Land acquisition - a fair deal?

SOUTH AFRICAN FARMERS are considering concessions in the DR Congo, the Chinese have expressed interest in the biofuel potential of Angola’s run-down eucalyptus plantations, and the sovereign wealth funds of the Middle East are snapping up large parcels of high-potential land wherever they can find it, Sudan being a prime target.

There’s no doubt that land leasing has become a major activity. But the much publicised failure last year of a Korean company’s attempt to lease more than a million hectares for maize and biofuel operations in Madagascar showed that this development model is not welcome everywhere. So much so that the UN’s FAO, in association with IFAD and IIED (multilateral agricultural and environmental development institutions) has seen fit to investigate agricultural investment and international land deals in Africa*.

Their report is based on a series of acquisitions (1000ha or more, from January 2004 to April 2009) in Ethiopia, Ghana, Mali and Sudan, as well as Sudan where data collection was particularly difficult. Nearly 2.5mn ha of large-scale allocations in all have been approved in these five countries over this short period, they say. Case studies from Mozambique and Tanzania are included. Approved allocations to date include a 150,000 livestock project in Ethiopia, 452,500ha for biofuels in Madagascar, and 100,000 highvalue hectares suitable for irrigation in water-stressed Mali. Foreign investment dominates There is a dominance of foreign investment, the report says, but domestic investors are also playing a major role in land acquisition. Another myth put to rest is that China, via its Africa Development Fund, is trying to enhance its own national food security; these operations are largely commercial. “Large-scale acquisitions of farmland in Africa...[have] made headlines in a flurry of media reports across the world,” the downloadable document states. “Yet international land deals and their impacts still remain little understood.”

It discusses key trends and ‘drivers’ in such land acquisitions, the contractual arrangements that are entered into and the way these are negotiated. It also covers the early impacts on land access for rural people in target countries. Notwithstanding the difficulties the trend has been picked up by farm machinery manufacturers and other inputs suppliers all over the world who see a new opportunity to open up significant new overseas markets. Much of the activity so far has been initiated by land agents from China and India, two well-endowed countries which can supply most of the hardware themselves. But a major source of funds remains the sovereign wealth institutions of the Middle East, such as SAMA Foreign Holdings (KSA) and KIA (Kuwait).

These are reliant mostly on established Western technology in the form of high-power tractors, implements and harvesting/storage machinery. And both types of funding rely on global supplies of fertilizers and other agrochemicals. In the process a series of important training opportunities, both for expatriate managers and for part-time smallholders, is being thrown up as well. Just the summary of the FAO’s findings cover more than three pages, amongst which are:

• there is a dominance of the private sector in land deals

• domestic investors are playing a major role

• government-to-government deals are rare

• eases rather than purchases are predominant; “host countries tend to play a key role in allocating them”

• transparency and checks/balances on contract negotiations are inadequate. And, perhaps most worrying of all, “Virtually all the contracts analysed by this study tend to be strikingly short and simple compared to the economic reality of the transaction.”

A series of recommendations is made. “What should African agriculture look like in 30 years’ time? What place should large investment and smallholders play within that, and why? These basic questions should frame decision making.” Fortunately the debate has already begun.h

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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