Impact investor AgDevCo, which is backed by the British government aid organisation UKAid, is investing $1.5 million in Malawi peanut processor Afri Oils to support the country’s struggling groundnut export industry.
The investment in Afri Oils, previously known as Afrinut, comprises equity and debt, and includes the acquisition of a 20 percent share in the company, according to senior director of investments Chris Isaac. Existing shareholders Exagris Africa, a company farming over 4,000 hectares across Malawi, and the National Smallholder Farmers’ Association, have also injected new capital.
The investments are aimed at helping Afri Oils build international-quality production capacity from a network of farmers, and will go towards modern equipment, a new processing facility and training. The company will begin by focusing on regional exports, mainly into South Africa, and expand into the European market within three years, according to Isaac.
Malawi’s global export industry once sold more than over 50,000 tonnes of nuts a year. That collapsed in the late 1980s when many countries implemented stricter toxin standards limiting levels of aflatoxin, a naturally occurring mould harmful to health, in nuts.
“We want to help modernise the groundnuts industry in Malawi,” said Isaac, who directed the deal for AgDevCo. “International markets are not accessible unless you can offer quality and consistency. With this investment, Afri Oils is well placed to become be a trusted supplier to major brands, putting Malawi back on the map as a significant groundnut exporter. The positive social impact for Malawi’s groundnut farmers could be substantial”.
Farming training will include harvest and handling practices to reduce aflatoxin levels.
The overall volume of nuts produced in Malawi has grown in recent decades, although it has struggled to keep up with standards. Malawi has produced over 250,000 tonnes of groundnuts a year since 2007, of which 15 percent is exported, mainly to regional markets, according to the FAO.
The Netherlands’ Facility for Sustainable Entrepreneurship and Food Security also granted a subsidy of €1.5 million for an ongoing project at Afri Oils in 2012, aimed at improving peanut quality and increasing production from 2,000 to 20,000 tonnes a year by 2022.
AgDevCo has invested $76 million in 53 agribusinesses in sub-Saharan Africa. The investor aims to generate financial returns, but also uses blended and concessional finance to support businesses. It invests $250,000 to $4 million in early-stage and growth capital agribusinesses that work with African smallholders.