Thomas Mutsvene, Heinz Eckart Klingelhöfer
Abstract
The agriculture sector has emerged as one of the critical sectors driving the economy in Southern Africa, with emerging (smallholder) farmers contributing 80% of food production and being large employers for local labour. Such farmers often suffer from a dependency syndrome that stifles their continuity if funding stops. Therefore, based on document analysis and literature, this paper develops an investment model that shall help in overcoming these continuity risks. The model incorporates value-addition processes, suppliers and buyers, government and money markets to ensure returns for reinvestment into emerging farmers’ operational activities.
The proposed model employs special purpose vehicles that connect emerging farmers with the different market actors, the government and the money market. Together with the resulting pooling and applying the portfolio effect, it allows emerging farmers to grow, while reducing their risk and still giving investors good returns at little risk. Hence, it helps to achieve sustainable agriculture and food security. Emerging farmers will benefit by having an investment model that saves funds for the next farming cycle, spurring continuity and growth with only little external support. The research recommends adopting this investment model to promote growth and minimise overreliance on government support.