Africa 'has come of age' for farm investments

Africa's solid economic growth during the world recession has earned the continent its spurs as an investment destination? With agribusiness opportunities looking particularly attractive, Panmure Gordon said.

Sub Saharan Africa in particular has, while lagging the Asian tigers in economic growth in recent years, performed considerably better than the other main emerging market groupings such as Latin America, according to the International Monetary Fund.

And the region, which maintained economic growth even during the depths of the world crisis in 2009, is set to see its growth rate accelerate this year, to 5.75%, while all other developing regions suffer slowdowns.

The performance was a sign that the "overall level of economic discipline has improved across the region, with governments demonstrating their ability to effectively manage their economies", Panmure Gordon analyst Damian McNeela said.

Agriculture was "well placed" to benefit from this greater stability, given increasing government support and rich opportunity from underexploited resources.

'Key pillar'

"Africa's vast natural resources suggest that it is well placed to supply the expected increase in food demand due to an increasing global population," Mr McNeela said.

"As such, agriculture is likely to be a key pillar of Africa's economic growth, and in particular Sub-Saharan Africa's.

Indeed, Angola, for instance, has unveiled plans to invest $2bn in farming over the next five years.

And the United Nations Food and Agriculture Organisation that, of the forecast increase in arable area over the next 40 years, Latin America and Sub Saharan Africa would account for 80%.

In Sub Saharan Africa, the amount of arable land used is expected to jump by 26% to 228m hectares between 1999 and 2030

Buy rating

The comments came in a note in which Mr McNeela placed a "buy" recommendation on shares in Lonrho, the African hotels-to-transport conglomerate, of which agribusiness is now the biggest division.

Indeed, last year Lonrho increased its exposure to the sector through raising its stake in farming and distribution group Fresh Direct, and acquiring John Deere and Komatsu dealerships in Mozambique.

"We believe that Lonrho's vertically integrated approach should allow it to capitalise on both the increased global and domestic demand for produce from Sub-Saharan Africa and the trend towards greater commercialisation of farming in the region."

Mr McNeela placed a target of 23p on Lonrho shares, which closed at 17.75p in London on Friday.