Zeder Investments Limited is listed on the Johannesburg Stock Exchange (JSE) and is currently one of South Africa’s leading agricultural investment companies, with a focus on agriculture, food, beverages, food processing and related sectors.
With a portfolio of 350 million rand that grew into an impressive 4 billion rand six to eight years later, Zeder’s investments are made in unlisted companies, a strategy underscored with a value-oriented and contrarian nature, which has been vital for generating attractive long-term investment returns.
“We have a strategy of unlocking value itself,” says Norman Celliers, chief executive officer of Zeder Investments.
Zeder has proven its forward-thinking capacity with its belief that African agricultural companies offer rewarding investment opportunities.
“We’re part of the PSG group and in a South African context, that gives us an incredible edge,” explains Celliers. “It’s got a reputation for entrepreneurial flair and access to business.”
Since linking with PSG in 2004, growth has been rapid. The PSG strategy of investing in various unlisted agri-companies has, over the years, produced good returns on investments and Zeder has been able to flourish on that groundwork by continuing to build on the close relationships PSG has built with the management of the companies in which it invests.
The South African agricultural sector can be characterised by its asset-rich, well-managed and profit-producing companies. Until recent years the sector had remained largely neglected by the investment community, due to the barriers making investment in food and beverages difficult for parties outside of the agricultural arena. Zeder is now successfully bridging this gap and creating much needed opportunities for investors outside of the agri-business community.
“We provide the market with a very unique option to access investments which otherwise aren’t that readily available,” says Celliers.
Predominantly, investments have been in equity instruments, usually in the form of ordinary shares, but alternative investment instruments have also been considered where an attractive investment return is expected.
Celliers says the current investment strategy is to build on this strong portfolio base, ensuring the companies they’re working with grow either through assistance with capital or through supporting productive corporate activity.
The prospects for long-term growth in Africa are an aspect which excites the Zeder management team. From where Celliers stands, he currently sees two main points of opportunity. The first is the new emerging consumer, whom 20 to 30 years ago had no disposable income, but is now coming to the forefront with demands for basic produce. This consumer is increasingly present in the growing African food and beverage market, a fortuitous situation for Zeder.
The second opportunity is applicable to more affluent consumers around the world. With this group, a noticeable change in diet can be seen taking place. Wealthier consumers are reviewing the way they eat, are concerned with the ingredients used in food produce and want to see rigorous food testing. Zeder is confident that moving forward it will continue to meet the demands of increasing public interest in nutrition, certification and traceability.
The companies approaching Zeder for investment opportunities are wide ranging, but historically have been South African. With these South African companies increasingly becoming global operators themselves, Zeder looks set to compete on the global scale in the future. However as growth continues, caution is applied to monitor expansion.
“We do feel that we need to understand what we invest in and understand the cultures of people, because we are entrusted with capital. At this stage we enjoy investing in South Africa and neighbouring countries, because we feel we can get there quite quickly and manage our investments actively,” says Celliers.
Zeder has a dominant presence in wheat-based, breakfast cereal products in South Africa, and has exposure across 20 food groups in South Africa. The diverse food groups range from fruit juices and condiments, to carbonated soft drinks, ice teas and baking powders.
Zeder’s largest investments include an indirect holding in Pioneer Foods, listed on the JSE, and of which Zeder’s control is approximately 30 per cent. Pioneer Foods has a turnover of approximately 18.5 billion rand a year and is South Africa’s second largest food company. Operations date back more than 100 years, with representation from some of the oldest milling, baking and food processing facilities in the country.
Capescan constitutes Zeder’s second largest investment, a Southern hemisphere fruit producer with a turnover of 5 billion rand a year. This heritage rich, fruit marketing and group logistics company dates back 70 years, and has provided Zeder with access to fruit in 20 to 30 countries around the world, enabling Zeder to market and sell fruit in more than 60 countries globally.
KaapAgri, an agricultural input, grain and financing business, is a further large and important investor, and also a prime example of some of what Zeder does best – buying an unlisted space and creating a value unlocking transaction. This process resulted in the KaapAgri group being traded independently with current annual turnover is in excess of 3 billion rand. The company also boasts underlying assets dating back 100 years and provides access to premier agricultural related retail groups, wholesale and express stores, and also fuel depots.
A key holding company for grain-related farm operations in sub-Saharan Africa is Chayton Africa. Chayton Africa has been established as a co-investment with Norfund, whom have invested US $10 million in the long term plan to establish best practises and leading expertise in African countries. The strategy is to embed and establish operations in Zambia that, once proven and successful, can then be rolled out as a model across further African countries. Few dispute Africa’s rich resources, but with an agricultural network outside of South Africa and Zimbabwe, which is relatively under developed, creating infrastructure is key. At this stage, farming in Zambia has had excellent outcomes, with approximately 4,600 hectares under irrigation currently present. Zeder has managed rapid development and at this point, is the second largest grain producer in Zambia, explains Celliers.
Zeder’s competitive edge appears in two key dimensions. Firstly, being part of the PSG group has provided a keen edge within the South African context. With PSG as one of the country’s premier financial services groups and with its reputation for building leading businesses and excellent corporate governance, unquestionable credibility in the market place is lended by association to Zeder, making access to capital smoother than for competing companies.
Secondly, the belief in restricting activity to areas where optimum knowledge, information and networks are held provides an expert vantage point over other more widespread agri-business competitors.
Given the sustained and highly successful investment strategy over recent years, Celliers has every confidence moving forward: “From an investment point of view, you have to tick all the boxes. We partner with governments, we make sure we have World Bank insurance for all our investments, we go into companies that meet sustainability guidelines. We do it in partnership with what local people want and view ourselves as long-term sustainable investors, not a short-term trading company. I think if you take that approach and you’re patient, Africa is a very exciting place.”
With Africa entering what could be described as an agricultural renaissance, Zeder Investments is poised and ready to roll out assured domination of agricultural investment.