Resource information
Recent increases in the prices of
agricultural commodities have spurred a surge of private
investment into farming and agribusiness. Given the right
types of large-scale investment, this can have a
transformative effect in underdeveloped rural areas and have
a positive effect on national economic development including
the provision of domestic food supply to urban areas that
can reduce dependence on food imports. This study analyzes
the experience of the Commonwealth Development Corporation
(CDC) as an investor in commercial smallholder and estate
agriculture and agro-processing in Sub-Saharan Africa and
Southeast Asia and the Pacific between 1948 and 2000. A
simple analysis of the data was undertaken to determine
whether success and failure can be correlated to any
critical factors. Seventy-nine (or 49 percent) of the
projects were classified as failures or moderate failures in
financial terms. This review of CDC agribusiness investments
corroborates the view that agribusiness investments are
risky, particularly when the investment is in a start-up.
While only one fifth of projects were rated complete
failures, one third of equity investments generated at least
moderately attractive internal rates of return, and overall
about 55 percent resulted in financially viable projects.
The majority of projects in both Asia and Africa ended up
being sustainable businesses that delivered broadly the
number of jobs and level of turnover that had initially been
anticipated. This raises the question of why, despite this
low level of returns on equity, these businesses often
survive. The analysis of CDC's agribusiness portfolio
demonstrates both historical potential and pitfalls and
illustrates the need to continuously adapt and innovate to
achieve both political and commercial sustainability.
