Primary producers seeking funding across the agribusiness sector often face a frustrating question: With Africa’s population set to account for one in every four people globally within decades, why is securing direct private equity at the farm gate still so difficult?
According to Niel du Toit, Senior Associate at pan-African private equity firm EXEO Capital, the answer lies in a structural mismatch between the risk profile of primary farming and the expectations of institutional investment funds.
The Risk-Return Mismatch at the Soil Level
Primary agriculture remains fundamental to continental food security, but standalone farm-level operations present inherent hurdles for traditional fund structures.
“While primary agriculture remains fundamental to food security, standalone farm-level investments are inherently exposed to climatic volatility, commodity price cycles, and the operational risks associated with agricultural production,” explains du Toit.
For closed-end private equity funds managed on behalf of investors, these unpredictable variables create a timing conflict. Weather shocks, disease outbreaks, and global price swings lead to cyclical cash flows that do not easily fit typical fund horizons.
Du Toit notes that “the risk profile of primary production does not always align with the return expectations and investment horizons of closed-end funds. As a result, there has been a notable shift over the past decade towards investment opportunities further along the value chain, where businesses often offer greater scalability, predictable cash flows, and enhanced opportunities for value creation.”
Following Capital Downstream to Value Addition
Instead of deploying capital directly at the farm gate, institutional investors are moving into downstream value-added segments—such as food processing, manufacturing, cold chain storage, and packaging logistics.
These off-farm operations offer predictable, year-round cash flows, an ability to pass through changing input costs, and clearer opportunities for regional scaling.
Furthermore, capital allocation is increasingly guided by changing consumer nutrition habits across urbanizing African markets. Trends such as rising demand for high-protein, high-fiber, and creatine-enriched products, changing diets influenced by GLP-1 weight-loss therapies, and AI-driven access to health information are all elevating the strategic importance of value-added food processing.
The Investor Checklist for Agribusinesses
For enterprises seeking equity partners to expand, du Toit emphasizes that fund managers look for specific characteristics before investing:
Exceptional Leadership (“The Jockey”): Investors prioritize visionary leaders with a proven ability to adapt, execute, and take accountability for strategic goals.
Aligned Incentives: Well-designed incentive structures—as noted by Charlie Munger—ensure management teams remain focused on building long-term shareholder value.
Defensible Moats: Businesses need sustainable advantages, such as trusted consumer brands, proprietary capabilities, cost leadership, or strong distribution networks.
Consistent Cash Generation: Citing the adage “cash is king,” du Toit stresses that a track record of profitability provides the stability needed to scale and weather uncertainty.
What This Means for Commercial Farmers
Crucially, du Toit clarifies that the shift in capital allocation is not a retreat from agriculture.
“The evolution of food funding in Africa is therefore not about moving away from agriculture,” du Toit highlights. “It is about recognising the trends driving growth and that feeding a rapidly growing continent requires investment across the entire value chain – from production and processing to distribution, branding and retail.”
For primary producers, the lesson is clear: vertical integration and off-take partnerships are key. Farmers who partner with processors or co-invest in value addition are best positioned to capture long-term institutional funding.