Masimong’s InteliChem acquisition highlights South African ag investment trend

EXEO partner Izak Strauss says firms like Masimong Group Holdings that invest to promote black empowerment in South Africa are increasingly interested in agriculture.

South African black-empowerment firm Masimong Group Holdings’ acquisition of a stake in an inputs supplier from EXEO Capital, is part of a wave of increased interest in the country’s food and agri sector among empowerment firms, said EXEO’s co-founder.

“In the past, there was not much interest in the sector by the black-owned companies,” Izak Strauss, co-founder of Bellville, South Africa-headquartered EXEO, told Agri Investor following its exit from Stellenbosch-headquartered InteliChem.

“Most of them first focused on industrial and mining investments, but lately they have shown a lot of interest in the food and agri sector.”

EXEO sold its 47.6 percent stake in crop protection and plant nutrition supplier InteliChem to Masimong late last month. Strauss declined to disclose financial details.

Interest in the ag space comes as a broader dialogue about black empowerment in South Africa creates what Strauss described as a “general pressure” to get more black-owned companies involved across sectors.

Empowerment-focused firms like Masimong, he said, are often supported by financial institutions, local operating companies or high-net-worth individuals and have return expectations similar to that of any other investor.

One such firm, African Pioneer Group, acquired EXEO’s stake in HIK Abalone Farm in November. Strauss also highlighted a November 2018 investment that saw black-empowerment focused Pelo Agricultural Ventures invest in Karan Beef, Africa’s largest cattle company, alongside the 2.1 trillion rand ($178.6 billion; €162.3 billion) state-owned asset manager Public Investment Corporation.

In addition, a group of black empowerment-focused South African investors is currently targeting a $32 million first close for Igaba Farms, an open-ended farmland vehicle  focused on “virgin land,” to which black-owned businesses are given preferential access.

Black empowerment investors have traditionally focused on sectors offering the highest returns and opportunities to use leverage, said Strauss. He attributed the recent interest in ag partly to a generalized focus on population growth and urbanization that has made the sector more relevant.

“As time passes, the pendulum always swings,” he said.

Masimong already had two agriculture-related investments before the InteliChem acquisition, said Strauss – Western Cape-headquartered Mouton Citrus and Southern Cross Investment Holdings, which exports dates and table grapes from its headquarters in Northern Cape.

EXEO drew from its $100 million Agri-Vie Fund I for the December 2013 acquisition of its 47.6 percent stake in InteliChem, which was founded by two former Bayer employees and has about $2 billion in annual revenue, said Strauss.

After beginning with a narrower focus on crop protection, he explained, InteliChem expanded into new product categories and began working with producers on meeting specific production challenges.

Though South Africa has experienced drought in recent years, which has affected its earnings, Strauss said EXEO realized a high teens return over the course of its investment in InteliChem.