The agriculture investments are in actual farmland and infrastructure, which are leased to approved operators to manage, develop and run.
- Agri Fund – Investors' money flows into the Agri Fund. The objective of the fund is to facilitate the creation of world-class agricultural farms in Africa to meet the growing global demand for food and provide greater food security within Africa.
- Purchase farm – UFF African Agri Investments will examine a broad selection of potential investment entities and identify those that it believes are most likely to meet the required selection standards for the Fund. Each investment opportunity will be assessed against the investment strategy to evaluate its eligibility, this includes an initial risk assessment and any additional due diligence. Each proposal for investment by the Fund is then submitted to the Investment Committee for review and approval. Apart from evaluating the commercial attractiveness of an investment, the social and environmental aspects of the potential investment entity will also be evaluated, including the possibilities on how to implement adequate social and environmental management plans. Once the Investment Committee provides the final approval, the Fund purchases the farmland and related infrastructure, e.g. houses, cold storage, silos etc.
- Appointing an operator – The Agri Fund appoints an operator to manage the bought farmland and infrastructure. The operator leases the farm and is in charge of the entire value chain.
The responsibilities of the operator include:
Leasing farm – The fund offers multiple sources of income through lease income from the selected operator, capital appreciation and value creation from operational efficiencies. Improve and expand farm – The investment model of the Fund addresses agricultural initiatives that lead to:
- Taking over the workforce and providing an adequate working environment
- Maintaining the asset and its improvements
- Complying with the International Finance Corporation (IFC) Performance Standards
- Complying with UFF African Agri Investments’ administration and IT monitoring system; and maintaining monthly reporting flows
- Enabling UFF African Agri Investments to comply with the required information feedback to investors.
Exit/ evergreen investment – Although the investments are considered to be long-term, exit provisions are always pre-considered. There are several possible exit strategies for private investments in the agricultural industry:
- land development and conservation
- environmental reform
- healthcare and education
- improved housing conditions
- food security.
- Direct sale of asset: Due to the expected large fixed asset component in the investments, a sale of assets on a separate basis may be a suitable exit option
- Roll-over into succession fund: Many investors wish to have a longer-term fund as the asset class is quite appealing in terms of an inflation indexed running yield with strong capital preserving characteristics of the underlying asset
- Trade sale: In many instances the operators negotiate first right of refusals should the Fund’s assets not be rolled over in succession funds. The latter is the preferred route to safeguard long-term sustainability and alignment of interest between farm owner and operator. When the Fund enters into sale-and-lease-back arrangements a put-call arrangement with the relevant operator is a good option. Here the exit is predetermined at fund closing. Many operators have requested a buy-back option to ensure the continuity of their supply after end of the fund term
- Listing on a stock exchange: Possibilities of such an exit will be assessed in the exit strategy document that will be drafted seven years after closing
- Refinancing of companies: Due to the relatively large proportion of fixed assets in each of the businesses invested in, refinancing of equity investments via local and international debt markets can be an option.