With the a nominally riskier jurisdiction. In Europe, team and has experience of international
rents in exchange for capital improvements,
extreme range of temperatures on the Output ($/ha) 1,060 527
German farmland, for example, fell heavily rather than freehold title. However, a farmland investments.
continent, research on local conditions Potential yield (t/ha) 8.69 11.32
to match planned farming activities is
Output ($/ha) 1,973 2,570
key from the outset.
Look for local incentives. Some Capitalisation Rate Multipliers Adjusted scores
countries offer investment incentives Financial Freedom 50.0 50.0
and tax breaks specific to the Ease of Doing Business 75 115
agricultural sector.
Investment Freedom 50 45
Research company registration
Corruption Perception 60 65
and look at local taxes. Local
requirements for setting up a new Property Rights 44.2 54
company vary widely. Logistics 38 51
Look at infrastructure and logistics. Political Assessment 47 43
Infrastructure quality and distance to Credit Rating 66 66
markets and trade hubs have a big Inflation 8.7 17.9
impact on profits, while planned roads
GDP Growth 9.6 5.4
and rail transport can open up new
farming areas. Corporate tax rate % 0.34 0.1
Work out labour requirements. Trade Freedom 31.5 21.7
Generally, there is a surplus of
Market land price $/ha 5,981 3,750
labour across the continent, but new
Knight Frank’s FIT land value $/ha 5,038 6,150
technologies will require new skills.
Sources: Kinght Frank Research, Heritage.org, World Bank, Transparency International, Trading Economics, Yieldgap.org Pumping – Large parts of Africa have access to huge volume of water for irrigation
4 5
AGRI-AFRICA 2018 RESEARCH
Senegal Morocco Tunisia Central African Republic
Senegal Morocco Tunisia Central African Republic
89
89
4.4 31 3.9 7 720 101 2.3 2 19 51 -0.8 2 14
4.4 31 3.9 7 720 101 2.3 2 19 51 -0.8 2 14
24
24
500
500
The Gambia Algeria
The Gambia Algeria
6 415
6 415
2.9
GROWTH POTENTIAL
3.6 Egypt, Arab Rep.
3.6 2.9 Egypt, Arab Rep.
2 4 MOROCCO
2 4
230 76 38 3.9 - -
Mauritania 76 The Kingdom of Morocco occupies a
230 38 3.9 - -
A selection of potential African farmland hotspots Guinea-Bissau
397 Mali
Mauritania
Niger
397 Mali Uganda
strategic location on the Mediterranean
412 just 14km from southern Europe. Almost
that could offer investment opportunities now or in 3.4 Guinea-Bissau Niger Uganda
16 3.4 457 412
4.4 Sudan 457 90 million hectares of the country are
5 16 5.7Sudan
the future 4.0
24 4.0
21
5 5.8
3
4.4
5.8
144 25 1,154 suitable for some form of agriculture, with
144 5.7 25 1,154
16 million having access to irrigation.
