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The spring 2008 food crisis prompted an increasing number of private and public operators with sizeable investment capacities to search for agricultural areas in developing countries. The international community is also calling for reinvestment in agricultural development and some see this as a win-win solution. But is it really so, and how can AFD operations secure these processes for developing countries?
Actors adopt new post food crisis strategies…
The bulk of populations hit by last spring’s food crisis are to be found in rural areas and major cities in South countries. Beyond economic factors that sparked the crisis, the structural origin of these difficulties lies in the low productivity of their agricultural sector which must face competition from the mechanized – and sometimes subsidized – systems in more developed countries. In this context, the historically low levels seen in prices for the main agricultural commodities have prevented these small producers from making any significant investments or from making a decent living, when it has not forced them to migrate to the cities.
2008 also revealed the fragility of some countries that lack sufficient natural resources (agricultural land and water) and have to resort to the international market in order to satisfy their food requirements. These countries are now seeking to secure their supply by controlling the use of agricultural land in foreign countries or the products these countries market. This is the case for many Near East countries, particularly oil producing countries (Saudi Arabia, Gulf countries, Iran…). It is also true for many Asian countries, the first are the biggest countries (China, India…), or the most developed (South Korea…). These countries all enjoy sizeable financial resources and may soon be exporting their own food insecurity.
Two additional phenomena are making this “Hungry Earth” even hungrier. Agricultural activities have become profitable thanks to global rates that are higher now than they have been for the past twenty years. They now attract private capital from all over the world and are a hot topic in the press for investors. Some investors are also anticipating climate change by buying barren land to the north of the Northern hemisphere which may become fertile with the rise in temperatures.
…new risks weigh heavily on the most fragile countries
This new land pressure on developing countries could involve tens or tens of thousands of hectares and would appear to hinge on two major points: the availability of virgin land, particularly in Africa, and the greater efficiency of agribusiness compared to family farming. There has consequently been a significant rise in the number of companies’ owner-operated projects to exploit large areas.
However, these land operations carry a number of social and environmental risks:
- No agricultural land is totally free of local land tenure rights. By taking possession of this land, via purchase or rental agreements negotiated with governments alone in exchange for royalties, populations may end up being evicted from their traditional land and losing their activities (farming, livestock grazing, crop picking, fishing…) and it may create or aggravate land conflicts, thus threatening stability and security in small regions or even entire countries.
- Farming in developing countries can create wealth and employment. Yet it is carried out by agribusinesses whose target is to meet external creditworthy demand. They cannot meet the food requirements of the poorest populations and - at the very best - simply provide a feeble response to food insecurity in the relevant country.
- Mechanized farming by private companies on fragile tropical soils poses serious environmental questions. There is, indeed, a serious risk that foreign companies will exploit the fertility of thousands of hectares over the short term, without restoring the land, and will leave their farms when yields start to fall. This particularly concerns annual crop farming.
Adopting a clear strategy
In these times of crisis it is more necessary than ever before to define clear strategies to reduce food insecurity and strategies for land policies. AFD has adopted a strategic intervention framework for rural development which has recently been updated with additions based on research conducted by the “land and development” technical committee that gathers French cooperation actors on land issues.
The main areas of the framework are worth noting:
- support for the definition of relevant public agricultural policies that are shared between national actors, coherent with the countries’ needs, and include specific provisions for land tenure security and land conflict prevention;
- support for the production and marketing of agricultural products, particularly subsistence products, by focusing operations on rural family-run farming. The development of this type of agriculture is an objective in itself, considering the number of people it concerns and their social position. It has also now been proved worldwide that this is the best way to sustainably meet the food requirements of both rural and urban populations as it guarantees “the full employment of land and of men”;
- support for decentralization and balanced land management.
This strategy does not exclude working on partnerships between agribusinesses and farmers when they give producers access to new markets or allow them to diversify. AFD has, indeed, been working on this type of project for a long time by supporting cotton production or perennial farming, or by developing village plantations in partnership with private agribusinesses that have been established for decades. In the case of subsistence farming, it is also important to ensure that partnerships between companies and producers allow the latter to keep part of their crops or to sell them on their national markets.
The way in which some countries have rushed headlong into acquiring land underscores how unrealistic their projects are. They are, indeed, unaware of, or widely underestimate, the agrarian realities of the land they have set their sights on.
The issue of financing such projects raises a number of questions about the poverty reduction and sustainable growth targets that have been assigned to AFD.
However, it is AFD’s role to come up with initiatives that can promote investment in Africa’s agricultural production and that comply with requirements in terms of environmental and social risks. Moreover, AFD has taken the initiative of studying the possibility of creating an investment fund. This fund would make equity investments in responsible companies that invest in African agriculture. Several institutional partners - such as IFAD, ADB, Agra Foundation and German cooperation - may join the African Agriculture Fund and Gulf investors may also be associated.
Finally, one of the roles of Agence Française de Développement and French cooperation is to continue to support South partners in the design and implementation of their land policies and to help them improve their food security via strategies that integrate – where relevant – balanced partnerships between private and foreign operators.
José TISSIER and Emmanuel BAUDRAN
« Main basse sur les terres agricoles en pleine crise alimentaire et financière », NGO GRAIN - Oct. 2008. (in French)
« Gouvernance foncière, sécurisation des droits dans les pays du Sud », white paper by French Cooperation actors – Sept. 2008. (in French)
"Foreign Investment in Agriculture Production – Opportunities and Challenges”, V. SONGWE – K. DEININGER, World Bank, in Agriculture and Rural Development Notes – Land Policy and Administration – Jan. 2009Websites Technical committee on land tenure issues in developing countries www.foncier-developpement.org