The Danish government is establishing an agriculture private equity fund to invest alongside local pension funds and private companies into the agriculture and food sectors of Africa, according to Niels Egerup, chief adviser in the government’s Office for Green Growth.
The fund will be managed by the Investment Fund of Developing Countries (IFU), a government-owned fund tasked with investing into developing countries alongside institutions for commercial returns.
The fund’s targeted investment return will be announced later.
The government will invest Kr40 million into the 10-year fund but hopes to attract a further Kr800 million ($146 million; €107 million) from local pension funds and other private investors. It will also mobilise capital from the private sector.
“We expect there to be great interest from Danish pension funds because some of them have already invested into agriculture,” said Egerup. “Agriculture-related companies in Denmark are also likely to want to get involved either by co-investing alongside the fund and/or by supplying equipment and technology to the projects.”
“In our experience we are able to mobilise six to eight times the amount of money of the fund,” he added. “And this could also include co-investments from other development finance institutions and/or multilateral institutions.”
During a speech announcing the fund’s launch, Mogens Jensen, Denmark’s trade and development minister, emphasised the need for Denmark’s agriculture sector to use its expertise to help alleviate hunger problems in Africa.
“The investment could feed a lot of mouths and grow locally. Many African countries lack the harvesting machinery, processing plants to dry cereal and logistics to ensure that the food reaches the consumer in high quality. All that Danish companies can deliver,” said Jensen at a food summit in Port of Aarhus organised by the Danish Agriculture and Food Council.
The council works closely with the IFU and will have an advisory role in the fund, according to Egerup.
IFU is now setting up a working group alongside government officials to identify investment opportunities.
“The focus will mostly likely be in processing companies, meat/poultry processing, dairy production, aqua-culture and logistics, including warehousing and silos, because there are a lot of opportunities relating to these sectors in Africa,” said Egerup.
The group will also negotiate terms with potential investors and work out the types of returns the fund will pursue; a return target will be announced at a later date, according to Egerup.
The fund is likely to have a three to four year investment period with an extendable 10-year term.
The fund was launched as part of a government initiative to contribute to green growth in developing countries by creating investment opportunities and mobilising institutional capital, said Egerup. And it is pursuing a similar model to the recently-launched Danish Climate Investment Fund that launched earlier this year.
IFU has co-invested into 812 projects in 88 developing countries, according to its website. Commitments now total more than Kr115 billion, of which IFU has committed Over Kr10 billion. And this has helped to create more than 350,000 jobs in the host countries.
IFU is fund manager for various funds including the Arab Investment Fund; the Danish Climate Investment Fund; IØ, the Investment Fund for Central and Eastern Europe; and IFV, the Investment Fund for Emerging Markets.