Musa Fund III will invest up to 25% in agribusiness – exclusive

Pan-African merchant bank Musa Group has launched its third private equity fund, and may invest up to a quarter of it in agribusiness

The firm has raised 300 million Namibian dollars ($22 million; €19 million) from Government Institutions Pensions Fund Namibia, according to Jerome Mouton, managing director of Musa Capital Namibia. The firm is targeting a final close of 450 million Namibian dollars, which is expected to be raised from other domestic pension funds. Musa Capital Fund III will target returns of over 20 percent.

“We had actually thought about raising an agriculture fund on its own quite a bit of time before we launched this fund,” said Richard Akwei, a principal of Musa Group, who leads its fund management business.

Akwei said the firm was comfortable investing in agribusiness because it is a controlling shareholder in African Frontier Holdings, a South African agribusiness and fast moving consumer goods company that owns primary production, processing, distribution businesses and supermarkets.

Musa is looking to expand those operations in tandem with the fund.

Namibia is a net food importer, so one of the firm’s priorities will be import substitution and building continuity into supply chains. It will consider business to business agriculture and food companies. It already has a hydroponic vegetable farm deal and traditional farms in northern Namibia in the pipeline.

“By establishing a sustainable commercial production base and then focusing on efficient distribution you can have quite an interesting regional business,” said Akwei. He added that firm would not invest in farmland for capital gain, but lease the land to focus on operational efficiency and consistent supply of raw materials.

“A key element to our strategy is not to invest in farming for the sake of farming,” he said. “Typically you find private equity shies away from primary production, which in our minds means that your success leads to your biggest challenge… where are you going to develop the supply from?”

“The African Development Bank is coming out very strongly when talking about sustainable agriculture … [required to be] run as a business,” said Akwei, adding that the approach would create jobs, food security and skills transfer. “We have spoken to the African Development Bank and our investment theses are aligned. What they find interesting about our fund is the partnership with local pension funds and particularly in non-traditional private equity markets, like Namibia.”