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Managing Agricultural Investments for Sustainable Agriculture in Counties

  Sep 16, 2016

Strathmore Business School hosted County Executives in charge of Agriculture from across the country to address key issues to consider in the management of agricultural investments at the county level. They keynote speaker Chege Steve, General Manager for Agribusiness at Centum Investment Company Ltd defined agricultural investments as different capital injections across the agribusiness value chain with the aim of generating returns. He further defined the ROI for businesses and public sector in agriculture.“In agribusiness, the ROI  generally refers to financial returns whereas in the private sector, the return is defined through a wide array of measures that capture the social impact of investments such as eradication of malnutrition,” stated Mr Chege.

Chege further drew comparisons between agricultural investments for the private and public sectors. He noted that in the private sector, the primary goal is to maximise the shareholders wealth with emphasis on socially responsible investing. He added that the key return measurement metrics include profitability, return on invested capital, internal rate of return and net present value. In contrast, public sector agribusiness is largely government driven or structured as Public Private Partnerships (PPPs). The performance indicators in the public sector include eradication of acute hunger, poverty reduction, job creation and skills/technology transfer.

Additionally, he pointed out that typical investments in the agricultural sphere are constituted by:

  1. Inputs (fertilizers, tools and implements)
  2. Primary Production (crops, livestock and fisheries)
  3. Processing (milling, grading and industrial processing)
  4. Marketing (distribution and exports)
  5. Retail (consumer facing operations)
  6. Service Providers such as banks and insurers.

Chege gave examples of public agricultural investment projects in Kenya which include; National Accelerated Agricultural Inputs Access Program (NAAIAP), Traditional High Value Crops (THCV) and Galaria/Kulalu Food Security Project. However, the first project did not have the intended impact due to low returns and overwhelming demands from farmers that were not met.

In conclusion, Chege proposed a number of key issues to consider in order to mitigate the failure of agricultural investments in the public sector. The factors include:

  1. Feasibility Study – It is imperative to cover all faces of the project including market dynamics, technical issues, political, legal and regulatory factors such as tariff barriers.
  2. Financial Modelling – This entails identification of sources of funds whether through debt, equity or grants.
  3. Resourcing – It is crucial to know where to get financing and in what form and whether particular expertise or training is needed for employees.
  4. Implementation Plan – The investment should have delivery timelines and the person responsible. This eliminates execution risk by detailing goals and milestones.
  5. Monitoring and Evaluation

About the Managing Agricultural Investments for Sustainable Agriculture in Counties

The Sustainable Investments in Agribusiness  program is results oriented, and is designed to build knowledge and equip participants with the practical skills required to support responsible and sustainable agricultural investments.

It will also facilitate knowledge sharing as participants exchange ideas and be exposed to advanced agricultural working methods that can transform perceived challenges into opportunities for sustainable investment in our country. Click here to read more

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