South Africa’s agriculture sector has emerged as a viable asset class amidst the low interest rate environment, according to Old Mutual Investment Group’s Director of Strategic Projects, Craig Chambers.

“South African farmland has yielded 22.1% over 15 years (to end December 2013) compared to the FTSE/JSE Index at 18.2% over the same period. It has also yielded consistently higher return than international equity (MSCI World), local bond (ALBI BEASSA) and local real estate (IPD) indices over the medium- to long-term,” he said.

As to the rest of Africa, Chambers pointed out that over 60% of the world’s arable land is situated on the continent, which makes for a very compelling Africa agricultural investment case.

Chambers said this is a “significant investment opportunity for institutional investors” looking for a good capital preservation tool in Africa that is also a reliable inflation hedge and has low to negative correlations with traditional asset classes.

“Agriculture is also a vital economic driver given a number of socio-economic factors, including population growth, poverty and unemployment,” he said.

The United Nations Conference on Trade and Development (UNCTAD) has estimated agriculture’s annual investment gap for the 2015-2030 period at $260bn in the developing world.

“These factors present acute challenges and make unlocking our agricultural potential not just an attractive option but a necessity,” said Chambers.

However, still the most urgent rationale for agricultural investment remains food security.

Chambers said that a 70% total increase in agriculture production is needed to feed the more than nine billion people expected worldwide in 2050 – of which 25% will be in Africa.

“An important point to note is that Africa presently spends in excess of $25bn annually on food imports,” he said.

“Retailers and traders are increasingly looking to secure their supply lines and the balance of power is moving upstream to the supplier of food, i.e. the farmer. Therefore, food independence for Africa can be supported by local institutional investment,” he said.

“Due to the availability of low-valued, premium farmland and agribusinesses on the continent, as well as the shortage of locally available capital and skills for agricultural development, agriculture is a particularly viable opportunity for investors seeking capital stability and higher risk-adjusted returns,” he added.