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An
investment fund for seed and related businesses in eastern and southern
Africa
F.
Mohamed
There are a number of
factors in sub-Saharan Africa that justify the establishment of an
investment fund to support the development and growth of the private
seed sector. These factors include the economic advantages of seed of
improved varieties, farmers' interest in acquiring new varieties, and
the currently unacceptable status of commercial seed markets.
In addition, opportunities for seed companies have improved with
increased liberalization of agriculture and with advances in crop
breeding. The countries of
eastern and southern Africa are largely agrarian economies that depend
on the production of basic staples. Maize is the most important grain in
most countries of the region; it has replaced sorghum and millets in
even some drier regions. For most of these crops, farmers have largely
depended on local seed or planting material supply; households save
their own seed, obtain it from neighbours, or buy grain suitable for
planting in local markets. The major exception is maize, and many of the
countries in the region have well-developed private or public maize seed
enterprises. The basis of
most of these enterprises is hybrid seed. Because of the deficiencies in
formal seed systems, the introduction of new crop varieties has been
difficult. The liberalization of the seed sector in the region opens up
tremendous opportunities for private sector seed companies to provide
the products and services which state controlled enterprises have so
miserably failed to do. Financing for agriculture in the region has been
poorly managed in the past and government interference in the sector has
resulted in banks losing money. Equity financing will therefore be the
prime source of capital for these emergent companies which will drive
the growth of agriculture in the region.
Apart from direct investments in seed companies, it is apparent
that the delivery of good quality seed is dependent on investment in
other related agricultural businesses. Relevant business sectors are: 1)
plant breeding and seed production, e.g. companies involved in all
aspects of plant breeding, seed production, seed marketing, and inputs
marketing; 2) grain handling and marketing, e.g. facilities for
cleaning, drying and storage of grain and related activities such as
warehouse discounting systems and commodity exchanges if they can be
developed within a reasonable time frame; 3) outgrower networks, e.g.
companies that contract small farmers for grain or higher value crops
which a larger company will process or package for local sale or export
and 4) peripheral business opportunities, e.g. businesses which are
further removed from direct farming activities, but could still impact
on farmer incomes. Processing of grain and non-grain crops will come
into this category, as will businesses which use communications
technologies to improve farmer access to information on weather and
market prices.
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