1 24 21 682 3.4
1
956 3 34 4,509
Agricultural exports account for about
144 956 682 3.4 34 4,509
1.2
Africa is a huge continent and, as the map on this page shows, there is commensurate 1.2 144 11% of foreign exchange earnings. Major
Nigeria South Sudan Ethiopia crops include citrus, apples and olives,
variation in terms of farming systems across its 54 countries, the area of agricultural land Guinea
Nigeria Ethiopia
Guinea 708 363 South Sudan but many others are grown including
available and the respective economic performance of each country. Most offer some 145
708
285
high-value
363 niche crops like blueberries
145 4.4 10.1 285
kind of agricultural investment opportunities, but there is very little data to benchmark 5.0 -6.8 perfume
5.0
4.4 -6.8 10.1 roses and saffron. Since 2011
potential returns. This is partly due to the nature of agriculture as a property asset – yields 56 22 110 a series of reforms have taken place,
6
56 22 110
tend to be far more volatile than say office buildings with secure covenants – but also due 6 1,773 3,144 including the liberalisation of the financial
1,829 4,220
1,773 3,144
to a lack of deal transparency across the continent. A database of transactions compiled 1,829 4,220 sector, and there has been extensive
by Land Matrix gives some guide as to where investors are looking. For each country the infrastructure investment. The ambitious
Kenya “Green Morocco Plan” for agriculture was
map shows how many deals have been recorded and the area of land involved. Most of Congo (DRC) Kenya
Sierra Leone Liberia Cote d’Ivoire Burkina Faso Ghana Congo (DRC) launched in 2018 and aims to increase
the deals are leasehold-based and a significant number, particularly in the Sudan and Sierra Leone Liberia Cote d’Ivoire Burkina Faso Ghana
262 productivity and exports. The plan
39 27 206 121 157 276 5.0 19
262 670
Southern Sudan, are government-to-government arrangements, often involving a Middle 39 27 206 121 157
6.1 Tanzania includes
276 5.0 incentives
19 for private investment
670
5.0 4.5 5.7 5.5 7.3 6.1
Eastern country looking to mitigate food security issues. The countries we have chosen as 5.0 4.5 5.7 5.5 7.3
62
Tanzania into agriculture. Currently, overseas
32 20 12 2 48 397
“hotspots” are some of those that could appeal to private investors. 32 20 12 2 48
9,612
62 397 individuals and companies are not allowed
1,731 1,858 689 202 6.6
2,582 9,612 6.6
to buy the freehold of agricultural land, but
1,731 1,858 689 202 2,582 50 Malawi are free to lease it.
Angola 50 Malawi
761
Angola
Benin Cameroon Gabon Rwanda 592 761
Benin Cameroon Gabon Rwanda 412 5.0 11 288
38 98 52 18 592
4.3 412 5.0 11 288
4.2 4.2 3.3
38
7.5
98 52 18
Zambia 4.3 ZAMBIA
26 Zambia
4.2 4.2 3.3 7.5 26
7 16 7 8 538 Mozambique Often viewed as a regional safe haven due
TANZANIA ZIMBABWE AND 7 16 7 8
238 6.1 39 612 538 Mozambique
155 608 1,422 128 to its relative stability, Zambia attracts
SOUTH AFRICA 155 608 1,422 128
500 238 6.1 39 612
500and institutional investors from
Tanzania has 44 million hectares of 6.3
private
Namibia
arable land with an estimated 29.4 million Although it would be stretching it to say Namibia
Madagascar overseas6.3 and other parts of Africa. Over
120 Madagascar
388 40 million
hectares suitable for irrigation and fresh that these two countries in southern MALAWI Botswana 414 120 hectares of the country are
388 3,683 414 to high
groundwater covering 6% of its surface Africa are currently investment hotspots, 3.7 Botswana
2.5 classified as having medium
3,683
area. The country has the second largest investors should not discount them from Congo 3.7 potential for agricultural 2.5 production,
Malawi’s agriculture sector accounts for nearly 11 Congo 32
260 3.8 1 40 11
livestock population in Africa. Popular their future strategies – simply because 30% of GDP, employs over 64% of the country’s but only about 1.5 million 32hectares are
69 260 3.8 1 40
crops for agri-business investors include their agronomic potential is so high, even 960
workforce and provides over 80% of the 106 3.4 10 2,657 69 cultivated annually. There are significant
Zimbabwe 960
sugar cane, tea, maize, soya, barley, if the economic and political environment country’s export earnings. However, despite its 106 3.4 10 2,657 volumes of water available for irrigation.
