AGRI3 Fund closes first African deal
5 December, Amsterdam – AGRI3 has provided a 50% pari passu guarantee to Old Mutual Investment Group Limited in Malawi, in order to support a Malawi Kwacha 19.5bln (USD 12mln), 10 year loan for Gala Agriculture Co Ltd (GalaMacs). The loan will be used to support the company’s operations and expansion, supporting sustainable agricultural production, improved livelihoods and forest conservation on the farm. This represents the first transaction the fund has closed in Africa.
AGRI3 Fund and Old Mutual Investment Group Limited, a leading asset management business in Malawi with Asset Under Management of just under a billion dollars, this week closed a USD12mln deal to fund GalaMacs, an export focused macadamia business in Malawi. The deal demonstrates that funding towards the agriculture sector can accelerate commercialisation at a large scale in Malawi and the right partnerships can adequately de-risk large scale sustainable farm expansion.
Malawi, located in the Southern African region, is heavily dependent on agriculture and is particularly vulnerable to climate related shocks. The agricultural sector employs 60% of the population and accounts for 30% of the GDP. The predominance of agriculture means the country is particularly vulnerable to commodity prices and agri-market volatility. Recent decline in tobacco sales and low cotton prices have seen a reduction in foreign exchange leading to shortages of other good such as oil and gas and imported foodstuffs. The country is also prone to droughts and other natural disasters (such as cyclones), which can affect crops and harvests.
The macadamia industry is relatively young in Malawi and developing at a rapid pace on the back of a growing global market, as well as being the preferred crop in migrating from tobacco production. It is primarily an export crop, which has growing global demand due to a number of lifestyle trends. The agriculture sector in Malawi is characterised by subsistence farming and therefore low productivity and limited cases of commercial scale and sustainable agriculture. Supporting sustainable agricultural production at a large commercial scale, with an export focus, will impact the economy through much needed foreign currency generation, the agriculture sector in advancing commercialised farming and the community with a web of activities that benefit surrounding communities, uplifting livelihoods. The impact demonstrates how the proposed investment amplifies activities at Gala beyond regular farming practices in Malawi.
GalaMacs is on course to become one of the leading farming operations in the region with 2,050ha of planted macadamia trees, offering significant economic and environmental benefits for the population. The loan from Old Mutual Investment Group (Malawi), supported by AGRI3, will be utilised to continue to support the expansion and ongoing operations of the existing farm. This includes restoring degraded land, which was previously used for tobacco, and supporting the scale up of sustainable production operations on the 2,050 ha of farm area using precision irrigation (1,400ha) and application of liquid fertilizers. The company is also trialling a range of innovative Integrated pest management and yield enhancement practices. The company will meet Global Gap certification for export and will also explore different sustainable certification schemes. The company further aims to restore and maintain a significant area, up to 3,000ha, of the land under native vegetation, with the potential to generate significant biodiversity and carbon mitigation benefits.
Critically for the country, the farm is expected to generate significant positive impact on rural livelihoods by providing employment and training support to workers on the farm. In addition, GalaMacs is in the process of developing a smallholder scheme, to provide farming opportunities for local communities, adding additional benefits for livelihoods and incomes.
“AGRI3 is very excited by the potential impact of this project. GalaMacs’ strong commitment to sustainability aligns well with AGRI3’s impact objectives and strategy. The transaction will not only allow AGRI3 to make its first investment in Africa, but also support a professional farm, which is not only aiming to improve productivity and create local jobs, but also implement a range of sustainability and livelihoods measures which will improve soil health, sequester carbon and benefit the local community.” Casper Havinga, AGRI3 investment Director
“GalaMacs, partnering with AGRI3 and Old Mutual Investment Group, has successfully concluded a long-term financing facility, that will have far reaching achievements for its operations, both now and in the future. This will contribute to the national economy by earning valuable foreign exchange and at the same time creating a high standard workplace for employees, whilst impacting the surrounding communities through responsible social governance.
GalaMacs through its vision, implemented strategies and practices in macadamia production, using modern agronomic techniques, by farming in a sustainable manner, protecting its fauna, flora and water resources through standards of environmental governance, has probably achieved the status of being the largest single macadamia operation in Africa. AGRI3 has played a pivotal role in assisting GalaMacs formulate its international profile. “ Chris Skordis, Chief Financial Officer GalaMacs
“This deal demonstrates how we can allocate capital towards projects that have a significant impact on key economic drivers such as agriculture, while speeding up the journey to commercialised farming. This project at Gala showcases that with the right partners we can diversify our export base while delivering solid returns to our customers and positively impacting the communities we operate in. As a responsible business, partnering with AGRI3 Fund has facilitated not only de-risking of the project but support towards sustainable farming, aligning with our responsible investment philosophy which is at the heart of how we operate” Mark Mikwamba, Managing Director Old Mutual Investment Group Malawi
About AGRI3 Fund – The AGRI3 Fund was created by the United Nations Environment Programme (UNEP) and Rabobank, together with partners IDH and FMO, the Dutch Entrepreneurial Development Bank, to support the transition to sustainable agriculture. The Ministry of Foreign Affairs of the Netherlands is a donor to AGRI3 Fund. FOUNT and Cardano Development are the Investment Advisors for the Fund. AGRI3 Fund aims to mobilise additional public and private capital globally and at scale. The Fund works with commercial banks, development finance institutions (DFIs), impact investors and institutional investors and provides credit enhancement tools and technical assistance to projects which actively prevent deforestation, stimulate reforestation, contribute to efficient sustainable agricultural production and value chains and reduce carbon emissions and improve rural livelihoods.
About Gala Agricultural Company Ltd – Gala is an agricultural entity focused on the production of macadamia nuts on 12 estates in the Namitete area, Lilongwe, Malawi. With over 2,050ha of planted orchards, Gala is on track to become the largest single macadamia company in Africa. The company has made considerable progress towards building a state-of-the-art, export-driven macadamia operation which is already delivering significant social, environmental and community benefits and contributing to the national economy through its foreign currency earnings. In 2021, Gala attracted equity funding from the Old Mutual Ulimi Trust Fund (Ulimi) to support Gala’s development path as a sustainable and responsible agribusiness. Ulimi is an agri-fund launched and managed by Old Mutual Investment Group and SIGNATURE Agri Investments which is dedicated to the development of sustainable agri and food value chains in Malawi.
About Old Mutual Investment Group Ltd Malawi – Old Mutual Investment Group (OMIG) is the leading fund manager in Malawi with assets under management sitting over USD1 billion as at October 2023. OMIG offers a wide range of investment solutions for both institutions as well as individuals. OMIG manages a comprehensive spread of investments across listed equity, interest bearing assets, property and alternative investments. Its investment capabilities are managed by specialists in each field, who focus purely on delivering on their client mandates. OMIG is committed to growing customers wealth by delivering consistent strong returns. Investing responsibly for the long term, delivering strong returns while also contributing to the greater good is at the heart of OMIG’s strategy.
For further information, please contact:
Maria-Pia Kelly
m.kelly@agri3.com