The Sunday Mail
Zaranyika
Zimbabwean seed houses are increasingly opening up to international investors as they seek to leverage on new technical and technological expertise.
Zimbabwe, like other Sadc countries, is haunted by low crop yields per hectare and experts say genetically modified new seed varieties will help improve the situation.
Independent expert research notes that while farmers in Zambia and South Africa get more than 30 tonnes of maize per hectare, local farmers are getting between 10 tonnes to 15 tonnes per hectare – at the most.
Local seed companies are battling acute liquidity shortages, high operating costs and softening consumer demand.
Over the past couple of years investors from Europe, America and Asia have snapped up stakes in Seed Co Limited, Agriseeds (Private) Limited, Pannar Seed Zimbabwe and Pioneer Zimbabwe.
Market watchers believe the technological capabilities of the new investors will help in production of high-yielding, drought-resistant seed varieties.
Mergers & Acquisitions
Local business assets, whose value has been eroded by an illiquid environment, have become the target of cash-rich international investors.
Last year, Vilmorin & Cie, a unit of French company Limagrain Group, shelled out more than US$40 million for a 33 percent shareholding in Seed Co, the country’s biggest seed house by assets and market capitalisation.
The seed maker, which has facilities in 15 countries mainly in Southern and East Africa, has a wide range of products and makes most of its sales from maize hybrids.
It has five factories in Zimbabwe, Zambia, Ethiopia, Kenya and Tanzania and 16 research stations.
Part of the funds that were injected by the French company were used to retire a US$36 million debt and finance a seed plant in Malawi. Domestic obligations were around US$13 million.
The company has also spread its tentacles to Kenya, Uganda, DRC, Tanzania and Nigeria.
After the consummation of the Vilmorin & Cie deal, Seed Co chief executive officer Mr Morgan Nzwere indicated that it was a “game-changer”.
Notwithstanding the financial muscle of the French business, the local unit is widely expected to leverage on the company’s 270-year history in the seed business.
Vilmorin & Cie boasts of more than 100 research centres and over 1 600 researchers that create 500 new varieties every year.
The business is also accomplished in the fields of plant biotechnology, which is used to accelerate the process of plant breeding, and also transgenesis, a technique used to create genetically modified plants and develop new varieties especially in circumstances where all other so-called conventional possibilities have been explored.
Similarly, the local unit of America seed business DuPont Pioneer, Pioneer Hi-Bred Zimbabwe, intends to acquire the assets and liabilities of Pannar Zimbabwe for more than US$30 million.
Post acquisition, the two organisations will be consolidated into once commercial entity supporting both the DuPont Pioneer and Pannar brands and operating under Pioneer Hi-Bred Zimbabwe.
DuPont Pioneer, formerly Pioneer Hi-Bred, is a large U.S. producer of hybrid seeds for agriculture.
It is also a major producer of genetically modified varieties.
DuPont Pioneer’s head of communications-Africa Mrs Barbra Sehlule Muzata told The Sunday Mail Business that farmers were likely to get superior products as a result of the merger.
“After merger, Pioneer and Pannar brands will remain in the market. The intention is to grow both businesses and brands into the future.
“The companies are excited to realise the future benefits of the merger in order to deliver superior products to farmers, but are committed to an orderly and thoughtful alignment process that maximises the value of both companies and brands and minimises disruption to the business and employees.
“Our efforts will focus on leveraging the asset footprint across both brands to enable the business to be sustainable and position us for growth here in Zimbabwe in the long-term.
“Bringing together the companies’ complementary maize germplasm pools will increasingly lead to more and better performing products and greater choices for farmers. In South Africa, the market is experiencing the benefits of the partnership.
“Our products are performing extremely well and were ranked at the top of the Agriculture Research Council trials results. Pioneer and Pannar remain committed to delivering the superior products and services that farmers want and need – this will not change,” said Mrs Muzata.
Germplasm is a term used to describe living genetic resources such as seeds or tissue, maintained for the purpose of breeding, preservation, and other research uses.
Pioneer and Pannar have strongly supported local agriculture but continued pressure on sales, revenue and profit as well as increasing bad debt write-offs, have largely affected the companies’ liquidity situation, hence the need to merge and ensure survival going forward.
It is anticipated that the consolidation will allow both brands to build the foundation for profitable growth through improved revenues, an improved cost structure and an improved liquidity position.
Not only has interest for local seed houses come from American and European firms, there has also been appetite for the same assets from South African businesses as well.
South African company Klein Karoo Saad Bemarking Edms is presently planning to invest in excess of US$10 million in Agriseeds (Private) Limited “in the next few years”.
The firm is believed to be angling for an 80 percent stake in Agriseeds.
Klein Karoo managing director Mr Lomo van Rensburg said last week the company plans to expand Agriseeds’ product range as well as launching several new locally bred maize hybrids in the short-term.
“We do not bring any GMO material into the country. If the Government would, in future, decide to approve GMOs, we would only then do that.
“It is also important to note that the program for non-GMO is run totally separate to ensure that only non-GMO seeds are sold in the country.
“We use several techniques to make sure that seed carry resistance to diseases, do have a low nitrogen requirement, are tolerant to several stress conditions like drought, logging, (among others).
“We are busy to run a very strong parent seed program to make sure that seeds are genetically pure to allow maximum yield,” said Mr van Rensburg.
The influx of international seed companies into the country happens at a time when efforts are being channelled towards new breeding technologies, with emphasis on the need for new seed varieties that can grow yield per hectare for farmers, especially in light of the impact of climate change.
Delegates at the recently held African Seed Trade Association (AFSTA) conference said it is critical for global seed companies to come up with new breeding technologies, paying particular attention to how they can speedily introduce new seed varieties.
AFSTA vice-president Mr Denias Zaranyika, who is also Seed Co’s managing director, has said while it used to take 15 years to come up with a new hybrid, it now takes between three and four years.
