africa Agriculture Capital market Economy Private Equity Privatization Tanzania

Private equity firms eyeing Tanzania’s agricultural sector

Approximate reading time: 2 minutes

Agriculture is Tanzania’s main economic activity employing over 70% of the population and contributing 30% of the country’s  gross domestic product.

 

It is indisputable that Tanzania is blessed with abundant resources. One important resource is the availability of vast arable land.

If this resource is properly utilized through agriculture, it has to the potential to of transform the country’s economy significantly.

Agriculture is Tanzania’s main economic activity employing over 70% of the population and contributing 30% of the country’s  gross domestic product. Majority involved in the sector practice small scale agriculture which doesn’t necessarily translate to high returns. Lack of funds and expertise to scale up the process have been mentioned to hinder the progress.  It is for this reason private equity firms have taken interest and hope to partner with local businesses involved in agriculture to boost the sector.

During the 2nd East Africa Venture Capital Association conference held in Dar es Salaam on October 11th, Private equity firms explained that Tanzania is an attractive place to invest in agribusiness given the country’s demographic and level of competition being low compared to that of Kenya. The country presents opportunities across the whole supply chain of agriculture.

Investors also pointed out that they see a lot of potential in cashew farming and are focusing their resources on the produce. Poultry farming is also another aspect that is expected to fetch high returns.

In order to realize the success of the agricultural sector, investors have called on the government to set up friendly regulations that will enable them to do business in the country. For instance, getting work permits has been an issue to foreigners who wish to come and work in the country. Currency stability has also been picked out as an important factor to doing business in the county. The investors have therefore called on the government to maintain their fiscal policies.

For local companies involved in the agribusiness value chain working with private equity firms is an opportunity for growth rather than a business takeover which is what most local business owners think. Private equity firms bring with them not only funds but also technical expertise that help companies grow. A good example is how DOB equity transformed Tanga Fresh, from a small company to the biggest diary company in the country.

Source: The Exchange

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