Since it got off the US sanctions list nine months ago, Sudan has struggled to emerge on investors’ radars. Reasons for this abound: red tape and corruption remain chronic problems; foreign banks, fearing a sanction relapse, are still fearful of getting involved in the 40 million-strong nation. Outsiders have remained very cautious – despite the country’s vast mining and agricultural resources.
That potential is not lost on everyone, however. Last week, Hassad Food, a subsidiary of the Qatar Investment Authority, the emirate’s $335 billion sovereign wealth fund, announced its intent to invest $500 million in Sudan’s agricultural and food sector over the next three years. The capital would be deployed through partnerships with local companies, in line with its “new vision” to become “a successful strategic investor in the global food and agriculture value chains.” Keen to show it will put its money where its mouth is, Hassad says it has plans to target other countries.
Qatar is not the first Middle Eastern country to go on the hunt for agricultural assets with a view to boosting its food security. In the wake of the financial crisis, when several countries restricted exports and global food prices skyrocketed, many of the region’s sovereigns initiated an agricultural deal spree.
That is continuing today. Last year, Al Dahra, an Abu Dhabi-based firm, sealed a $1.3bn tie-up with the Saudi Agriculture and Livestock Investment Company, a state-owned group, to develop farmland in 10 countries around the Black Sea. In February, a group of companies controlled by one of Dubai’s richest families inked a $1 billion investment in a 77,000-hectare beet and grains farm in Egypt. Two months later, Iraq’s trade ministry said an Iraqi-Saudi partnership was considering an investment in one million hectares in Anbar province.
In the case of Qatar, however, there is even greater urgency. A regional boycott launched in June 2017 by the country’s bigger neighbors has raised concerns about its ability to source fresh food such as dairy, of which it used to import vast quantities from Saudi Arabia. That country has now emerged as Qatar’s bitterest rival in the region, and Doha has had to find new supply routes, often at a significant premium. The strategy has involved airlifting cows and going bigger on climate-controlled, drip-irrigation facilities (an expensive feat in one of the driest countries of the world).
Middle Eastern countries’ efforts could in theory be a source of concern for other institutional investors. Faced with state-backed competitors acting on a strategic rationale, dealmakers pursuing a purely financial motive naturally fear they’ll often be outbid. Cohabiting with Qatar in a given market may also lead neutral investors to fear they’re about to take on geopolitical risk. Yet those scares are probably exaggerated.
First, sovereign players tend to be looking for assets of a scale beyond what fund managers and all but the biggest LPs typically target.
Second, they’re generally active in different markets – partly to try to limit transport distances when they’re looking to ship the produce, but also because they’re keen to avoid political backlash in Western countries. We’ve heard that a prominent Qatari firm, for example, is considering downsizing its portfolio in Australia.
Middle Eastern sovereigns tend to favor proximate emerging markets. As a UK-based manager active in the southern hemisphere told us, “those entities are better equipped than us to invest in Africa.” More often than not, off the radar is precisely where sovereign investors want to be.
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