How we approach risk

There is a common perception that Africa is a risky investment environment.

However, with the right skills in place, it is possible to invest with confidence and to leverage the strengths of each opportunity to deliver superior returns.

There is certain risk that we want and are in fact willing to pay for or invest in. The key is to correctly identify these and then remove or mitigate the secondary or unwanted risks that may be associated with that decision. These are a few of the risks that we are mindful of:

Political and legal risk
EmVest’s primary strategy to mitigate political risk is to invest in a range of countries. By working closely with the investment authorities of the various countries and by making major investments in infrastructure, EmVest demonstrates that it is a serious, long-term investor, without entertaining any whims of the ruling political party.

In recent years, many African nations have managed to stabilise their economies, thereby reaping the benefits of increased growth and falling inflation. As a result, they are realising that their economies have great potential and are letting go of the nationalistic approaches of old. There is a growing willingness to welcome foreign investment and to nurture and protect such investment.

However EmVest has a relationship with a number of multi lateral investment guarantee agencies who, at a marginal premium, underwrite the value of country specific investment capital.

Banking and financial sector risks
Bilateral tax agreements between most of the Southern African Development Community (SADC) countries simplify financial issues and the movement of money. EmVest uses both South African and Mauritian banking and financial structures. Both countries have world-class banking and financial sectors with no more inherent risk than that found in northern Europe or North America. Mauritius offers the added benefits of being a tax effective investment hub.

Crop risk and climate risk
EmVest diversifies geographically in terms of latitude and longitude and further mitigates risk by investing in a range of crops and vertically integrated activities to generate multiple income streams. If one crop is lost, this loss is small in the diversified crop portfolio. EmVest also invests in buying the most technically advanced and appropriate seed available for its crops.

Water risk and climate change
The availability of water is always a critical consideration in project identification and the dependence on rainfall is reduced wherever possible. We are as much an agricultural land investor as we are an investor in sustainable supply of water.

Land tenure and land value
In South Africa, most land rights are freehold. However, in other African countries, leasehold is typically the land tenure system. These leaseholds are valued and tradable - thus making them almost equivalent to ownership.

As sub-Saharan farming becomes modernised, crop yields should start to rise and the value of land, whether freehold of leasehold will appreciate.

Productivity and farming methods
Typical yields in Africa are one quarter of those in developed agricultural economies. EmVest will continue to invest to stay at the cutting edge of farming technology and this, along with its innovativeness and local expertise, enables EmVest to maximise its competitiveness. 

Through hands-on management and effective use of modern technology and farming methods, EmVest has radically boosted productivity of the land it manages, achieving significant increases in yields. Innovative farming methods enhance sustainability and also reduce labour and fuel costs, water usage, overheads and soil erosion.

A further increase in productivity comes from EmVest’s strategy of consolidating small farms into more productive farming hubs. This consolidation brings value to all, as it releases the benefits of economies of scale. 

Vertically integrated value stream
Vertical integration of the value stream increases EmVest’s span of control over the means of production and associated variables. By being both producer, manufacturer and distributer of agricultural products we mitigate the risks associated with exposure at an isolated level in the value chain.

Human resources
The human resource facet of any business is potentially risky. EmVest believes in nurturing its human resources into becoming a powerful asset and competitive differentiator. Through long-term job creation, EmVest effects true economic upliftment, as the financial security of ongoing income has a profound effect on employees’ lives, enabling them to plan ahead and realise their dreams.

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