The Democratic Republic of Congo (DRC) is not often associated with investment potential. However, John Ulimwengu, senior agribusiness investment advisor to the DRC government, strongly believes the country has the resources to dispel this scepticism. He is also a senior research fellow at the International Food Policy Research Institute (IFPRI), a Washington based research centre. Speaking on the sidelines of The Global Africa Investment Summit, he explains the work he is doing to get agribusiness investment off to a good start.
Which agribusiness sectors in DRC are ripe for private investment?
There are a variety of sectors requiring development including cereal production, fruits and vegetables and also commodity crops such as tea, cocoa and palm oil.
The DRC has 80 million hectares of arable land, with only 5 percent being used. Some 95 percent of that land is used for subsistence operations, so there is great potential for commercial scaling of the sector. We also have vital natural resources to support a growing agribusiness sector. Some 56 percent of surface water in Africa can be found in the DRC.
What’s your take on the idea that cash crops should not be the priority sector for agribusiness investment, as they don’t directly produce edible food?
I think that’s a negative characterisation. You don’t have to grow everything you need to eat. If a smallholder exports cocoa in exchange for income, that allows them access to buy foods they are not growing themselves, and vary their diet.
It’s not feasible for smallholders to grow all the foods they require for a varied diet, they don’t have the land capacity to do this.
Cash crop exports bring in income to pay for food and other things such as energy and education.
What is the policy and regulatory environment doing to attract private investment into agriculture?
I don’t perceive a political risk to investment in DRC for a number of reasons, not least that a good company survives political disturbances.
Firstly, the government is providing the necessary infrastructure to support agribusiness investment. In addition, the DRC government is working with organisations such as the Multilateral Investment Guarantee Agency (MIGA), to provide that political guarantee to investors. MIGA will announce to the investment community, whoever’s interested in such projects, what the investment guarantee provisions are for the DRC.
What are the biggest challenges for investor access to the DRC’s agribusiness sector?
The single biggest challenge to investment is land security. To resolve this, the government is securing land in different parts of the country and deciding what crops the land is suitable for. The government is currently allowing outside investors to invest in agribusiness projects on 50-year lease terms. Until we reform the law, that’s what’s on offer at the moment.
The second biggest challenge is infrastructure. Energy, roads, railways and waterways are all required to support agribusiness and the markets they serve. Agribusiness investors should not be shouldering the infrastructure deficit. The government is drawing up complete investment packages before promoting to donors or private investors. It selects the site, the agribusiness to be conducted, and allocates funds to develop the necessary infrastructure on and in the surrounding area.
For example, one of our proposed agribusiness sites is a 1000-hectare site, suitable for vegetable crops, and we’re estimating a $50 million revenue agribusiness to be developed there. With those complete figures established, it’s far easier to approach investors looking to develop energy projects, for a $30 million investment.
Are there any initiatives which private investors can tap into?
The DRC government has identified sites for 20 proposed agribusiness parks across the country, and we have one which has completed the first phase of development. We are actually meeting with MIGA, the International Finance Corporation and the International Development Association [all World Bank Group members] this week, to discuss the funding of the second phase.
One of the parks will feature timber processing, and we intend to establish a biomass plant there using waste wood from the timber harvesting process, as a feedstock.
What’s the state of the local private equity and funds industry?
We don’t have a local private equity or funds industry, but we’re working with the IFC to nurture that industry in the DRC. This is part of our aim to develop the local financial infrastructure to support agribsuiness investment internally.
Also, there are plenty of banks on the continent operating on a pan-African level, but they are currently absent from the agribusiness sector, particularly at the primary agriculture stage. Contributing to this is the high risk they associate with smallholder farming investment. An interesting experience I had recently, which highlights this point, is the DRC government providing the investment guarantee to one of the successful agribusiness co-operatives in the country. The bank offering the loan requested the government guarantee 100 percent of the loan in cash. They essentially wanted to take the government’s money, accrue a little interest, and not expose themselves to the business’ risk at all.
African continental banks are not ready for agribusiness investment just yet, so we’re looking at other ways. I have a meeting soon with Rabobank, who have an established agribusiness financing arm, and we’re hoping to put an investment agreement together with them, for the DRC’s agribusiness industry.
We’re also looking to develop small, perhaps state-owned at first, agriculture lenders, such as the ones developed in Nigeria and Ghana.
Finally, agribusiness investment in Africa is centred around mid-stream, value addition. Is the primary producer missing out on vital investment?
As I said during The Global Africa Investment Summit, without a properly supported primary production sector, there’s no way you can support an entire value chain. As a rule of thumb, I suggest seeking to control 50 percent of your supply, and putting in place a programme to promote those subsistence farmers to fully fledged agribusiness entrepreneurs.