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How we manage investment risk
in Africa
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Key risks to manage
Operational risks
We have experienced managers on our farms, well versed with handling rural communities and employees. In the rural areas people respect traditional tribal governance and we take great care to respect this. Justin Malewezi, our Director of Business Strategy, was formerly Vice President of Malawi and is revered in the rural areas. This is not just because of his political standing, but also his position in the tribal hierarchy as a paramount chief, a position that is one level below that of the tribal King.
Political risks
We have highly positive relationships across the Malawi Government. We ensure that our business objectives do not conflict with goals agreed by the Malawi Government with the International Community. Furthermore, both the British Government and the European Union are very substantial donors to the Malawi Government’s budget and we, therefore, maintain dialogue with both to provide a positive background of support for our business aims.
Our business model is in demand from numerous African countries beyond Malawi, principally for the following reasons:
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• | non-extractive basis – we do not seek profit at the expense of the host nation of her peoples | |
• | major commitment to social development, including feeding programmes and targets for fulfilment of the Millennium Goals | |
• | commitment to maximise employment, including under irrigation systems that boost employment significantly through year-round farming | |
• | development of successful outgrower schemes, engaging with vast numbers of the rural poor and creating financial gains for them |
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The Rt Hon Goodall Gondwe, Minister of Finance for the Malawi Government, wrote to cru on 9 July 2007 and stated the following:
"On behalf of the Malawi Government I am delighted to write in support of Africa Invest. They have established a fresh, new approach to viable commercial agriculture that carries immense potential to our rural areas with real benefits for small farmers, their families and communities...
I would like to assure all investors in Africa Invest that our Government will provide full support to ensure their business can flourish to the mutual benefit of all.” |
Crop risks
Drought and disease are potential major risks to any agricultural business. We have highly trained farmers responsible for managing these risks. Drought risks are being mitigated through installation of irrigation systems whilst disease risks are generally well known and preventable.
Financial risks
These principally relate to the repatriation of monies invested. We have close relationships with the Reserve Bank of Malawi, ensuring that all investment is noted and therefore subject to established rules for investors external to Malawi. These provide for full return on capital invested, repatriation of profits or interest on loans.
Legal risks
We will only operate in countries where there is respect for the rule of law and a strong and fair judiciary. The basis of law is also important, although much of sub-Saharan African countries law is based on former European colonial powers e.g. British, German, Italian, Portuguese, Belgian. For instance, Malawi law is very similar to British law as it was a former British Protectorate and member of the Commonwealth. |
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Investment risks
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| • | The Plan Manager will arrange for the purchase of the Plan securities to include capital protection from financial institutions rated AA- or better (as measured by Standard & Poor’s or equivalent) at the time of purchase but the financial institutions’ ratings could subsequently change. In the event of such securities being unavailable, the Plan Manager may substitute the securities with alternatives with similar characteristics. | | • | There is a risk that the Issuer may fail to meet its obligations. In addition, the terms of the investment may permit the issuer of those investments to withhold, defer, reduce or even terminate payments in certain events, as a result of which investors may receive less than they would otherwise or may have to wait for the proceeds. | | • | Your circumstances could change, forcing you to sell your Plan investments early. If this happens, you may get back less than the amount you originally invested. The value of the Plan will be determined by the price at which the Investments can actually be sold on the relevant Dealing Date. | | • | You cannot claim full reimbursement if the price at which your securities were purchased has fallen, when we sell them, following you exercising your right to cancel. | | • | If you have invested via an ISA and subsequently decide to cancel, it may not be possible to invest in another ISA for the relevant tax year in which you invested. | | • | Tax assumptions are based on our understanding of current legislation and practice at the time of print. The levels and basis of taxation and reliefs from taxation can change at any time and any change could be applied retrospectively. The value of any tax relief depends on individual circumstances. For tax advice, potential investors should consult their professional advisers. | | • | Past performance IS NOT necessarily a guide to future performance and should not be used to assess the risks associated with this investment. | | • | The Africa Invest Capital Protected Plan is not the same as a bank or building society where capital is guaranteed and, with instant access accounts, is readily available without penalty. | | • | Careful consideration should be given to the benefits and risks of this Plan and its suitability to your own personal circumstances and attitude to risk. We would recommend that you take professional advice before investing. |
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