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“Precision farming deals with optimum use of water, land and the ecosystem needed for optimum if not maximum yield”

Exclusive interview with Dr Iraj Abedian, founder and chairman of Pan-African Capital Holdings. He was also a panellist at the recent Africa’s Green Economy Summit in Cape Town.

Please introduce yourself and tell us more about your career so far. The general public knows you as a commentator on economic news.
I’m Iraj Abedian, by training an economist. Over the past 40 years, I’ve been in different parts of economic analysis which I studied. Once upon a time for 20 years, I was at the University of Cape Town, teaching economics as a professor of economics. Subsequently, I went to the Standard Bank as the chief economist of the Standard Bank Group. Prior to that, I got involved with the new South Africa’s macroeconomic policy formulations.

When I left Standard Bank, I established two groups of companies, one in research and risk analysis and one in private equity. One company is called Pan-African Investment and Research; the other one is called Pan-African Capital Holding, and I’m very active in both of them.

What made you decide to start Pan-African Investment and Research Services?
Well, the establishment of my first company after I left Standard Bank in 2005 was essentially to carve out my own professional space. My DNA is as an economist. However, economics appeals to me and I’m passionate about it because what it can do in terms of economic activity, enterprise development and impact on social welfare, and the focus of my research and risk analysis in Pan-African Investment and Research has been exactly that. What are some of the opportunities in South Africa, in the broader region and all the way on the continent as it interrelates with the global economy that is becoming more and more interrelated, integrated and interdependent. So that was the reason I established Pan-African Investment and Research, focusing not just on this research side of it, but also about the application of research into real investment opportunities.

Was there a particular reason why you decided to focus on agriculture?
My focus over the past few years has shifted from general, within the framework of general private equity investment within our Pan-African capital operations, into agriculture. Agriculture appeals to me because it’s the cross-section of a number of very exciting variables. Most importantly, environmental sustainability.

Environmental sustainability requires a special attention in agriculture. And for me, agriculture is exciting also because it’s a sector in the set of activities that lend themselves to the application of technology. Technology for me is a very exciting part of economic analysis. Agriculture in so far as environmental sustainability is concerned, requires the use and the application of technology to make it not just farming, but also precision farming. And precision farming then deals with optimum use of water, optimum use of land, optimum use of the ecosystem that you need to put in place for whatever you’re producing to be able to give you the best, if you like, optimal, if not maximum yield. At the same time, agriculture is about food security. It’s about food security for the broader society and more importantly for the poor and the vulnerable. As it happens worldwide, agriculture is also about, call it non-urban areas, not just rural but non-urban areas by and large.

I am aware that technology enables us to do some production in urban settings too. But at the moment, agriculture happens in the rural areas and rural area is where much of the poverty and a lot of vulnerable communities are, especially on the continent of Africa, but not uniquely to Africa. But where we live in sub-Saharan Africa, for me, agriculture and precision farming, and paying attention to the environmental sustainability elements of agriculture together with social sustainability, meaning the welfare of the workforce, the welfare of communities, and all of those become combined.

As I mentioned, agriculture then becomes a cross section of all these variables that we need to bring together in order to not only have commercially viable investments as entrepreneurs, but at the same time, make sure that we have maximum impact. Nowadays, the term impact investing is fashionable, it is in vogue. And for me, impact investing is nowhere better applicable than agriculture. A very important part of agriculture on the continent of Africa is about greenification of production processes or agriculture operations; and by greenification, I mean producing with minimum carbon footprint. We can never make it zero, I don’t believe not yet, but at the moment we can definitely materially and significantly have an impact on environmental sustainability by making the production processes in agriculture a lot greener with minimum carbon footprint.

What specific challenges and opportunities does the agri sector face in terms of climate change and accessing resources such as water and power?
Of course, what I just explained about the opportunities for greenification of agriculture and food production comes with opportunities and challenges. The challenges remain primarily with the mindset of the funding agencies, the banks, government institutions, DFIs (development finance institutions), nationally and internationally.

They oftentimes talk about impact investing and, in fact, regularly talk about environmental sustainability. But in terms of my experience, more often than not, they don’t know how to apply it. Their mandate says you need to be environmentally sustainable, but when they want to translate that mandate into funding terms, funding conditions, quantum of funding, etc. etc., they fall flat. They get into protracted, unhelpful, sometimes destructive loopholes of administrative processes; in their language, risk mitigation, risk identification. But the more I interact with them, the more I realise that they do not have the required expertise, experience and background to be able to define risk and find risk mitigation processes. So that’s the main challenge. That’s the biggest challenge that the agriculture sector faces at the moment. Of course there’s a lot of global and national focus on it, but we are a long way from dealing with this particular challenge.

