AFGRI Group Holdings (“AGH”), the investment holding company with interests in food, agriculture and financial services related companies providing products and services to ensure sustainable agriculture and food security (collectively, the “AFGRI Group”), announced the creation of a strategic grain storage platform vehicle in collaboration with a consortium of leading South African institutional investors to enable the growth of grain storage capacity in South Africa and on the continent and to strengthen food security in the region.
As background to the transaction, Chris Venter, the CEO of AGH, explains that in 2011 the AFGRI Group sold its debtors’ book to the Land and Agricultural Bank of South Africa (“Land Bank”) with a clear vision of gaining access to a stronger balance sheet and the ability to expand its lending capabilities to offer a broader base of financial support to farmers.
“Since then the AFGRI Group has substantially increased its debtors’ book, growing it more than fivefold in value from 2011. The number of loans to farmers has also increased considerably from 1,290 to 8,620 farmers. The Group has expanded its financial service offerings across all nine provinces, financing not only grain production but various other commodities. Through the recent acquisition of the South African Bank of Athens, we are today able to offer a wide range of additional banking products to farmers.”
Venter said that using a similar approach, the AFGRI Group is now pleased to announce the creation of a strategic storage platform vehicle, AFGRI Grain Silo Company Proprietary Limited (“AFGRI Grain Silo Company”) – which has the clear objective of expanding its current storage capacity of some 4,7 million tons to six million tons in the near future. “This will allow us to not only cater for grain storage, but to expand into the storage of other types of commodities,” says Venter.
Three new institutional investors have committed to invest alongside the Group and its current BEE employee partner, Izitsalo Employee Investments, in the platform and through this, to support AFGRI’s strategy for growth and food security. The three institutional investment partners are STANLIB Infrastructure Investments, Wiphold, and the Land Bank. This investment consortium will initially own storage facilities with a total value of R3,6 billion at inception.
Venter continued, “AFGRI Operations Proprietary Limited (“AFGRI Operations”) will manage the storage facilities on behalf of AFGRI Grain Silo Company in terms of an evergreen management agreement. This arrangement provides the strategic benefit of AFGRI’s excellent track record in managing storage operations, and deep experience of the sector.”
AFGRI Operations will continue to be a JSE Approved Storage Operator for all the grain silos, while the grain silos will continue to be JSE Approved Silos and JSE registered delivery points.
This transaction will assist AFGRI to achieve four strategic objectives, namely: (i) the creation of a strategic storage platform with a focus on expanding across Africa; (ii) partnering with reputable South African institutional investors; (iii) unlocking the value of AFGRI’s grain storage assets, the proceeds from which will be used to further expand AFGRI’s financial services reach and support for farmers; and (iv) entrenching AFGRI’s reputation as the foremost long-term services provider to farmers and the agricultural industry. The Group’s current 4,7 million tonne storage footprint consists of grain silos and bunker complexes throughout six provinces in South Africa.
“High-quality commodity storage and related services is in demand by our customers, and through the consortium, we aim to ensure that we enter new areas across South Africa and simultaneously grow capacity,” said Jacob de Villiers, MD of AFGRI Grain Management.
“For clients making use of our silo and bunker facilities, it is business as usual,” de Villiers indicated. Farmers and grain silo users will continue to experience AFGRI Grain Management’s proven expertise and track record on an ongoing and uninterrupted basis.”
The effective date of the transaction is 31 March 2019 and all suspensive conditions to the transaction have been fulfilled.