Futuregrowth Asset Management, a boutique of Old Mutual Investment Group, is capital raising for its third South African focused agriculture fund, Africa Global Funds can reveal.
The fund manager is also capital raising for the US-dollar Old Mutual African Agricultural Fund which will invest in agricultural land and infrastructure across the African continent. Smital Rambhai, Product Manager: Community Property & Agricultural Funds, Futuregrowth Asset Management, said: “We have discretion to close the fund before the final close if we feel that we have raised an adequate amount of capital for investment.”
“We have raised approximately R250m from local pension funds for the third South African focused agricultural fund. We’ve raised $25m for the African Agriculture Fund, and it has given us a start to investing and we will continue to raise more capital as we have a large pipeline of deals,” he said. “We are targeting at least $250m for the African Agriculture Fund and around R1.5bn for the South African Fund,” Smital toldAGF.
For the South African Fund, Futuregrowth targets an IRR of the South African CPI + 10%. From a nominal perspective, it is around 15.5%-16% per annum in ZAR terms. For the African Agriculture Fund, the fund manager is aiming to achieve 12% in US-dollar terms.
Futuregrowth anticipates the first closing of its third South African focused fund in March this year. The Futuregrowth Agri-Fund III will target agricultural land, biological assets and agricultural infrastructure in South Africa, whereas the Old Mutual African Agricultural Fund will invest in Africa excluding South Africa.
The Futuregrowth Agri-Fund III will do acquisitions with a minimum of R40m with a capacity to expand the farm and infrastructure to R250m or greater. Smital said that from a land and infrastructure perspective, South Africa is quite attractive from an investors’ perspective.
“If you look at global yields of leasing of land for farming businesses, in South Africa you can get between 8.5-10.5%, whereas in the US, the UK or the Netherlands it’s only 1.5-3%. In addition, the cost of production and the volumes generated in South Africa should be better than the more developed countries,” he said.
The African Agriculture Fund’s objective is to facilitate the creation of world class agricultural farms in Africa to meet the global demands and security for food.
“Outside of South Africa, we see deal opportunities across the African continent some of which include Burkina Faso, Morocco, and Zambia. We are looking to raise more capital, which will allow us to invest in and further diversify the Fund,” Smital said. “Outside of South Africa, the agricultural land and infrastructure is not very developed, so more capital is required to create infrastructure as well which will be beneficial enhancing the returns,” he added.
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