Making nutrition attractive to investors.
The humanitarian case for investing in nutrition in Africa is clear. For example, despite great advances, no African country is on course to reach the UN target of ending childhood malnutrition by 2030. Yet, as delegates learned at the recent Nutrition Africa Investor Forum (NAIF) in Nairobi, to drive meaningful change, nutrition needs more than a humanitarian pitch -- it must demonstrate economic potential in order to attract the private sector.
Highlighting the importance of un- locking investments across the nutrition value chain, Fokko Wientjes, vice president, nutrition in emerging markets at DSM said,
"With 30-40% stunted children in Africa there is an urgent need to make nutritious foods widely available, affordable but most importantly aspirational in the eyes of the consumer. We, at DSM are investing in aspirational nutrition to deliver safe and nutritious foods for all."
Nutrition is very much a commercial sector in its infancy. The challenge for those looking to improve nutrition is how to clearly define the sector and create a finance eco- system that can support both the short and long-term needs of nutrition companies.
"A lot of people who invest in nutrition aren't investing in nutrition from their per- spective. They're investing in agriculture, in logistics, or even solar technology," Dominic Schofield, president for the Global Alliance for Improved Nutrition (GAIN) Canada, told delegates.
According to investment advisory firm Valoral, the number of investment funds that specialise in food and agriculture increased from 38 to 446 between 2005 and 2017. However, very few of these funds deploy capital with the stated intention of boosting nutrition. Defining the sector is therefore key to laying the groundwork for nutrition-led investment.
The report Fueling the Business of Nutrition, which was presented at the forum by the Harvard Kennedy School, suggests two ways in which the sector can take shape. The first is to provide a working definition of nutri- tious food, which is given in part as "a food that... provides beneficial nutrients (such as vitamins, major and trace minerals, essential amino acids, essential fatty acids and dietary fiber) and minimizes potentially harmful elements". Second is to identify and map businesses with investment potential in the nutrition space.
The nutrition value chain already includes a great diversity of actors, opening up a range of possibilities for investors offering differ- ent types of finance to companies in various stages of development. These investors are gradually being switched on to nutrition as governments and development finance insti- tutions (DFIs) begin to earmark the sector as a focal point for private capital. According to the Business & Sustainable Development Commission, there is $155bn to $405bn of global opportunity in reducing food waste in value chains by 2030. Some $110bn to $205bn is up for grabs in reformulating prod- ucts for increased nutritional value.
Some companies are already looking to capitalise on the opportunity. Africa Im- proved Foods (AIF) recently set up a public private partnership (PPP) with the Rwandan government to buy soybean and maize from 24,000 farmers to produce enhanced food- stuffs for 1.5m children in the East Africa region. In 2015, the International Finance Corporation arranged a $21.5m loan agree- ment and $4.5m in equity to support a $45m factory in Kigali which opened a year ago. Today's economic climate breeds investors who are hungry to explore such opportunities.
"Capital is growing faster than GDP in places like China, India and Africa. So if you don't have a place to deploy, you need to start looking," Heleen Goussard, head of unlisted investment services at South African investment advisory firm RisCura, told the forum.
Yet appropriate targets are often hard to come by. In his speech, Tom Adlam, direc- tor at AgDevCo Rwanda revealed that his organisation has $100m ready to invest in the agriculture space but struggles to find ap- propriate investees. Many nutrition-focused companies are early-stage SMEs who fall outside the remit of large institutional inves- tors. AgDevCo for example invests any- where between $2m to $5m -- a figure that would swamp most infant companies. The challenge is how to tailor finance to specific company needs, and create an ecosystem which can move businesses up the rungs of financing to ever larger partners.
Lessons from renewables
Renewable energy was once viewed in much the same way as nutrition. An analysis of the conditions which led to the birth of the now multi-billion dollar industry could inform the growth of the nutrition sector. For renewa- bles, the sector was initially de-risked by DFI and government activity.
"All new initiatives need the DFIs," Mar-tin Poulsen, managing director at Acacia Sustainable Business Advisors, told the forum. "If you're trying to do something innovative and novel, unless you get them on board you won't go far."
After concessional capital was granted to startups, venture capital was used to support growth in early stage renewable companies, after which larger companies turned to debt financing. The hurdle which the sector faced was how to move renewable companies up from the first concessional phase to the more competitive demands of venture capital and debt funding; to move away from blended finance to strict institutional investors like pension funds, hedge funds and investment banks.
"The DFIs are brilliant in terms of ena- bling first investment but the problem is that the funds then begin to speak the language of DFIs," explained Goussard. "By the time you get to an institutional investor that's not the language they speak or understand
-- they are often not sure that you will make the financial return."
Presenting a case
Nutrition finds itself at the beginning of this journey and will need to diligently map its investment future in order to present a strong case to larger investors. As the sector begins to solidify, buoyed by its close alignment to numerous SDGs, global health prerogatives and a strong case for commercial returns, nutrition can gradually attract a range of investors and establish a reputation as one of Africa's leading emerging asset classes. GAIN and other likeminded organisations are at the forefront of this effort to drive forward nutritious foods financing in order to improve health and wellbeing on the continent. n
The Nutrition Africa Investment Forum was hosted by GAIN, SBN and DSM and organised in cooperation with IC Events, a sister company of IC Publications, publishers of African Business.
The challenge is to define the sector and create a finance ecosystem that can support the needs of nutrition companies.
SUN Pitch Competition
The Scaling Up Nutrition Business Network (SBN), in collaboration with the Global Alliance for Improved Nutrition (GAIN) and DSM, organised the first Africa edition of the Scaling Up Nutrition Pitch Competition (SUN Pitch Competition). The competition aimed to showcase SMEs that are innovatively improving diet and tackling malnutrition across the continent and highlight new investment opportunities.
Twenty-one finalists from across the nutrition supply chain presented their companies in Nairobi. Presentations were judged according to the validity of the investment opportunity against four key elements: nutrition impact, commercial viability, scale and innovation.
The overall winner, Ope Olanrewaju of Kennie-O Cold Chain Logistics, was crowned the SBN Nutrition Champion. Kennie-O Cold Chain Logistics provides transport and storage solutions for perishable foods in Nigeria. Their efforts have helped strengthen local supply chains, countering post-harvest losses and encouraging the consumption of fresh foods. He will be awarded a $15,000 technical assistance prize that will be administered locally as well as with international experts in Switzerland, the Netherlands and Asia over the coming months under the mentorship of GAIN and SBN. In addition, four other finalists were awarded prizes generously contributed by partners.
Nutrition will need to diligently map its investment future in order to present a strong case to larger investors.
[c] Copyright IC Publications 2018 Provided by SyndiGate Media Inc. ( Syndigate.info ).
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|Publication:||African Business (Al Bawaba (Middle East) Ltd.)|
|Date:||Dec 17, 2018|
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