Africa Agriculture Development Company’s sale of a 356-hectare farming project in Ghana to a local agribusiness is part of an effort to attract investors to an irrigated farming hub in the West African nation.
AgDevCo announced in mid-January the sale of Babator Farming Company – a commercial farm on the Black Volta River in the Savannah region of northern Ghana – to local onion provider Oba Pack Company for an undisclosed sum.
AgDevCo’s West Africa and commercial agriculture director Erik Wiersma tells Agri Investor the property purchased by Oba Pack is designed to function as proof of concept for the Babator Irrigated Farming Hub, a 10,000ha site intended for development as Ghana’s largest food production and processing hub. Plans call for 3,500ha of the 5,000 irrigable hectares on the BIFH site to be developed as large commercial farms and the remainder to be made available to smallholder producers.
Wiersma explains that Ghana’s Ministry of Agriculture approached AgDevCo – a development finance institution supported by the UK’s Foreign, Commonwealth and Development Office, the Mastercard Foundation, and the Norwegian Ministry of Foreign Affairs, among others – about five years ago, asking for help establishing an irrigated farming hub similar to the one the firm has worked on in Zambia since 2012. He says the firm has negotiated a 50-year land lease with local tribal authorities in northern Ghana for permission to develop the Babator site.
After an initial investment of $6 million that included land acquisition and irrigation infrastructure, he says, AgDevCo proved the agronomic potential of the 356ha site sold to Oba. In addition to row crops such as soy and corn, he says, the demonstration farm includes crops like tomatoes, onion and okra, which are important for local markets.
Oba, which has been sourcing its onions from surrounding countries such as Burkina Faso, Mali, and Niger, now plans to grow and process onions and grow soybeans to support the local poultry feed industry.
Wiersma says the property acquired by Oba attracted interest from at least five parties, of which three were domestic and two were international. Interest in further development of the property, he says, is evenly split between some Ghanaian companies already active in row crop and fruit production, and others focused on anticipated growth in domestic livestock supply chains.
“We are now talking to two or three other potential investors who are looking to develop their own irrigated farms on the concession as well,” he explains, estimating as many as 3,000 additional hectares could be developed by the end of the year.
“We have commercial farms that are relatively large-scale, but they bring along the small-scale farmers who are also in the area, and give them access to crops that they want to process or continue in.”
Although there are many sources of capital that can potentially offer support to projects like the BIFH, he adds, the lack of personnel capable of operating the projects causes significant delay.
“It’s about patient capital. When you do this type of agricultural investment, it’s not a PE type of money. You are probably not going to get your money back within a cycle of a fund,” he says. “It’s more the DFI type of money that needs economies of scale and needs large projects to put their money to work, still with an impactful meaning.”
Although government-linked entities continue to be the most important sources of capital for such greenfield development projects, said Wiersma, some private investors are starting to express interest.
“This private money is looking more to back local operators first, and then they expand to a Babator-type set up,” he adds.