Zimbabwe
seed crops and, more recently, avocado is a cause for caution. South Africa has the importance to the economy, there is considerable South Africa Crops traditionally grown include staples
pears. There are several attractive best farming infrastructure and knowledge scope for agriculture’s contribution to increase. 162 5.1 South
7 Africa
389 such as maize, wheat and other grains
incentives to investing in agriculture in base on the continent. The proposed land 162 5.1 7 389
Recognising this, Malawi’s government has Eswatini (Swaziland) along with cash crops like tobacco and
Tanzania including: Reduced import appropriation bill has naturally worried 968 1.8 13 344
established the Green Belt Authority, a state- Eswatini (Swaziland)
cotton, as well as dairy and livestock
968 1.8 13 344
tariffs on project capital items (0% for farmers and caused land values to fall by owned enterprise, to engage local and foreign enterprises. However, higher value crops
investment in agriculture); favourable as much as a third. However, President 12 2.5 4 55
investors to invest in irrigation systems for 12 including
2.5 4 nuts55
and citrus are growing
investment allowances and deductions, Cyril Ramaphosa is concerned about commercial farming Key purposes. It is estimated
Key
in importance. Agri-businesses benefit
for instance a 100% capital allowance on reforms that could inflict lasting damage that 400,000 hectares of land in the country
Area agricultural land are Recorded overseas
GDP growth (% 10-year average) Area land deals (1,000 ha) from a range of tax incentives and capital
agricultural expenditure; zero-rated VAT on on the country’s economy so it is hoped (1,000 sq km) Area agricultural land land deals since 2001 Recorded overseas
suitable for irrigated cropping, yet only 74,000 are GDP growth (% 10-year average) land deals since 2001 Area land deals (1,000 ha)
(1,000 sq km) allowances provided under the Zambia
agriculture inputs; straight line accelerated that land distribution will be handled currently being utilised, evenMaize mixed Lake Malawi
though Cereal-root crop mixed Fish-based Arid pastoral-oats
depreciation allowance on capital more carefully than it was in its neighbour Maize mixed Cereal-root crop mixed Fish-based Arid pastoral-oats Development Act. Corporation tax for
is one of the world’s largest bodies
Agropastoral
of fresh water. Highland mixed Forest Based North Africa dryland mixed
goods; up to five years’ carryover of all Zimbabwe. Following the departure of agricultural businesses is only 10%
A number of potential areas have been identified Agropastoral Highland mixed Forest Based North Africa dryland mixed
business losses against future profits; the Robert Mugabe last year, Zimbabwe’s new Highland perennial Humid lowland tree crop Irrigated North Africa rainfed mixed compared with 35% for other sectors
for investors, each targeted at specific crops
unrestricted right to transfer outside the President Emmerson Mnangagwa has tried Highland perennial Humid lowland tree crop Irrigated North Africa rainfed mixed of the economy and investors are also
including sugar, cotton, rice, maize, cassava
Root and tuber crop Pastoral Perennial mixed North Africa highland mixed
country 100% of foreign exchange earned to tempt farmers and investors to return by and bananas. Tea, tobacco, pigeon peas and allowed to import agricultural equipment
Root and tuber crop Pastoral Perennial mixed North Africa highland mixed
profits and capital. offering long leases on farms. macadamia nuts are also grown. free of import duties.
Sources: World Bank, Land Matrix
6 7
AGRI-AFRICA 2018 RESEARCH
FOCUS ON ZAMBIA
Tanya Ware, Director, Farms and Estates, Zambia, takes a detailed look at land
values and opportunities across the country
Zambia occupies a strategic trading Development Once established, businesses also Infrastructure
position in Sub-Saharan Africa, bordered benefit from a range of tax incentives
as it is by the Democratic Republic of the Ten farming blocks have been identified and capital allowances provided Legislation provides protection from the
Congo, Tanzania, Zimbabwe, Angola, and surveyed around the country to under the Zambia Development compulsory acquisition of land without
Mozambique, Namibia, Botswana and enable more land to be opened up Act. Corporation tax for agricultural due compensation.
Malawi. It is one of the few countries in for agriculture. Each block consists of businesses is only 10% compared with The country’s infrastructure is also
the region to have an annual surplus of a large-scale core business of up to 35% for other sectors of the economy improving. The Accelerated National
cereal crops, which is exported officially 10,000 hectares surrounded by several and investors are also allowed to Roads Construction Programme aims
or informally to these eight countries. large commercial farms. This nucleus import agricultural equipment free of to rehabilitate the existing road network
provides the infrastructure and out- import duties. Those investing over linking Zambia to its neighbours, as well as
History grower opportunities for smaller farming US$500,000 into specific agricultural the highways between the country’s major
enterprises. The ambition is to encourage subsectors including horticulture towns. For example, the 321-kilometre
The nation has a strong history of
large-scale investment, while supporting and cotton also qualify for a range of Lusaka/Ndola dual carriageway is due
crop production and a relatively well
local farmers. additional incentives. to be completed in 2021.
