EAFF on "Foreign direct investment in land in Africa: Risks, opportunities, challenges"

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Philipe Kiriro
Coalition for Dialogue on Africa.
Land Policy Initiative Briefings:

“Foreign Direct Investment in Land in Africa: Risks, Opportunities, Challenges”

Lisbon, 7th June 2011

Contacts
PHILIP MACHARIA KIRIRO
(Dip,Bsc,Msc)
President E.A.FF
Vice patron KENFAP
P.O. BOX 13747-00800
Westlands, Nairobi
Tel: 254-020-4451691
Mobile:254-728 405 067
E-mail: [email protected]
[email protected]

INTRODUCTION

Land is an important resource in development, but this fact is clouded by the social and cultural values attached to it and other undisclosed interests. This has made it difficult for most governments to develop a comprehensive land policy that would provide guidelines in land use for investment in agricultural, urbanization and in national development processes i.e. infrastructure.

To the rural poor, land is the most important resource at their disposal. Land provides livelihood and settlement to the majority of people in Africa.

Background

Agriculture is the main economic activity for the majority of people in SSA. This is mainly because the majority of people live in the rural areas (80%). Agricultural produce accounts for over 70% of raw materials and total export. Its contribution to GDP is above 24% in most countries of Africa. The achievement of the Millennium development Goals will highly depend on the performance of the agricultural sector and rural development. This is in line with CAADP Agenda that expects economic growth and achievement of the Millennium development goals to be realized through growth in the Agricultural sector.

Agricultural development trend in the continent has not been encouraging. According to FAO reports, there was a 27% increase in per capita food production in Asia (1980 - 1995) during the same period there was a decline of 8% in Africa. There are many challenges that hinder performance of Agriculture in the continent and land is one of the main challenges.

Risks

Governments in developing countries main agenda is to move from low income level with low GDPs to high income and even industrialize.

Agriculture is viewed as the sector that will trigger economic development .No wonder developing countries view land grab phenomenon not more than FDI opportunity in agriculture and food production, that would lead to food security and deliver other benefits such as employment, technology and skills transfer.

There are however risks linked to what might be generally viewed as beneficial investments and it is probably the reason that land deals are shrouded in secrecy, Lack consultations and information or concrete data on size of investments, impact to local communities, natural resources and biodiversity.

Foreign governments are using FDI processes to solve their own internal domestic problems. Foreign governments through their own private sectors and government cooperations are promoting acquisition of land in developing countries as an alternative to purchasing food from the global market .Saudi Arabia has acquired 500,000 ha of land in Tanzania and over 100,000 ha in Sudan, to grow wheat, vegetable and animal feeds, United Arab Emirates purchased 400,000 Ha of land in Sudan ,other governments such as Egypt ,Libya, South Korea ,Japan, China, Qatar are also involved.

To address it’s water crisis the government of Saudi Arabia decided to reduce domestic cereals production by 12% per year to help conserve water. To actualize this desire the government earmarked USD 55 billion to provide loans at preferred rates to Saudi companies which want to invest in the countries with stronger agricultural potential.

Governments such as China, India, Brazil, the US and the EU have enacted mandatory targets for use of biofuel in transportation fuels, creating guaranteed markets for biofuels for decades to come.

Developing countries have taken this as an opportunity and are eager and willing to avail their so called ‘idle’ land for this purpose as additional income to help improve their trade balances .Again governments do not assess long term impact of these investments to communities ,the environment and biodiversity.

its only after land issues have been resolved at community level that the role and significance of community-investor partnership which does not require transfer of land rights is possible

There are concrete situations providing incentives to foreign and direct investment in land. The food crisis of 2007 and 2008 was a majority trigger point .The crisis clearly demonstrates to countries that depend on import to meet their domestic food security that there is an urgent need to find other solutions to their domestic food supply.

During 2007-2008 food crisis countries in middle-East that depend on food acquisition from the global food markets found it extremely difficulty to cope with the high expenditures.

There are projections indicating that by 2050 agriculture will have to grow by 70% to meet food demand by a world population of 9.1billion.There is political support for agro-fuels in the major continents, such as, South America, North America and Europe .The political support for biofuels in these regions has also provided a conducive policy environment to the private sector to venture into biofuel production targeting land in developing countries.

