I thought it would be ideal to start the series by first dispelling some myths about investing in the agriculture space. I expect that if you are reading this, you are interested in investing some of your hard-earned income or time into agriculture. If you are financially savvy, you would also want to compare the return on investment (ROI) from an agricultural investment to more mainstream investments such as bonds, treasury bills, real estate, etc, (I will run the numbers on the ROI for several investment options later on). Hence, it will be good to know if your thoughts around agricultural investments are founded or endeavour to understand why some of your earlier investments failed.
Myth #1: I need a sound agricultural background to invest in agriculture.
The truth is that in any investment, technical knowledge always comes in handy but it’s overrated to think without that knowledge, you cannot invest. It will however be helpful to build your technical knowledge and expertise along the way. Your will be amazed at how relevant even your current skills are to succeeding in agricultural investments.
Myth #2: I can’t invest in agriculture because farm work is hard work which I’m not prepared for
Indeed, agriculture is hard work but increasingly, it’s becoming more intellectual than physical. With the basic knowledge of technology – improved seeds, crop protection, fertilizers, irrigation, aggregation, market, etc – it becomes less dependent on physical exertion. However, one thing many fail to realize is that investing in agriculture does not necessarily have to be on the farm. People need to understand the value chain perspective of agriculture and see what part of the value chain they have an appetite for and go for it.
Myth #3: I will not be competitive with imported products
Indeed, imported products are a major concern in Nigeria. In 2011, over $1.8m was spent importing rice, and this has been on the increase. However, observing trends in the country, Nigeria is starting to place more emphasis on local production in order to promote employment. While importation (both legal and illegal) will not disappear immediately, you will be doing yourself a lot of good by getting into local production early
Myth #4: You cannot go wrong in agriculture
I’m sure some of you will have had horrific experiences investing in this space and lost money doing it. Long gone are the days when you think agriculture is about throwing the corn seeds in the soil, going to sleep and coming back for a bountiful harvest or buying the birds, letting them run around and get your daily crates of eggs. If you want to make money in agriculture, you have to understand that it takes good management to succeed. You have to also do your research. There was a wave of cassava investment at a time without a clear idea of the market to absorb that particular variety of cassava you were growing. Yes, while some varieties might be great for garri making, they might not be suited for processing into beer etc.
To be continued… (Feel free to ask questions and I will do my best to answer them as exhaustively as possible – you can submit your questions on my Twitter handle @amdeji or below)
I am the author of Scaling for Success: Empowering African SMEs. I am a Partner at Sahel Capital, a food and agriculture-focused private investment firm in Sub-Saharan Africa. Sahel Capital manages the Fund for Agriculture Financing in Nigeria (FAFIN) and the Social Enterprise Fund for Agriculture in Africa (SEFAA).
I co-lead SEFAA, an impact-first fund investing in agribusinesses that provide direct or indirect benefits to smallholder farmers across 13 countries in Sub-Saharan Africa. I also lead investments and portfolio management for SEFAA and manage FAFIN portfolios, two of which were recently exited. I am a director on the board of one of the portfolio companies and serve in advisory roles for several startups and SMEs.