CAP partners with Mission Produce for South African avocado expansion

Criterion Africa Partners managing director George McPherson says investors are mispricing the risks associated with Africa's potential for agricultural development.

Criterion Africa Partners sold a minority stake in a joint venture it developed with a South African avocado producer to Nasdaq-listed Mission Produce, which plans to help support an expansion focused on supplying European markets.

Oxnard, California-headquartered Mission Produce –  which provides avocadoes and mangoes  to customers in more than 25 countries  –  announced in early February the creation of a joint venture called Selokwe Agri between Mission Produce, CAP and ZZ2 Boerdery, a family-owned South African farming company with roots stretching back as far as 1702 and the Dutch East India Company’s produce farming in the Cape of Good Hope.

ZZ2 currently owns 250 avocado hectares managed by partners and plans call for Selokwe to develop up to 1,000 hectares in South Africa’s Limpopo region to produce the Hass variety for export to European markets.

CAP managing director George McPherson told Agri Investor the origins of the deal stem from a brownfield South African forestry investment that drew from the firm’s second fund. CAP combined a portion of a eucalyptus plantation within that asset and adjoining land devoted to avocados, which had been acquired through a Fund I investment in a farming company that had worked on a separate development project with ZZ2, he explained.

That combined entity, Selokwe, is the company Mission Produce acquired a stake in through a separate deal, about which McPherson declined to disclose details. He explained that such focus on potential higher and better land use has always been an important part of CAP’s core forestry business and will be an important part of any future deals the firm pursues.

“Developing land for alternative uses has been what good timber investors have been doing for 30 or 40 years,” said McPherson, who previously served as a managing director at former CAP parent, Bethesda, Maryland-headquartered Global Environmental Fund, according to his LinkedIn profile.

“In an African context, it’s not necessarily going to be real estate, but it’s going to be asking ourselves the question of what can we actually do with this land that improves the value above and beyond what we can get out of it if we just stuck with the forestry side of the business.”

CAP is also headquartered in Bethesda and advises two forestry funds supported by investors that include FinDev Canada, the European Investment Bank, FMO and others. In April 2021, the firm sold another Fund I forestry asset for $39 million and last year exited a stake in a Gabonese forestry company to a unit of French energy company Total.

Mission Produce manages 5,500 avocado hectares with integrated operations across California, Mexico and Peru and a sourcing network that includes Brazil, Peru, Colombia, Guatemala and elsewhere. McPherson said the opportunity to help such a large and established company expand its regional presence is also part of what made the Selokwe deal attractive for CAP.

“Anytime you bring a large international player to Africa, it’s a good thing for Africa and hopefully it’s a good thing for the player that’s being brought to Africa,” he said. “Investors are mispricing the risk. You need to have good partners and a manager that has people on the ground and people that are going to stick around. It’s not for the faint of heart, but it also represents an opportunity, especially on the ag side.”

CAP previously operated as the Africa unit of GEF and managed $115 million as of a October 2021 filing.