Financial crisis of 2008 has created additional incentive .The current financial opinion is that the single recession hedge of the next 10 or 15 years is an investment in farmland. The high price of agricultural products on the other hand,and the rising demand for agricultural commodities has triggered growth in the investment on land due to raising land prices and incentives for agricultural productivity. At business and country national development levels there seems to be positive and very attractive benefits in promoting FDI in land .What needs to be examined is the long term implications to countries, sustainable developments.

Challenges

What is wrong with the current FDI is that governments take it as an easier way of ensuring national food security needs and generation of income. Governments may end up neglecting the very small producers who have produced food to themselves and the countries for decades (60to70% local food supply) under extreme difficulties. This to many countries that are targeted by foreign and direct investments will lead to disempowerment of the majority of people in the rural areas by denying them the opportunity to directly participate in food production and overall wealth creation for themselves and the nation.

The other problem is that governments use national resources to provide a conducive environment to the investors i.e rights to the land ownership with proper legal rights, to ownership, access to water, electricity, roads etc.All this is done at the expense of the local people.

The other major problem is on the trend and the environment within which investments are taking place .It is in countries that have very weak land policies, countries where the entire population depend on agriculture and yet are major importers of food meaning that even with land and people available they are food insure.

Even with countries with reasonably good land policies there are outstanding issues around state sovereignty over land, land distribution, land tenure systems and land tenure security. According to World Bank data in Africa only 2 to 10% of land is held under formal land tenure. The rest is nationalized or controlled by the state. This means that the majority of land in Africa 90-98% is available and subject to grabbing. This explains why although Africa has over 800million ha of cultivatable land, it is only 197mha that are currently in use. When the same land is availed to foreign investors it is accompanied by ownership rights and use rights and a guarantee to access to water and infrastructure development.

With so many unresolved issues around land that lead to failure of the local people to engage in production, it would be morally and socially dangerous to consider FDI as the solution.

The expected benefits from FDI do not add up and therefore not sustainable.

Way Forward

For developing countries to benefit from FDI investment on land its important that solution is found on pending issues on land. It is important that the issue of land and especially tenure security is sorted out. This is an important incentive for the local people for them to invest in agriculture on a long term basis. It is important also that governments in developing countries take lessons from developed countries on what needs to be done to develop agriculture and especially through heavy investment, in small scale agriculture and protection to ensure that producers have access to domestic and regional markets. Government investments in its own people would demonstrate its trust, confidence and capacity in local people create wealth and overall national development. It is important that government apply its resources both physical and human to ensure food sovereignty and as a consequent sustainable food security. Food security is a domestic affair calling upon government and its citizen to take responsibility. To succeed land remain a critical factor.

There has been proposals around win-win possibilities in FDI in land .The world bank in partnership with IFAP and FAO are developing a framework and promoting voluntary principle of agricultural investment. The seven principles within the framework have very important elements, but its only after land issues have been resolved at community level that the role and significance of community-investor partnership which does not require transfer of land rights is possible. Such partnerships will also ensure a balance of profit social, environmental responsibilities and sustainability of the undertaking.

Due to lack of transparency and accountability by governments and investors, local land users, who do not have legal rights on land have been displaced and even lose access rights natural to resources such as water, grazing land and forests.

In many cases the expected benefits are never realized. Instead of a realization of a win-win scenario the whole process turns out to be exploitive and eventually exposing the underlying interests of investors which are merely speculative hence not using land productively.

Conclusion

The land grabbing process in Africa has gained momentum and unless issues of land are addressed at National level to ensure that local villagers have access to land and a secure tenure security the local people will be pushed deep into poverty through displacement and being converted to peasants and farm labour. This will lead to instability in Africa and especially with the knowledge that land is not only their for economic purposes, but other important social political functions. Land is also a major political resource in that it defines power relations between and among individuals, families and communities under established systems of governance. Apart from land enhancing prospects for better livelihoods. It also helps them develop more equitable relations with the rest of society, thus contributing to faster and sustainable development

Thanks.

P.M. KIRIRO
PRESIDENT EAFF
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