Futuregrowth Development Equity Fund earmarks R200m for aquaculture investment

Futuregrowth Asset Management, which manages more than R150bn on behalf of retirement funds, is setting aside around R200m for investment in sustainable aquaculture projects. These include in particular those that earn the majority of their revenue from abalone farming.

The investment falls within the Futuregrowth Development Equity Fund, which has to date invested approximately R1.7bn in development projects with exposure to sectors ranging from infrastructure to pharmaceuticals and transport. The Fund, which finances selected projects primarily through equity stakes, is open to South African domiciled institutional investors.

Futuregrowth investment analyst Amrish Narrandes said, “We see this as a strategic play to enhance returns for our shareholders by investing in a sector that shows significant long-term growth prospects with very high export potential. Our investment also meets the mandate of the Futuregrowth Development Equity Fund thanks to the socially responsible, sustainable nature of abalone aquaculture, a sector that remains under-invested in South Africa despite ongoing poaching of wild abalone populations.”

Aquaculture is a component of the ocean economy, which is one of the key sectors identified under Operation Phakisa, a government initiative to deliver on some of the priorities encompassed in the National Development Plan.

According to a report by the Centre of Excellence in Natural Resource Management (CENRM) at the University of Western Australia, aquaculture is one of the fastest-growing food producing sectors in the world. The report indicates that aquaculture now provides almost half of all fish for human consumption, a share that is projected to rise to 62% by 2030. CENRM data shows that South Africa is the third largest supplier of farmed abalone in the world with an estimated production of 1,450 metric tonnes (mt) in 2015. In comparison, 50,000mt of abalone were farmed in China and 10,000mt in South Korea.

President Jacob Zuma has said that South Africa needs to do more to unlock the vast potential of its oceans, which government says could contribute R177bn to the country’s economy each year and create as many as one million direct jobs. South Africa’s oceans contributed approximately R54bn to its gross domestic product (GDP) in 2010 and accounted for approximately 316,000 jobs.

Dolf van Wijngaarde, co-analyst of the investment, said Futuregrowth had no specified timeframe in which it planned to invest its capital and would evaluate projects on their merits. The fund may also opt to increase its investment allocation to aquaculture should it find appropriate opportunities in the sector.

“We could invest it all in one year but it could take longer; it all depends on the quality of the investments that are available to us at the time,” he said. “Our aim is to look for the most profitable investments for our pension fund clients provided they adhere to the sustainable, developmental mandate of the fund.”

Narrandes said the fund’s preference was to take a minority stake in multiple businesses.

“That gives us sufficient scale to exert some degree of stewardship over the business but without taking control,” he said. “We also prefer businesses that earn the majority of their revenue from abalone aquaculture, not only because of the growth prospects of that sector but also because of the strong contribution this makes to relieving pressure on wild abalone populations.”