Given its high-value export orientated nature, local government support and expansion opportunities, aquaculture has seen rapid growth in South Africa. According to Kennett Sinclair, partner at Africa focused private equity manager Exeo Capital, aquaculture continues to gain popularity globally, as wild-caught fish numbers decrease due to stricter regulated marine activity, climate change effects and trading regulations.
Sinclair says that it is for this reason that their Agri-Vie Fund II – the private equity fund focused on food and agribusiness investments in sub-Saharan Africa – has concluded an investment into TerraSan, a fast-growing aquaculture company operating on the South and West coasts of South Africa.
“The fundamentals driving the aquaculture industry globally as well as in sub-Sahara Africa support the strategic rationale for the transaction. In addition, this partnership introduces the potential for expansion and value addition across the TerraSan business to a level not possible before.”
A mature business with good management, a large percentage of black shareholders and very sound corporate governance, TerraSan has the proven ability to be a platform for other acquisitions, Sinclair explains. Dr Mohammad Karaan, executive chairman at TerraSan said: “TerraSan is pleased to welcome Agri-Vie to its fraternity of shareholders. We look forward to their contributions to our company as we strive to expand our investments.”
Exceptional growth prospects
Despite being a long-standing business, Sinclair points out that TerraSan exhibits exceptional growth prospects which are in most cases already in the process of being implemented. “TerraSan’s strategic intent is to grow organically by expanding its abalone and mussel production facilities, improving the quality of the bulk fishmeal produced in order to command a higher price for exports and becoming the processing home for the smaller quota holders in the small pelagic fishing industry.”
As fishmeal is a major expenditure component for fish producers engaged in aquaculture based predominantly in the northern hemisphere and abalone is a highly sought-after delicacy in Asia, Sinclair says that Exeo Capital finds TerraSan attractive given Exeo’s emphasis on investing in companies focused on exports and import replacement, which most of TerraSan’s activities are focused on.
“Although substitute products such as soy meal, rapeseed oil, and even alternative proteins such as insects have been growing, most aquaculture products require fishmeal and fish oil in their diet, which will likely result in increased prices of fishmeal and fish oil.”
Exeo Capital manages the $175m Agri-Vie Fund investing in TerraSan. This is a second Agri -Vie Fund, building on the success of its predecessor $100m fund. The fund’s deployment programme is gaining momentum with this, its first investment, and the investment team is also attending to a range of other imminent opportunities in sub-Sahara Africa.