Via How We Made It In Africa, an interesting article on foreign farmland acquisition in Africa:
A key driver of foreign investment in land, food security is a challenge mankind has been confronted with in various times and places. Wherever human societies have developed, growing needs have led to increasing arable land. The key solution has always been migration when possible, otherwise innovation-led yield increase. Over millennia, mankind has been gradually spreading over the various continents. This process is now unfolding at the scale of the planet.
Agricultural transactions involving foreign investors recorded since 2000 amount to 83 million hectares of land in developing countries – 1.7% of the world’s agricultural area – although only half of these data are considered reliable. The pace of acquisition has slowed down in 2010 but stays firm. Over 80 countries are targeted by foreign investors but 11 of them concentrate 70% of the targeted surface as reported by Land Matrix. Two-thirds of the targeted farmland is located in Africa, especially in sub-Saharan Africa. In Africa, reported large-scale acquisitions of farmland amount to 4.8% of Africa’s total agricultural area – equivalent to the area of Kenya. Most of the targeted countries are poor with weak land governance, have high yield gaps and good accessibility.
There are three broad groups of economic players in agricultural land: 1) governments seeking to acquire agricultural land in other countries in order to secure food and energy supplies; 2) agricultural companies either looking to expand or to integrate the supply; and 3) financial investors. These groups do not work in isolation: the interest of one set of actors, by putting pressure on land, drives the interests of the other groups higher. The investors are mostly private actors – especially from America and Europe – but also public or state-owned companies – especially from the Gulf states
Investment originates from three groups of countries: 1) emerging countries (especially China, India, most emerging Asian countries, Brazil, South-Africa); 2) Gulf states; and 3) countries in the “Global North” (USA, Europe). The increasing involvement of investors from emerging countries is symptomatic of a new trend towards South-South relationships. It is likely driven by cultural affinity and reduced transport and transaction costs to feed large populations.
Investment in farmland is driven by long-term trends such as growing consumption of food and biofuels in a context of limited availability of water and energy. Investors are interested in securing access to food or other agricultural products, access to water and financial returns in an alternative asset class. Both food and non-food crops (e.g. biofuel crops, rubber) are of interest. Large-scale acquisitions for food crop production are located mostly in East Africa and West Africa, to a lesser degree in South-East Asia, according to Land Matrix. The main crops involved are rice, corn and wheat. Biofuel crops, especially jatropha, also play an important role in land acquisitions, with the majority of projects located in Africa, especially in East African countries (e.g. Ethiopia, Mozambique, Tanzania). Eastern African countries are also of interest for land acquisition projects involving flex crops – which can be used for either food or biofuel production – such as soya bean, sugarcane and oil palm, which have played a central role in the recent wave of large-scale acquisitions. Overall, export appears to be by far the main objective of the future use of acquired land.
Significant risks are associated with investing in farmland. The main challenges are to respect the economic and social rights of local populations, to preserve environmental sustainability and to avoid one-sided agricultural development. Investors often compete for land with local farming communities. Indeed, although the importance of land rights and land governance for the economic performance of agriculture has long been recognised, land tenure systems in many countries, particularly in sub-Saharan Africa, are unclear. They are often found in the form of a dual system where formal property rights coexist with customary land rights. The latter may be overlooked and lead to local populations losing access to land without adequate compensation.
Investments in farmland can be a “win-win-win” strategy if the risks are mitigated, particularly through project transparency and long-term engagement with the local population. Besides the gains for investors and home countries, investments in farmland can yield benefits for local communities, the host country at large and lead to increased global agricultural production. Financial investors have an important role to play in maximising these benefits.
The way forward includes improved governance, especially security of land tenure. Guidelines ensuring responsible investments in land conducive to broad-based development have been produced but an effective mechanism to enforce them is still missing. Documenting foreign investment is also key, both for transparency and better understanding of the phenomenon.
There is a strong case for private investment in agriculture. Investments required in developing countries to support the agricultural output needed in 2050 amount to an average of US$83 billion per year, which represents an increase of about 50% over current levels. There is increasing evidence that collaborative business models between small farmers and investors (such as contract farming, outgrower schemes and joint ventures) can be mutually beneficial, boosting agricultural productivity while reducing poverty and hunger, without necessitating transfer of land.
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