Egypt eyes private equity to boost agriculture

The Egyptian government has concentrated efforts towards developing agricultural productivity, encouraging both investments in domestic production, as well as for private domestic companies to invest in overseas farmland.

Locally based private equity firm Citadel Capital has stated its intentions to invest in East Africa, particularly Kenya and Uganda. A major overseas acquisition by Citadel Capital can be expected next year.

The selling of state-owned enterprises has provided a much needed boost to the interest of private entrepreneurs. In order to encourage a greater level of agricultural production, the government has made significant efforts to improve productivity.

The country aims to be 75% self-sufficient in wheat within the next decade, raising the ratio from the current level of 55%. This would include increasing planted area by 29,400 hectares per year and also to increase the yield per hectare, which is by no means an easy task, given the propensity for drought, coupled with such meagre water supplies. Per capita consumption is currently estimated at 800 cubic metres, compared to the recognised poverty line of 1,000 cubic metres.

Domestic food supply pressures have risen in Egypt on lack of adequate capital investment, recession-led lower disposable income and lowest levels of water per capita in the world.

Also, due to limited potential to expand the Nile Delta, much of the increase in production will come from newly reclaimed land. The BMI report sees such dynamics begin to take effect from 2010, with wheat production increasing throughout the outlook, although faster growth in consumption will mean that it becomes increasingly unlikely that the domestic gap will ever be plugged through domestic production alone and that overseas production is the only means by which this can be achieved.

BMI expects to see moderate growth in most of the categories covered in the outlook in 2010 and, in the majority of cases, through the entire window to 2014. For most farmed products, however, this trajectory is not predicted to pick up sufficiently over the course of the outlook. Only beef and sugar are forecast to post double-digit production growth to 2014; of consumed goods, only milk, rice and beef are predicted double-digit growth.