x Abu Dhabi, UAESaturday 22 July 2017

Arab food security fund to seek out global acquisitions

An Arab private equity fund, with $2bn of contributions from the GCC, is set to be launched next year to invest in food companies around the world.

A shopper at the Abu Dhabi Coop: a new fund will invest in food companies around the world, to bolster the region's commodity security.
A shopper at the Abu Dhabi Coop: a new fund will invest in food companies around the world, to bolster the region's commodity security.

An Arab private equity fund, with $2 billion (Dhs7.3bn) of contributions from the GCC, is set to be launched next year to invest in food companies around the world. Soaring commodity prices and high inflation last year raised concerns about food security in the Gulf, leading to increased interest in foreign agricultural assets. The UAE imports about 85 per cent of its food at an estimated cost of Dh10.64bn a year and all other Gulf countries are net importers.

"Individual countries are realising populations are growing and the importance of allocating more finance for food resources and securing food," said Rajagopal Ramamoorthy, director of financial investments, at the Arab Authority for Agriculture Investment and Development (AAAID), which will oversee the fund. "Once the recession is out the way and as economic growth returns we will see the fund become active." GCC governments approved in April the allocation of $2bn in finance for the fund, the final amount of which is expected to rise further, he said. The authority already holds 30 per cent stakes in UAE food producers Al Rawabi Dairy Company, Rowadh Poultry and Fujairah Poultry. It also aims to develop agricultural resources in member states. Launched with capital from 12 Arab nations in 1976, the authority, which is headquartered in Sudan and has an office in Dubai, has since swelled to include 20 members across the Middle East and Africa. Despite near term agricultural and food surpluses in the wake of the global recession, it was vital to look at measures to secure food security and sufficiency, said Abah Ofon, agricultural commodities research analyst for Standard Chartered Bank in Dubai. "Rising incomes, populations and per capita consumption for key agricultural commodities mean that food output must increase substantially over the longer term without which food deficit countries in the Middle East will be among those most severely impacted," he said. "Investment in agriculture has slowed over the last decade but it is important that this be reversed as part of a cocktail of measures to boost global output."

The UAE last year started talks with Pakistan to invest up to $500m in its farming sector. Al Qudra Holding, an investment company based in Abu Dhabi, said in August last year it planned to acquire about 400,000 hectares of farmland in the Middle East, East Africa and the Far East. A rally in stocks in recent months as the global recession has eased has raised the value of the AAAID's existing $350m investments in world markets, said Mr Ramamoorthy. The authority's equity portfolio in the GCC has grown 29.8 per cent in the year to date, with the fund's international consolidated portfolio rising by 16 per cent, he said. But the financial downturn has had an impact on the authority's plans, forcing it to put on hold pilot research projects in Mauritania, Tunisia and Comoros in Africa to test "zero-tillage" farming methods. In addition, the organisation has had to cut around 30 per cent of its 210 staff, said Mr Ramamoorthy. tarnold@thenational.ae