Foreign investors are increasingly eyeing Africa’s vast farmlands, particularly since 2007, thanks to rising food costs and enthusiasm for biofuels. A picture of what outside investment in African agriculture might look like is starting to emerge.
A September report by the World Bank says in 2009 more than 45 million hectares of farmland deals were announced worldwide, a huge increase over previous years, with most of the action in Africa. Ethiopia, Sudan and Mozambique were hot spots.
The prospect of foreigners building large commercial farms across Africa has raised concerns in activist quarters that foreigners will damage the environment and exploit local populations. In Africa, subsistence farming remains the norm, and documentation of land ownership is usually unavailable or impenetrable, even in cases where a family has farmed it for generations. Charities are calling the investment push a new form of colonialism.
For their part, investors argue that importing high-quality seeds, fertilizers and other technologies will increase subsistence crop yields as they bank steady, if not spectacular, profits. Furthermore, they say the benefits of industrial agriculture trickle down, providing farmers with jobs and better access to markets.
Foreign investors have not always been greeted warmly. Most notoriously, a deal in which the South Korean concern Daewoo Logistics attempted to lease half of Madagascar’s arable land sparked a 2009 military coup in the island nation – and the collapse of the deal. Land acquisition by foreigners has been more common in Latin America, but in August, Brazil limited the practice, citing national security and environmental concerns.
Russell du Preez, chief investment officer of EmVest Asset Management, a South African concern with European and US investors and stakes in farms across southern Africa, echoes the standard investor position that ecologically sound, fair-minded operations are the best way to run farms that will produce consistent profits.
EmVest employs 2,800 people, he says. In Mozambique he conceded that the salary is “extremely low” but still more than that country’s minimum wage for farm labour, which is below $50 a month. “It sounds terrible, but before there was nothing,” he says.
Enriching the local population also creates a market for a commercial farm’s products. “The population dynamics are very favourable in sub-Saharan Africa,” says Paul Christie of London-based Emergent Asset Management (EAM), a firm with an African agriculture fund. As Africa’s middle class grows, “people’s demands are changing and we can respond to it.”
However, it’s impossible to generalize over whether investors are living up to their ideals. Their spreads are scattered across a vast continent, and each player has its own investing thesis – EmVest, for example, is not keen to own land, but EAM wants to own it and develop complementary businesses like livestock and food processing. A Standard Chartered report found that “there is no consensus on the best development model for agriculture in Africa.”
TRANSPARENCY
Mark Cackler, manager of the World Bank’s agriculture and rural development department, says transparency is the key to evaluating any deal. Among other things, this means disclosing terms and consulting with local communities. However, he said he is not aware of any standard certification process, such as that used to confirm that a crop is organic, to approve land deals.
Cackler also argues that commercial agriculture could reduce hunger. Of the world’s 925 million chronically malnourished people, most live in rural areas. He suggests that outside investment might also boost African crop yields, which typically don’t reach even 30% of their potential.
The World Bank report found that despite the intensive deal making, farming has only begun on a small fraction of the land foreigners have acquired. Even in those cases where planting is underway, it hasn’t always proved profitable for investors or beneficial to the local community.
In addition to investments by foreign investors, nations including China and Saudi Arabia have bought or leased huge swathes of African land, with the aim of feeding their own populations. Some entrepreneurs have seen Africa as a home for growing biofuel crops such as jatropha, though the World Bank was largely unimpressed by the early efforts.
“Since Africa is itself food insecure, the crucial question is its ability to address the issue of food security in other regions,” according to Standard Chartered. “It is also debatable whether land acquisition by foreign investors can lead to a win-win situation for the host and the acquirer.”
Michael Taylor of the International Land Coalition Secretariat argues that even when commercial farms do create jobs, the process doesn’t necessarily benefit locals. Commercial agriculture inevitably overtakes land that has practical and cultural significance. It can be a place to harvest crops or collect firewood but also a burial ground. In areas investors are eyeing, “There’s no empty land that has agricultural potential,” he says.