EXEO buys 49% of Zambian cold-chain protein business

Africa-focused private equity house EXEO Capital has invested $6.4 million to acquire 49 percent of Capital Fisheries, a Zambian cold-chain distribution business that focuses on animal proteins.

The transaction is the third sealed by the firm’s Agri-Vie Fund II, which reached a first close on $100 million in February. Chief executive Herman Marais told Agri Investor last month that the firm was aiming to close the vehicle on $175 million in the second half of this year.

Agri-Vie Fund II has now deployed $24.4 million, Ellora Ghosh, investment associate at EXEO, told Agri Investor today.

Capital Fisheries sells fish harvested in Zambia, Zimbabwe and Namibia, mainly tilapia, bream and horse mackerel. It has also started distributing smoked fish as well as different cuts of Zambian beef and sausages produced locally, in addition to a few imported products. Processing is done in a modern fish and meat plant in Lusaka.

Ghosh said the firm had been attracted by the company’s diversified profile, which made it less vulnerable to the risks associated with the distribution of animal food, such as sudden bans on certain products or changes of regulation abroad.

She cited Asian bird flu and foot-and-mouth disease as two examples of potentially disruptive events for a cold-chain business, noting that Capital Fisheries’ diversified portfolio allowed it to “balance out against those shocks.”

Coping with copper

EXEO had been wanting to invest in Zambia since 2015-16, when the economy slowed down and valuations moderated on the back of lower copper prices, the export of which provides Zambia with the bulk of its hard currency, Ghosh said.

She noted that the firm had always believed in the country’s “strong fundamentals,” owing to reserves of high-quality copper set to last until 2050. In addition to this macroeconomic solidity, she emphasized that, despite Zambians’ strong appetite for proteins, they only consumed about 58g per capita a day, compared with 103g for developed economies.

Part of the discrepancies stemmed from supply-chain issues, causing huge wastage, that proper cold-chain systems could help address, she argued. Developing countries’ per-capita cold-storage capacity equals 19 liters, she said, while it stands at 200 liters in developed markets.

About 70 percent of Capital Fisheries’ clients are wholesalers that distribute to the country’s informal markets, many of which are located in rural areas. Asked whether the lack of reliable electricity in some remote parts of the country was a problem, Ghosh explained that the company’s containers allow products to be safely stored for up to two days without access to power-dependent refrigeration.

Ghosh also said Capital Fisheries had looked at installing solar-powered systems but initially ruled out the upgrade due to excessive costs, though she reckoned the company may consider the option again as it seeks to expand national coverage.