The other challenge of course is expertise and knowledge, human resources fit-for-purpose that can apply modern precision farming technology to the agriculture processes. So these are for me the top two challenges, opportunities: plenty. We do have on the continent a great deal of opportunities for the greenification of production, environmental volatility, uncertainty, extreme weather, if you like, that have become part of our lives, but we need to use technology and precision farming techniques to make sure that the investments that we undertake are more secure and more sustainable. I find in all activities of agriculture opportunities for investment, whether you’re in primary production or processing or export, etc. And of course, the more we reorient our historic or conventional agriculture production processes and agri-processing methodologies and techniques in line with modern technology, the better the opportunities that come up.

One of the key opportunities is that sooner or later in sub-Saharan Africa, if not on the whole of the African continent, we need to learn to have a regional perspective as opposed to a nationalistic perspective. Because the scale matters. Precision farming, like many, many other economic enterprises, requires a minimum scale of production. Then you can have a great deal more promising and more productive investment opportunities. You can employ, for example, solarisation of your energy base much better and much more profitably.

So scale-up production is important as well as critical input, such as water and water management. If you think regionally, water scarcity is better managed, than if you think nationalistically in the old style and fairly irrelevant methods of putting boundaries where the dams and catchment areas are, where the processing has to happen, etc. So, I think those are some of the very exciting challenges and opportunities as entrepreneurs we need to wrestle with to make impact investment in this particular sector a lot more profitable and a lot more impactful.

What projects are you involved in currently that are particularly ground-breaking in your view?
At the moment, my personal focus is on an entity or enterprise that I established four years ago called Agri Finance Facility. In essence, it’s a non-banking intermediary for the distribution of wholesale capital into medium to large farmers, more specifically in the export-grade fruits, fresh fruits from South Africa and increasingly Southern Africa. It’s an exciting enterprise. Opportunities are huge. And what has made the opportunities so big is pretty much the collapse of the Land Bank. As you know, four years ago, the Land Bank collapsed under the pressures of state capture. It left a massive, multibillion funding gap, possibly as large as 40 billion rand. The banking sector is not capable of providing the required funding. As I mentioned earlier, the banking sector doesn’t have the requisite skills to be able to assess the risk and price the loan and the finance properly. So when in doubt, they chicken out, they fall back on their old habits, exaggerating the risk, because they don’t understand it, and overpricing the funding, and as a result, farmers cannot afford it.

So we have a massive disconnect between what is needed and what the funding institutions, be they long-term players in the capital market or be they from the banking sector, can and do provide. So I saw a gap here and I launched Agri Finance Facility in order to make it an intermediary distributor and intermediate between the sources of capital and the customers. And that keeps me busy all the time at the moment.

Where in Africa are you active?
My activities in Africa at the moment, obviously, charity starts at home: South Africa is my central focus of activities but increasing in Namibia, Botswana and Mozambique, and in essence, having refined the Agri Finance Facility processes, such as risk identification, risk mitigation and credit pricing.

Now, I must emphasise, it’s a challenge that is not finished yet, because as I mentioned, sources of capital are fairly unfamiliar, hesitant and unable to come with the same level of funding that the market requires. Be that as it may, after four years, we are slowly extending our operations from South Africa to Namibia, to Botswana and Mozambique in a very, very systematic and slow process, because essentially it is an enterprise that is all about risk and risk management, but at the same time bringing in impact, at the same time making sure that your clients are in line with what we want to achieve, which is an impactful investment not in terms of finances only, which is important for sustainability of the enterprise but also the greenification of production processes. And that’s an exciting opportunity. So you work with solar installers with private sector power companies that are emerging. And hopefully, in the next couple of years, we will have a subcontinental operations bringing in precision farming with precision energy, with precision environmental management, and hopefully fit-for-purpose finance that suits the goal of developing this particular enterprise.

You were a panellist at the Africa’s Green Economy Summit in February in Cape Town. What were your impressions?
My participation in the recent Africa’s Green Economy Summit in February 2024 was an interesting one. I pretty much shared elements of the salient points of what I shared with you now. I find it very interesting that across the continent, the summit brought policymakers, entrepreneurs and some institutions to get the discussion and engagements going.

For me, it was the first time, and I found it very appealing to interact with some fellow Africans outside South Africa who are busy with similar types of challenges. Also, hearing the perspectives of institutions of finance, local and international, and gain better insights into how we can collaborate, how we can crack the common challenge of bringing the right finance and the right technology to those who have the land and resources in order to expand activities, but along a new green path of production towards the greenification of African production processes.

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