Setting up farms and growing crops in Africa may sound like an unusual investment for your ISA. But that is precisely what lies behind the Africa Invest Capital Protected Plan.
It is not just the world-wide increase in food prices that makes this investment viable, though that helps make it more profitable. Instead, making money from farming can be as simple as applying modern farming techniques to transform the output of hitherto unproductive land. And there is plenty of that in Africa.
Take a politically stable but remarkably poor country like Malawi (in fact the twelfth poorest in the world) where there simply isn’t the money or the technology to enable them to use irrigation. Farms right beside Lake Malawi, one of the largest freshwater lakes in the world, lay fallow waiting for the brief rainy season. It takes a relatively small investment to begin irrigation; then it is possible to grow two or three high value crops per annum instead of one of low value. And the profits can be significant.
The investment case
As Jon Maguire, chief executive of cru Investment Management points out; “There are no companies investing in food listed on the Malawi stockmarket, so you’ve got to go in and start something yourself.
The potential to see tremendous investment returns is there for all to see, but you have got to get your hands dirty to access it. Our whole investment thesis is based on the two year pilot scheme that we undertook, and that is forecast to generate trading profits in 2008 of some 30-40% of our original £2.5m investment.
I have just purchased the second biggest farm in Malawi for £800,000 – a former tobacco farm which has 1,050 hectares and huge outbuildings. The profit on that farm this year will be in the order of £470,000 so you’ve got a two year payback.”
The investment potential
“I have done a deal in the UK to acquire an internet herb and spice business which is a perfect fit with what we are building out in Africa. It puts us into the enviable position of being able to grow paprika in the ground over in Malawi, take it through the food processing plant next door and then bring it over here to the UK where it can be sold on the internet.
As an illustration of the potential, we sold last year’s entire paprika crop – all 460 tonnes of it – at $2,000 a tonne so we made £460,000. The shelf value in UK supermarkets would be £69m. The more you can cut out the middle men the greater the profits.”
Strong ethical credentials
“Not only has the investment case been proven but there have also been a string of knock-on benefits. Profits are very much shared with the local communities. We now employ over 2,000 employees, over 9,000 families take part in our outgrower schemes and 1,700 children and elderly in our feeding programmes.
If we raise the full £120m to expand this project then, over the next seven years, over 1.3m Malawians are set to benefit.”
Investment opportunity via Africa Invest Capital Protected Plan
Seven year structured product – plan manager: Keydata Investment Services Ltd
Investments into the Plan are split into two parts as follows:
Capital protection aims to return the total original investment, irrespective of the performance of the investment into Africa. Part of the initial investment (circa 70% but will depend on interest rates on 2 May 2008) is placed with a AA- or better credit rated institution who commit to returning 100% of the original investment after seven years.
Capital growth is achieved through investing the remainder of the investment into the Africa Invest Fund. Investors in the Plan at the end of the seven year term will also continue to own shares in the Africa Invest Fund which can either be held or sold. The aim of the Africa Invest Fund is to secure a stockmarket listing for the underlying holdings of the Africa Invest Fund and this may offer an additional profit to investors in the Fund.
- An exceptional ethical investment
- Available for double ISA tax period
- Uncorrelated to equities, bonds or cash
- Offer must close 18th April 2008
- Commission 4% of initial investment
- Available as ISA, PEP/ISA Transfer, SIPP
This article is for professional financial advisers only and other personsof any other description should not rely or act upon it. Any investment in theAfrica Invest Capital Protected Plan should be made only after the investor hasread and understood the Brochure, Key Features and Terms & Conditions. Issuedby the Plan Manager of the Africa Invest Capital Protected Plan: Keydata InvestmentServices Limited. Registered Office: Floor 8, Fountain House, 2 Queens Walk,Reading RG1 7QF. Registered no. 3714989, England and Wales. Keydata InvestmentServices Limited is authorised and regulated by the Financial Services Authority,25 North Colonnade, Canary Wharf, London, E14 5HS. Registered under the FinancialServices Authority number 194148. The favourable tax treatment given to ISAsand PEPs may not be maintained. The rates and relief from taxation may changeover time and apply directly to you as an investor. Distributed by: cru InvestmentManagement plc No. 3 Callaghan Square Cardiff CF10 5BT. Registered no 5359461,England and Wales. cru Investment Management plc is an appointed representativeof SD Asset Management Limited, Harlech House, 20 Cathedral Road, Cardiff CF119LJ, a company regulated by the Financial Services Authority(FSA). FSA number429241. Opinion expressed represents the views of cru Investment Management atthe time of preparation. They are subject to change and should not be interpretedas investment advice.
Smashed initial target
Since November 2008
Share issue oversubscribed
PARTNER INSIGHT: For many advisers, outsourcing to a multi-manager or discretionary fund manager makes sense, allowing them to focus on the adviser-client relationship
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