Posts Tagged ‘FDI’

Seeing the land for the jatropha

Amongst all the kerfuffle about biofuels a couple of years back I frequently found myself sub-vocalising good ol’ Pete Townshend:

Meet the new boss
Same as the old boss

And now Anna Locke over at ODI has written an excellent, balanced piece dissecting the real problem: land management and large-scale agricultural investment, of any stripe. She writes:

Among the incentives is the fact that land simply does not cost very much in many ‘land-rich’ African countries such as Tanzania and Mozambique, due to exceedingly low land rentals and taxes, which do not adequately reflect the true value of the land to the users. This means that companies can hold onto large areas of land without having to think too closely about the cost of doing so. Land is allocated on a first-come, first-served basis in many countries, prompting a rush by investors to get to the head of the queue and get as much land as possible. This also means that companies often try to secure larger areas of land than they can manage initially in order to guarantee taking the project to scale or for future expansion, or to get hold of an asset that they can sell on in the future.

Despite the above, cheap land and labour are often the cornerstones of governments’ investment policies. This has been encouraged by some of the international donor agencies and is seen by governments as a way to compensate for often difficult business environments with high costs in other areas. But how can this be squared with the rights of communities and local citizens to adequate compensation for their land and decent work conditions?

I have it on good authority that considerable effort by government and some CSOs was subsequently put into developing a Biofuels Strategy for Tanzania, when the country reportedly has some excellent land laws that are just not enforced very consistently. Maybe this was clever strategy by the CSOs – taking on land law enforcement generally might be too big a challenge – but it appears to be another case of mistaking a power/politics issue for a technical problem, for which, by implication, a technical solution can be found. Given that the biofuels revolution appears already to have faded, can lessons be easily transferred to other agricultural sectors? If the issue was framed as a technical problem in the first place that might be difficult.

I have some other observations cum recommendations:

  • Land is definitely cheaper in much of Africa than it is in developed countries. Any economic manager / adviser would be mad not to try to leverage that for the good of the country.
  • But navigating local community politics is hard. Investors are right to be wary!
  • Developing country governments can help most by establishing clear, transparent processes for handling this, and then following them properly.
  • Unfortunately, under misguided pressure by investors, they often appear to short-circuit their own rules which are usually put in place in the first place to protect local people from ‘evil investors’.
  • So to developing country governments I say: Yes investors may need help navigating your byzantine bureaucracy, and you should ensure no officials unreasonably hold up business. (Actually it would be great if you could do that for everyone else, but I understand you cannot do everything at once.) But please do not attempt to spike due process.
  • To investors I say: Face up to reality. This won’t be easy and you need to be prepared for the long haul. The best way to win over local people is to be good employers who respect the local environment etc. Don’t make promises of new schools etc that you cannot keep (unless/until you make millions). You’re a business not a charity, so just focus on being a good business!

That all said, any rich countries looking to trim some budget fat and maybe to make a nice deal at Durban next week should give the strongest possible consideration to ditching their “incredible and immoral [biofuels] subsidy” schemes. (Quote from Mark Lynas)

Big farm, big deal

Last but not least on my round-up of what was blogged while I was putting my feet up, my eye was caught by this article from Madeleine Bunting on a massive land deal on Mali (bought by the Libyans). It is so far from least that I have created an entirely new category Land Tenure to house it. I should be blogging a lot more about land as it is critical to just about every conservation and development project* I have ever come across.

These kind of land deals are serious business in Africa these days, and so they should be. Africa has got a lot of land which is underutilised. Various problems raise their head. From a conservation perspective unutilised land might have a lot of utility as a biodiversity reserve. I’m generally not a big fan of trying to cover half the earth in protected areas, but that is not to say there are not good arguments for adding to what we’ve got, especially in lesser known habitats. Moreover, as this blog is certainly prepared to argue, creating a protected area is not necessary to conserving habitat. However, plonking a new big agricultural project smack down in the middle  of a biodiversity hotspot, as I have seen happen, really does not count as a good idea.

Another problem with land deals is you always have to ask: whose land is it? Unfortunately the politicians’ answer does not always accord with local views on the matter. As with any such large investments, even ignoring the lure of corruption, there are often incentives for officials and politicians to simplify a more complex situation on the ground in order to appeal to investors. If all of this translated into full compensation for those affected and better services for all this would be less of a problem, but Africa’s governance problems have severely eroded governments’ capacity to act as an honest broker across all sorts of issues. The strength of feeling over this incredibly sensitive issue should never be underestimated; a major land deal between S Korea and Madagascar was cited as a factor in the less-than-constitutional change of government there in 2009.

But, the thing that often gets missed in all of these discussions is the question: why is this land underutilised? It certainly isn’t all remote wilderness. Agriculture in much of sub-Saharan Africa is a byword for inefficient production. Governments are now seeking to resolve this by bringing in foreign expertise and investment, but the fact is that, around here at least, they could do much to free up the agricultural sector without selling out their countrymen. Government run marketing boards and cooperatives are horrendously inept, and it is hard to see what benefits they bring smallholder farmers; however evil the much abused middle-man is, he at least has the incentive to get the best kind of inputs (seed, fertiliser, pesticides) to the farmers at the right time of year. Unfortunately politicians like to take a rather paternalistic attitude to rural farmers when in fact often the best thing they could do is just get right out of the way other than a few very basic market interventions such as subsidised inputs (ref recent stories on Malawi) and setting floor prices on staple produce (to limit the ‘evilness’ of the middle men).

Finally, governments could clear up land tenure properly so farmers could use their land as collateral on loans. But that would limit politicians’ scope for making those big deals they love so much … so not much chance of that happening any time soon.

* By which I mean either straight conservation or combined conservation and development project. Obviously there are all sorts of education and health related interventions which have nothing to do with land tenure. It is, though, also a critical issue in recovery after natural disasters such as the 2010 Haiti earthquake, see David Week’s recent remarks on the issue. (Refer also to the post and comments on ActionAid Australia’s blog; it seems the government Haiti, in echoes of what I see here, was never much interested in land tenure reform or clarity before the earthquake either.)

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