

At the end of last year, private equity firm Actis invested $54 million in top South African independent food retailer Food Lover’s Market. Now Old Mutual South Africa has bought a stake in ready-made food producer In2Food.
The new investments are bets on growth in South Africa’s food market, but they have come at a time of deepening drought.
Last Friday South Africa’s Agriculture Minister Senzeni Zokwana warned South Africans that they could expect rising food prices. “Food security will be heavily affected”, he told his country after the government had reviewed yield expectations. He added that drought damage was so serious that investment was now needed for land rehabilitation.
But the ways food is being bought in South Africa is evolving, with more ready-to-eat convenience foods on offer.
Old Mutual, which invested in In2Food through its Private Equity Fund IV, sees convenience and packaged food industry growth in South Africa as part of a global trend. Actis also sees this kind of growth as part of the wider expansion and modernisation they have seen across the retail industry.
The agnostic Old Mutual has invested in the food industry previously – the most recent example being through its Mutual Private Equity Fund III in private and own-brand food label manufacturer Liberty Star.
Before that, the firm had investments in South Africa’s third-largest food manufacturer, Foodcorp, through their 2004 Old Mutual Private Equity Fund I. Both Actis and Old Mutual South Africa have told Agri Investor that convenience food, including food that is seen as fresh and locally sourced, is gaining traction in South Africa and in urban areas of sub-Saharan Africa.
Old Mutual South Africa investment principal Mohsin Cajee said told Agri Investor: “In the convenience food sector, our thesis is one where consumers are cash-rich and time-poor, and we think that relative to the developed markets the convenience food market will grow in South Africa.”
Old Mutual and Actis will both seek to expand the operations they now have stakes in.
Cajee, who sat on the Liberty Star board, and will represent Old Mutual South Africa at In2Food said: “We will add value in terms of M&A activity because it is part of the investment thesis; consolidation and growth through acquisition, and improving the overall corporate structures within the business.”
The firm did not say whether In2Foods would expand to other African countries, but it also has operations in Brazil.
Actis partner and director of consumer David Cooke, who will sit on Food Lover’s board, told Agri Investor that Food Lover’s own expansion would include adding franchises in other east African countries. He said: “Part of that [$54 million investment] is going into the business to help expansion.”
Food Lover’s Market was founded in 1993, and is now considered one of South Africa’s biggest food retailers alongside Shoprite, Pick n Pay, Spar, Woolworths and Walmart’s Cambridge Foods. It has 120 branches in 11 countries including South Africa, Zimbabwe and Namibia.
Cooke added: “West Africa is clearly on our radar in terms of potential new areas – but there is also still a lot to be done in terms of the existing countries that the business is invested in.” Food Lover’s has been franchised out as far as Australia.
“The rise and penetration of modern retail in sub-Saharan Africa is hugely evident,” Cooke, who sees modernisation in food retail as part of a trend towards expansion and consolidation in African retail generally, told Agri Investor. “We have been putting up modern retail malls. The interest that we see from global retailers and South African retailers is in expanding modern retail formats.”
“The most obvious example is the likes of Wal-Mart expanding into South Africa and acquiring Massmart … McDonald’s and KFC have also been expanding,” he said
“Marry that with increasing urbanisation rates and the development of infrastructure, and it all adds up to a very exciting modern retail growth story across the continent.”