developed agricultural infrastructure
dating back to when it was known as
Northern Rhodesia. Often viewed as a Central Copperbelt Luapala Northern
North Western
regional safe haven it attracts farmers
$2,500-$3,000 $2,200-$2,400 $2,000-$2,000
CASE STUDY:
from other countries such as Zimbabwe $2,300-$2,500 $2,000-$2,000
and South Africa, as well as private and $850-$1,000 $1,200-$1,600 $1,000 $750-$850 $750-$850
institutional investors from overseas. $250-$300 $250-$400 $250-$400 $150-$200 $150-$200 JOINING THE VALUE CHAIN
From an agronomic perspective, over
40 million hectares of the country are
Zambeef has invested heavily Walking around Zambeef’s Kalunda dairy
classified as having medium to high in all stages of the agri-supply unit, an hour’s drive from the capital
chain. Andrew Shirley paid a visit. Lusaka and home to around 1,500 cows
potential for agricultural production,
milked in a 70-point rotary parlour, it is
but only about 1.5 million hectares are
Agricultural investments into Africa need clear that the unit is run to standards as
cultivated annually. There are significant
not be confined to primary production, exacting as you’d find on a farm in the
volumes of water available for irrigation TYPE OF LAND MAJOR CROPS GROWN indeed one of the advantages of the UK and the herd management techniques
and it is estimated that the country has
Irrigated Soya beans continent’s relatively undeveloped food applied are just as advanced. Later in
40% of the total water resources in
Wheat chain is the huge opportunity for vertical the day, a trip to a large supermarket
Central and Southern Africa. Cleared
Maize integration and the ability to add value reveals a wide selection of value-add
Bush to crops and livestock. As the number
Sweet potatoes Zambeef dairy products lining the shelves
Crops of middle-income households rises, so
Tobacco including flavoured milk and yoghurts.
Crops traditionally grown include does the demand for more Western-
Mixed beans style shopping experiences, products, The same applies to the extensive variety
staples such as maize (corn), wheat and
Nuts packaging and hygiene standards. of fresh and branded packaged meats
other grains along with cash crops like
tobacco and cotton, as well as dairy and Rice that are sold in both Zambeef’s own retail
On a recent trip to Zambia I was able to
livestock enterprises. However, higher Sunflower outlets – it has 205 throughout Zambia and
see in just a few hours how Zambeef,
value crops including nuts and citrus are West Africa – and Shoprite supermarkets
the country’s largest integrated cold
growing in importance. where it runs a number of in-store
All prices US$/acre chain food products and agribusiness
butcheries. Speaking at the launch of its
Despite this, the bulk of Zambia’s company, has taken advantage of
latest shop in Lusaka, CEO Francis Grogan
Gross Domestic Product has historically this trend. Each year the company
said: “Our mandate is to bring affordable,
been driven by the export of copper slaughters around 78,000 beef cattle,
quality, fresh products to our customers,
and cobalt. To lessen the country’s over seven million chickens and 60,000
sold in a hygienic environment.”
reliance on these metals and to mitigate Western Southern Lusaka Eastern Muchinga pigs, processes 19 million litres of milk,
the impact of global commodity price $600-$750 $1,300-$1,600 $2,500-$2,800 $1,800-$2,000 $2,000-$2,000 packs 69 million eggs, produces 154,000 This strategy seems to be paying off with
volatility, the government has put in tonnes of stock feed and grows rain-fed Zambeef’s retail and cold chain business
$100-$150 $750-$1,000 $1,400-$1,500 $700-$800 $750-$850
place measures and incentives to and irrigated crops on almost 16,500 generating revenues of over US$95m in
encourage investment and further $150-$250 $250-$400 $100-$150 $100-$150 hectares of land. the first half of 2018.
Source: Knight Frank Zambia
development of the agricultural sector.
