LONDON (Reuters) - African farmland investment has the potential to match the exponential growth of Brazil’s agricultural industry, the head of business development at privately owned agricultural operator Quifel said.
“The best benchmark is really Brazil. What took the Brazilians around 30 years, one should try to do it in 10-15 years,” Pedro Marques dos Santos, head of business development at Quifel said, referring to how Africa could emulate Brazil’s dominance in global agricultural investments.
Quifel operates in Africa, Latin America and Southern Europe and began operations with a palm project in Brazil.
“In 2007, Quifel also embraced the Sub-Saharan Africa land development opportunity,” Marques dos Santos said, noting higher land prices in Brazil as one driver.
Investors poured $26 billion in foreign direct investment into Brazil in 2010 and around one-third of all funds and companies investing in farmland globally have committed funds to Brazil, the OECD said in a report.
But anyone interested in buying up Brazilian land may find it tough as last year the attorney general issued a ruling that limited the area of land foreigners were able to purchase.
The effect has been to cap at 12,350 acres the amount of land that can be bought by a foreign investor or a company that’s more than 50 percent foreign-owned, prompting some investors to look to alternative regions.
This, combined with rising food prices, has spurred global interest in African farmland.
Global food prices are at record levels and are likely to remain so in the months to come, according to the U.N.’s Food and Agriculture Organization.
Africa has lower production costs than Latin America due to cheaper land and labour yet could offer similar yields, Marques dos Santos said.
There’s a bigger need to invest in infrastructure and logistics in Africa but, “The end result is to expect high returns if farm talent is able to overcome everyday operational difficulties.”
Brazil, Latin America’s largest country, is one of the world’s leading exporters of agricultural commodities including coffee, sugar and soybeans.
Quifel, which runs African farms in Mozambique, Sierra Leone and Angola, chose these countries based on their coastal locations and expectations of high economic growth, Marques dos Santos said.
Coastal West African countries were attractive for fruits and vegetables, while Mozambique appealed “for oilseeds, thus avoiding transhipment within the continent and by being closer to Asian markets for potential exports,” he said.
Many African countries are net food importers, raising questions about food security and whether production should go to feeding the local community.
“Quifel’s projects are Greenfield and for the foreseeable future our production will be bought by local players - mainly processors or crushers - as the countries need that production for domestic consumption,” Marques dos Santos said.
Beyond the food security issue, investing in Africa has other challenges, which helps explain why its agricultural potential has not yet been fulfilled.
“Companies which can’t cope with the long-term horizon are slowly leaving the region,” he said.
Quifel has a long-term expansion plan within Sub Saharan Africa, he said, adding that its immediate focus will be on the development of the areas it already has under management.