The Africa Seed Investment Fund

It has been a while since my previous post. Apart from a considerable amount of travel, my energies have been fully focused on preparing for the launch of the Africa Seed Investment Fund, a $12 million investment facility to be managed by African Agricultural Capital. The facility is the brainchild of the Alliance for a Green Revolution in Africa and will offer medium to long term capital to seed businesses in eight countries in East & Southern Africa.

The African seed industry has (alongside most other agricultural sectors) been starved of investment capital. As a result, there is a significant deficit in high quality certified seed available to farmers across the region. This deficit, along with the questionable quality of this most essential of all farming inputs, is a substantial contributor to the poor agricultural productivity and efficiency endemic to the region. The Africa Seed Investment Fund offers the opportunity to seed businesses to access the capital they require in order to increase seed production volumes, seed quality and take advantage of the opportunity to commercialise new improved seed varieties - the fruits of research and development work carried out by both national and international plant breeding programmes.

The launch was held on April 2nd in Kampala. Now the hard work of identifying, researching, evaluating and negotiating investment agreements will start.

Pan Paper and the role of agribusiness in rural Africa

Over the past 10 days, I have made visits to two AAC seed company investees in Uganda and Kenya. NASECO (an acronym for the Nalweyo Seed Company) is located near Hoima in Western Uganda and Western Seed Company is in the Kenyan town of Kitale, close to Mt Elgon. Visiting investees is usually an enjoyable experience: the great privilege of my work is to meet and spend time with business owners and managers who are committed to building successful businesses. I was also very happy to have been able to drive to both destinations. Travel writer and novelist Paul Theroux considers driving the least enjoyable and interesting way to see a country, but to me it is infinitely preferable to the endless hanging-around of air travel.

On the way to Kitale, I passed through the small town of Webuye, home to a long established and large business called Pan African Paper Mills, usually abbreviated to Pan Paper. By coincidence, the next day an excellent article appeared in the Daily Nation by Jaindi Kisero, urging action to be taken to save Pan Paper from closure. It came as no surprise to me that Pan Paper is once again in a state of impending closure – it seems to have been struggling for most of the last 15 years. Its problems stem from many causes, the most serious of which is the lack of plantation timber in its immediate vicinity, but which also include high transaction costs, and little protection against paper imports.

Kisero’s argument was based on the critical importance that rural-based agribusiness plays in sustaining rural communities. “If you close down Pan Paper, you hurt the lives of hundreds of thousands”. And he’s right. The social impact of closure would be enormous. My appreciation of agribusiness’s developmental role dates from my experience as the Financial Controller of Tanganyika Wattle Company in the town of Njombe in Tanzania’s southern highlands. Tanwat, as the company was fondly known, had been in operation for almost 50 years. At that time, the business had more than 2,000 employees across its four divisions – the eponymous 10,000 hectare wattle estate and factory, the 600 hectare tea estate and factory, a sawmill, timber treatment plant and 5,000 hectare pine and eucalyptus plantation, and a 2.5 MW dendrothermal (wood-fired) power station. It was a fine example of an integrated rural agribusiness.

As an investment, it is fair to say, Tanwat had not been a great financial success for its shareholder. Though profitable, overall return on capital was low. However, it is no exaggeration to say that its social impact was huge. To put this in context, Njombe was little more than a village when the business was founded in the early 1950s. Since then, it has grown into a busy town with more than 60,000 inhabitants. Njombe’s growth was not entirely due to Tanwat, but the company’s impact – specifically, the $30-40 million in wages and salaries funneled into the local economy over the best part of 50 years; the substantial value of purchases of Tanzanian goods and services; the huge contribution in direct and indirect taxes paid; the delivery of electricity to Njombe and its environs; the foreign exchange earnings over decades of operation; health services delivered through Tanwat’s hospital; and, less quantifiable but no less significant, the transferable skills developed in the workforce – construction skills, engineering knowhow, motor mechanics, office administration, accountancy and, latterly, computer literacy – is undeniable.

So this is the dilemma facing the Government of Kenya. Keep Pan Paper open, subsidise it and allow it to continue to provide livelihoods and opportunities for the town of Webuye and its rural population, or accept market forces and let it go under, with a saving to the exchequer but a big social cost.

There is no easy answer.

Hybrid Maize and the legacy of George Shull

White maize is by far the most important crop in East & Southern Africa. The grain is palatable; crop yields are high in comparison to alternative grain crops; labour demand is low. Well over 200 million people in sub-Saharan Africa rely on maize as their principal staple crop.

Remarkably, for a crop so critical to food security across half the African continent, maize is a relatively recent introduction. The Portuguese brought it to Africa early in the 16th century, since when it has spread throughout the continent. Its popularity owes much to its productivity : under the right conditions, commercial farmers in Southern Africa have achieved yields in excess of 10 MT/hectare for hybrid maize. Indeed, I remember during one visit to the Mpongwe farms in the Zambian copperbelt, the General Manager, Patrick Tobin, proclaiming his delight that he would soon be eligible to join the “ten tonne” club of Zimbabwean commercial farmers (though I never knew if such a club really existed).

But yields like this are only possible where farmers are using hybrid maize seed. Exactly 100 years ago, an American plant scientist, George Shull, published research into the phenomenon of hybrid vigour in maize (enhanced yields through hybridization). Within 20 years, hybrid seed maize offering significant yield improvements was on sale in the USA, and the technology quickly spread across the world. Everywhere, that is, except Africa, where hybrid maize still makes up only about 25% of the total area planted to maize – despite its manifest yield benefits. To put this statement in context, smallholder farmers using traditional open-pollinated varieties of maize, probably average yields of about 1 MT per hectare in comparison to Mpongwe’s 10 MT target – a factor of ten. This colossal inefficiency is a major contributor to the continuing food insecurity on the continent and, in light of the ever increasing population, a major risk to the future.

This is a simple example of why it is so important to invest in Africa’s seed industry, from breeder to multiplier through production, distribution and retail. Access to and utilization of improved maize seed has the potential to transform African agriculture. African Agricultural Capital (AAC) has already invested in four seed companies in the region and it is both my hope and my intention that AAC will continue to look actively for opportunities to invest in the seed sector in the future.

For more information on this and other important crops in sub-Saharan Africa, it is well worth reading Securing the Harvest, by Joe de Vries and Gary Toennissen. Both work for the Rockefeller Foundation and both were instrumental in the foundation and initial capitalisation of AAC. I owe them a debt of gratitude.