Agriculture is one of Namibia’s most important sectors and is a significant source of economic growth and industrial transformation. Most of Namibia’s population is dependent directly or indirectly on the agricultural sector for their livelihoods. As an investment asset class, agriculture offers attractive monetary returns. There is a positive correlation between agriculture investment and food price inflation, therefore, by investing into agriculture, you are hedging a portfolio against inflation. As a recent testament to this claim, during the COVID-19 restrictions, while other sectors were affected in the slowdown of economic activity, agriculture prices remained consistently robust.
Agriculture investments have the benefit of diversifying a portfolio from public traded stocks, matches the return profile of pension liabilities, and gives exposure to agricultural land, which is a finite resource. A growing world population and continued pressure to produce food will drive land prices and in doing so, investment returns.
The social benefits of investing into the asset class has numerous advantages. The sector’s significance is largely because of a potential for growth, through increasing productivity to ensure food security, skills development, creation of employment and poverty eradication, export opportunities and reducing dependence on imports. In addition, agriculture is a catalyst to industrialization and encourages investment into infrastructure.
Investment in agriculture is important because empirical evidence suggests that improved agricultural performance has the potential to reduce poverty, increase household incomes, make food affordable, and spur structural transformation, thereby contributing to overall economic growth and environmental sustainability.
Despite the importance and potential of agriculture in socioeconomic development, investment in the sector has been relatively limited. Multiple factors are responsible for the underdevelopment of agriculture and its low levels of investment, but risk is one common factor.
However, with precise planning and oversight, these risks can be mitigated. Natural disasters can be managed through technology, greenhouses, and infrastructure. Hedging instruments can be implemented to manage exchange risks that directly impact inputs costs and the sale of export goods. Trade barriers remain a key risk but taking advantage of advantageous trade regulation should be a key input into structuring investments.
How to invest into the sector? Choose the right fund manager such as Eos Capital that will give access to a diversified Agriculture fund instead of a single investment, one that is regulated and registered with Namfisa, and has the skill and experience within the agriculture sector. Accessibility to capital for emerging farmers is a key success factor for a strong future in the agriculture sector, and Eos Capital, Namibia’s leading private equity firm, is committed to the growth and development of Namibia and the surrounding region through meaningful investments and progressive impact.
Eos Capital’s strategy and decision for launching the Euphrates Agriculture fund is to address the aforementioned challenges, and to focus on boosting the productivity and sustainability of the agriculture sector by means of an unlisted manager solution to unlocking development funding and early-stage investment.
In many ways, investing in agriculture can be a strong and fruitful venture. There is no better asset to own than one that increases in value over the long term and keeps pace with inflation.
The Euphrates Agri Fund aims at improving food security and providing additional employment and income to farmers, entrepreneurs, and laborers alike by investing patiently and responsibly in efficient local value chains.