IFC to invest US$25m in the Singapore-based commodity trader Valency International

The private sector arm of the World Bank, International Finance Corporation (IFC) has proposed investment of up to US$25m in the Africa operations of Singapore-based agricultural commodities trader Valency International. The investment help de-risk a US$50m three-year revolving commodity-backed trade finance facility given by South African bank Absa to Valency. This financing will be used to purchase raw cashew nuts, cocoa, sesame, shea nuts, ginger, and soya beans sourced from Nigeria, Ghana, Tanzania, and Cote d'Ivoire.

“IFC is signing [a] master risk facility agreement with Absa and will provide [a] guarantee of US$25m to Absa, while Absa will enhance its existing facility from US$25m to US$50m after IFC support,” Deepak Tikoo, company secretary and investor relations, Valency International told the NTU-SBF Centre for African Studies.

The IFC commitment comes on the heels of investments made by European development finance institutions in the firm’s African activities in recent years. In 2023 Valency secured a US$15m equity investment from the UK development finance institution, British International Investment (BII) to fund the expansion of its cashew nut processing and warehouse infrastructure in Nigeria. Valency procures cashew nuts directly from Nigerian farmers and processes them at its factory in the south-western Ogun State. The processed cashew kernels are then distributed in bulk to markets across the world. BII has also kept the option of investing a further US$35m in equity into Valency within two years of completing its initial investment.

In 2022, Finnfund and Norfund, the development finance institutions of Finland and Norway, respectively, each provided a US$10m loan to Valency for the establishment of a state-of-the-art cashew processing plant in Cote d'Ivoire, the largest producer of raw cashew in the world, with an annual capacity of 45,000 tonnes.

Africa produces approximately 60% of the world's cashew supply, yet nearly 90% of its harvest is exported in raw form to countries like Vietnam and India for processing. Processing of cashew involves removing the kernel's shell and peeling, as well as roasting and salting the nut. Most stakeholders recognise the need for Africa to capture a larger share of the value by processing the nuts on the continent. Doing so could generate an additional US$280m annually and create 250,000 new jobs. West Africa’s geographical proximity to the American and European markets offers something of a competitive advantage over Asia. However, poor infrastructure and higher labour cost, and lack of state-backed subsidies offset those advantages.

In addition to cashews, Valency is engaged in sourcing cocoa, sugar, pulses and beans, oilseeds, and spices from several countries in West and East Africa. The continent also serves as a market for some of the company's other products, including rice, fertiliser, agro-chemicals and paper. Valency's fast-moving consumer goods division supplies the Champion range of custard powder products in Nigeria.

Valency, which trades beans, cocoa beans, ground nuts, packaged foods, raw cashew and cashew kernels, rice, sesame seeds and sugar under its agro and consumer food products segment - its mainstay business - was set up by Praveen Kumar Jain in 2007. Today, Valency has grown to boast a presence in 38 markets across Asia, Africa, Europe as well as North and South America, with 13 offices around the world. Valency considers the real base of the company to be in Asia and Africa - two regions which contribute more than half of its revenue and rank among its fastest-growing markets. Although it has 1,300 staff on its payroll globally, only 22 are located at its head office in Singapore. The firm saw a 30.2% jump in its annual revenue (US$630 million) in the financial year ending Mar 2022. Agricultural and consumer food products segment contributed more than half of its revenue, with two other main segments - fertilisers, chemicals and industrial – making up the rest. Besides the expansion of its cashew processing facilities, Valency is also building a steel production plant in Ethiopia. It plans to introduce a few product lines such as agrochemicals in West Africa.

References

‘Finnfund invests in Valency International to foster sustainable cashew production in Côte d’Ivoire’, Finnfund, 15 April 2022

‘Invest in Africa cashew’, African Cashew Alliance, 2022

‘Processing of cashew nuts to create 2000 new jobs in Cote d’Ivoire’, Norfund, 2022

‘Slump in global cashew demand pushes Ivory Coast industry to verge of collapse’, Reuters, 05 June 2023

‘British International Investment supports Nigeria’s agricultural sector with commitment to Valency International’, British International Investment, 11 December 2023

‘GWFP Valency’, International Finance Corporation, 08 February 2024