8 9AGRI-AFRICA 2018 RESEARCH
WINE AND WILDLIFE
Vineyards and game reserves also offer investment
opportunities in Africa. Andrew Shirley goes on safari
to check out the potential
For many consumers, the closest they while second placed Germany saw an
will have got to Sub-Saharan Africa is 18% increase to 1.7 billion rand.
enjoying a glass of South African wine.
Chris Mullineux of winemaker Mullineux
For those lucky enough to have visited
and Leeu, backed by Indian investor
in person, the chances are it would have
Analjit Singh, Chairman of Max India,
been on a safari to one of the many
says the outlook for the sector is positive,
amazing national parks or private game
despite concerns about a potential
reserves throughout the region.
land appropriation bill currently being
But whichever way people choose to discussed by politicians. “South Africa is
experience Africa, demand is rising and finally building a reputation for world class
this has the potential to provide investors wines and we are starting to be able to
with unique land-based opportunities. charge much higher prices.
Take wine, for example. According to “We don’t have our heads in the sand,
figures from the Knight Frank Luxury but feel the risks here are far outweighed
Investment Index provided by Wine by the positives. South Africa is not the
Owners, the selling price of top quality only winemaking region that has issues,
South African wines traded on the but the cost of land here is a fraction of
secondary market has increased by 245% what you’d pay in other countries and
over the past five years, compared with we’re not restricted by regulations like
47% for those from Bordeaux and 85% producers in Europe. It is much easier for
from California. us to experiment with new varieties and
innovations. The weakness of the rand
Numbers from industry body Wines of
also helps with exports, which account
South Africa also show that the value of
for half of our production, and are paid
exports rose by 4% to almost nine billion
for in hard currency.”
rand in the year to June 2018. Exports to
the UK, the biggest consumer of South Susan Turner, Managing Director of
African wine, rose 10% to 1.8 billion rand, Valuations for Knight Frank South Africa,
says the market for vineyards remains A continent of opportunity – Visitors are encouraged to engage with conservation projects (left) An African safari is an unforgettable experience (above) South African wine is increasingly popular (below)
firm with prices averaging around 500,000
rand per hectare of vines (£29,000/ha). we’ve seen an increase in interest in the Many will buy established game reserves,
Many purchases are for lifestyle reasons likes of Rwanda, Namibia and Botswana. but a number are starting their own re-
as well as commercial investments, she All the safaris that we sell in Africa are wilding projects. British businessman Mark
notes. “New farm owners are generally chosen due to the way they manage Tompkins and his South African wife Sarah
wealthy, professional and independent their camp or lodge – they have to be bought 70,000 acres used for goat farming
of commercial farming.” sustainable and pro conservation for their in South Africa’s Karoo region. They have
While winemaking in Sub-Saharan business to work.” since rehabilitated the land and introduced
Africa is largely limited to South Africa, Alasdair Pritchard of Knight Frank’s species such as cheetah and elephant last
conservation opportunities are spread international team says a number of seen in the area over 100 years ago. With
across the region. Travellers are luxury hotel chains are looking to acquire an emphasis on conservation, the Samara
becoming more adventurous and are properties in Africa that can deliver strong reserve is run as a profitable business.
increasingly driven by the desire to environmental benefits as part of their
help conserve wildlife and be part of “Occupancies of ecotourism lodges like
corporate responsibility programmes.
sustainable projects, as well as just tick ours in the Eastern Cape tend to go up
Individual philanthropists are also active
off the “Big Five,” says Kerry Golds of towards 70% plus on a full year basis and
in the market, says Tanya Ware of Knight
up-market safari operator Abercrombie that’s definitely profitable. And the moment
Frank Zambia. “Enquiries are increasing
& Kent. you put elephant, buffalo, lion, leopard and
from high-net-worth individuals looking
“Africa is one of our strongest sellers. to expand on their existing private rhino – basically the big five – your land
Kenya and Tanzania always do well, but investment portfolios.” value almost doubles,” says Mr Tompkins.
