AIIM commits US$150mn to create pan-African cold chain logistics

04 Oct 2022

To improve essential temperature-controlled logistics infrastructure in sub-Saharan Africa and ensure food security in the region, African Infrastructure Investment Managers (AIIM) and its investment partners, Bauta Logistics and Mokobela Shakati (Pty) Ltd Consortium have established a cold chain logistics platform, Commercial Cold Holdings (CCH) with the initial acquisition of CCS Logistics from Oceana Group. Funds managed by AIIM intend to invest up to USD150 M in the platform, inclusive of the initial asset acquisitions as well as a pipeline of further acquisitions and greenfield development projects. The transaction is subject to regulatory approval.

The transaction was financed by a mix of equity and debt financing. AIIM, through its flagship South African IDEAS Fund and pan-African AIIF4 Fund, will have a controlling 59.2% stake in CCH. CCS has been operational for over 50 years and is an established leader in South Africa’s temperature-controlled logistics (TCL) market. CCS currently operates about 100,000 pallets of storage across six facilities in Johannesburg, Cape Town and Walvis Bay, Namibia.

As global population grows and demand for food supply chains increase, demand for temperature-controlled logistics is also on the rise. This transaction therefore signifies AIIM’s entry into the cold storage sector which seeks to establish a pan-African cold storage platform.

AIIM Investment Director Damilola Agbaje says the cold chain logistical infrastructure sector is underdeveloped, and in places non-existent, across Sub-Saharan Africa and this investment diversifies AIIM’s current portfolio into a high growth and high impact area.

 “South Africa, which possesses the continent’s most advanced TCL infrastructure at 13m3 of cold storage per 1,000 residents, lags comparable economies such as Egypt and Brazil, which have 105m3 and 83m3, respectively our research has indicated,” said Agbaje.

“TCL infrastructure is critical for both improving Sub-Saharan Africa’s food security; allowing domestic producers to meet the standards required to participate in global trade; and creating higher value jobs through more formal food retail and wholesale models.”

He noted that with current population growth rates mixed with the rapid rate of urbanization, the regional deficit in temperature-controlled logistics was expected to worsen. CCH would focus on acquiring and developing facilities with strategic physical locations and/or integration with market-leading food producers, wholesalers, and retailers.

“Anchoring CCH’s strategy with such an established player is crucial for the platform’s regional expansion. New market entries will leverage CCS’s technical expertise and operational track record to secure strategic customer relationships,” he said.

The Environmental and Social Management Plan (ESMP) will be augmented to meet applicable environmental health and safety guidelines. An additional environmental and social governance (ESG) hire will be made as the CCS business is being carved out from Oceana to become a standalone business.

Agbaje said that AIIM recognized that cold stores were energy intensive and would leverage its extensive track record in energy investment across the continent to drive efficiency and improve the CCS generation mix.

“Recently, in South Africa, the power grid has experienced reliability issues. Any worsening of the current supply situation poses a risk and constraint to the TCL sector. By deploying captive renewable energy generation and battery storage with AIIM partner companies, CCH expects to reduce the risk of grid reliability constraints and drive growth,” Agbaje said.

Taking pressure off the grid will improve supply to more vulnerable users. Furthermore, renewable generation capacity and improved cooling efficiency will reduce the carbon footprint of CCH toward a neutral position.

He said up to 70% of CCS throughput will come from staple foods that were critical for domestic food security. Maintaining a national network of state-of-the-art facilities to ensure a continuous supply of staple foods.

“This marks the third investment signed by AIIM’s fourth generation pan-African infrastructure fund, AIIF4, a thematic investor with a strategic focus on the mobility and logistics, energy transition and digital infrastructure sectors. AIIF4 is delivering on its mandate to construct a diversified portfolio of highly impactful, attractive, growth-oriented platforms across our themes. Food security in the current global and African context is a topic of increasing importance, and we believe the CCH platform will play a role in addressing these critical matters. We look forward to further announcements as AIIF4 continues to expand its portfolio” said Olusola Lawson, Managing Director & Co-Head of AIIM.

“Bauta is pleased to be partnering with AIIM and Mokobela Shakati in establishing this Pan African cold storage platform. As we build out a network of temperature-controlled warehouses in key demand hubs and food production regions on the Continent, we are excited about the role that CCH will play in facilitating intracontinental trade. With the investment announced today we hope to establish CCH as the pan-African TCL partner of choice” said Michael Osekereh, the Managing Director of Bauta Logistics.

“The acquisition of CCS is a natural extension of our developing partnership with AIIM to create an infrastructure-based platform underpinned by integrated logistics, ports services and cold storage. The acquisition enhances the solid base we have already established and provides us with the cornerstone required to realise our vision to play a meaningful role in key sectors of our economy.” said Moss Ngoasheng, founding director of the Mokobela Shataki consortium.

ENS Africa were the legal advisors, PWC were the financial advisors on CCS and Frost & Sullivan were the commercial advisors.

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