Opportunity awaits early investors in region’s controlled-environment agriculture projects

While social and economic ravages of the pandemic cannot be overstated, it showcased the region’s resilience and even its ability to turn adversity into opportunity. Under expert leadership, countries in the region weathered the health crisis admirably, acting swiftly, keeping the public informed, and getting everyone vaccinated in short order. But it was challenging to maintain supply chains during the early 2020s. This gave way to discussions of self-sufficiency and global moves to nearshoring and onshoring approaches that are likely the future for regional businesses.

These crises are an extension of the region’s long-term struggle with meeting food-production needs. Its populations have grown rapidly, and with COP27 still fresh in our minds and anticipation of a Dubai-hosted COP28 already building up, the Arab Gulf must face some tough decisions on how to pivot from traditional methods of food production, which are inherently less environmentally friendly than emerging alternatives.

One such alternative is controlled-environment agriculture (CEA). These methods support operations such as vertical farming and indoor fish-farming and offer an opportunity for GCC investors, as governments here set their sights on self-sufficiency. Amid an ongoing sustainability push, these kinds of food production methodologies are very attractive to regional agriculture ministries, which should pique the interest of VCs and a range of other investors with the foresight to back early adoption.

A ‘growth’ segment

Saudi Arabia has already announced plans to build the world’s largest vertical farm, which will encourage the United Arab Emirates to greenlight a series of projects in the same vein. In July last year, the UAE opened a $40-million hydroponic farm backed by Emirates Crop One, a joint venture between Emirates Flight Catering and vertical-farming specialist Crop One. The facility is said to be capable of delivering more than 1 million kilograms of produce annually, while operating with 95% less water than conventional agriculture. Meanwhile, Dubai’s Food Tech Valley is designed to be an “integrated modern city” based on clean, technology-based agricultural output. And Abu Dhabi’s industrial cluster Kezad and the Ghassan Aboud Group are collaborating on the Abu Dhabi Food Hub, which they plan to turn into “the region’s largest multi-category wholesale food trading and logistics hub”.

Such projects have government backing through the UAE’s National Food Security Strategy 2051. But part of the strategy is to encourage private-sector involvement. Private funding will be critical to success, yet because of CEA’s greenfield status, investors are understandably cautious. Uncharted territory jangles the nerves at the best of times; and as of right now, we do not live in the best of times. Vertical farming facilities come with significant upfront price tags and global inflation rates with supply chains only just starting to normalise. It is also worth noting that regulations have yet to be defined for this niche industry segment, and operating costs, including utility bills and manpower, are also high.

But wait, for there is also opportunity, especially so for early adopters. Governments are very much in the driving seat where sustainability is concerned. Having such a stake in the future leads to offering incentives and subsidies in the present to ensure that buy-in from the private sector is sizeable enough to build momentum. UAE government agencies are providing land and have introduced energy subsidies – moves that reduce both CapEx and OpEx. We can expect to see more of this kind of support as the government devises ways to meet the goals of its Vision projects, as well as live up to its SDG pledges.

Tyron Holgate is Project Manager, ALEC.