10 11LOCAL KNOWLEDGE IN
KNIGHT FRANK AFRICA
Peter Welborn
A GLOBAL NETWORK
Managing Director, Africa
+44 20 7861 1200
peter.welborn@knightfrank.com
Knight Frank’s key African agri-experts don’t view the continent
RESEARCH
from afar, they live and breathe it on a daily basis. Meet two of them Andrew Shirley
Head of Rural Property Research
+44 7500 816 217
andrew.shirley@knightfrank.com
SUSAN TURNER
MD, RESIDENTIAL TANYA WARE
VALUATION DIRECTOR, FARMS
AND ADVISORY, AND ESTATES,
SOUTH AFRICA ZAMBIA
Susan has over 20 years’ involvement with Born in Zambia, Tanya grew up on a farm and Most of the properties featured in this
all aspects of the property industry, but later farmed on her own producing crops, report are currently for sale through Knight
for the past 17 has focused on valuations. livestock, fruit and vegetables in Mkushi, Frank. See below for more details.
Susan has valued everything from residential Kalomo and Lusaka. She has a unique local
Page 2/5 – Sinazongwe Farm,
properties to banks, hotels, military bases knowledge of the agricultural sector across
Lake Kariba, Zambia (POA)
and timber, wine, fruit and game farms. She the country and in neighbouring countries
specialises in the field of agriculture the such as Mozambique. This experience Page 10 – Mumbuluma,
length and breadth of Africa. She is retained recently broadened to include game farms Kafue National Park, Zambia (POA)
by a number of agricultural property funds and lodges in the most remote and beautiful
and has travelled to 11 African countries locations. She advises and represents buyers Page 11 – La Bri, Franschhoek,
South Africa (95 million rand)
in the past 18 months to advise clients on and sellers including commercial farming
agricultural investments. groups, conversation funds and investors,
travelling at least 20,000 miles each year in
Susan lives on a small farm in Franschhoek,
Zambia by car, light aircraft and the odd
near Cape Town, and is passionate
boat trip!
about horses, regularly competing in
showjumping events. She has an honours Recent sales to major conservation and
degree in Agriculture from Stellenbosch commercial farming groups totalled 75,000
University and is a qualified professional acres and Tanya is currently marketing a
valuer and registered estate agent. She variety of commercial farms around Zambia
has also lectured on property valuation at Knight Frank Research provides strategic
totalling 115,000 acres, as well selling a
the University of Cape Town and actively advice, consultancy services and forecasting
selection of superb game lodges and private
to a wide range of clients worldwide including
participates in the mentoring of new valuers. estates. These range from an exclusive 200-
developers, investors, funding organisations,
acre boutique private island on the Zambezi
susan.turner@za.knightfrank.com corporate institutions and the public sector.
river to a 22,800-acre mixed-use commercial
All our clients recognise the need for expert
farm and private conservation estate.
independent advice customised to their
tanya.ware@zm.knightfrank.com specific needs.
RECENT MARKET-LEADING RESEARCH PUBLICATIONS
RESEARCH RESEARCH
Get in touch
The global perspective on prime property and investment
Knight Frank has sold, valued or
offered strategic advice on agricultural,
THE WEALTH REPORT 2018
viticultural and conservation property
in 15 African countries over the past 12
AFRICA LOGISTICS months. We can offer a full range of
ACTIVE REPORT AFRICA
2018
CAPITAL
THE REPORT 2018
2017/18 2016 advice and services on all property
types in 49 of Africa’s 54 countries
12th Edition
REAL ESTATE MARKETS IN A CONTINENT OF GROWTH AND OPPORTUNITY SUB-SAHARAN AFRICA’S EMERGING LOGISTICS PROPERTY SECTOR
The Wealth Report Active Capital 2018 Africa Report Logistics Africa
- 2018 2017/2018 2016 Please do get in touch, we’d love
Knight Frank Research Reports are available at KnightFrank.com/Research to help.
Important Notice
© Knight Frank LLP 2018 – This report is published for general information only and not to be relied upon in any way. Although Peter Welborn
high standards have been used in the preparation of the information, analysis, views and projections presented in this report,
no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of,
+44 20 7861 1200
reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view peter.welborn@knightfrank.com
of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed
without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited
liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London,
W1U 8AN, where you may look at a list of members’ names.You can also read
