Written evidence submitted by Michiel
Timmerman
POTENTIAL FOR
AGRICULTURAL INVESTMENT
BY CDC
There has been very substantial commercial investment
in agriculture in lower-income countries over the last five years,
driven by a number of factors. These include (1) a desire to
improve food security by emerging market countries as economic
growth results in increased wealth and demand for protein and
general consumption of foodstuffs; (2) a consequent desire to
improve food security by net food-importing countries; (3) attractive
yields and portfolio diversification from farmland for financial
investors in a low interest rate environment; (4) sharp rises
in food prices in the 2007-08 boom and again in 2010 and into
2011. These trends continue to drive demand for agricultural
land today and have resulted in sovereign wealth and investment
funds buy up large tracts of land, particularly in Latin America
(Brazil's cerrado region) and in Eastern Europe. These regions
are targeted because of the availability of large blocs of farmland
at relatively low prices, compared to western farmland, the ability
to maximise yields through large scale, mechanised cultivation,
sometimes weak land governance and in some cases (eg Brazil) government
support and infrastructure development.
Investors have more recently turned to Africa, where
there are large areas of suitable farmland available. According
to press reports, investors expressed an interest in 42 million
pa globally after the 2008 commodity boom, of which 75% was in
sub-Saharan Africa. Put in context, this is nearly 10% of the
total 446 million ha estimated of uncultivated land available
globally (Rising Global Interest in Farmland, World Bank 7
September 2010).
Unlike Eastern Europe, where large farms are available
from private or former state entities, and Brazil where the cerrado
region was sparsely populated, many areas of African farmland
are farmed, with poor quality title, by smallholders or otherwise
used by the local population. Many African countries display
weak state capacity, poorly defined property rights and weak enforcement
of any property laws which do exist. This creates a substantial
risk that the foreign investors' appetite for farmland can result
in the displacement of the local population and the use of large
scale, mechanised agricultural practices, as in Brazil and Eastern
Europe. Yet with appropriate training, provision of infrastructure
and processing equipment and other investment such as seed research,
smallholder-based or small-holder inclusive models of agriculture
can be very successful (Awakening Africa's Sleeping Giant,
World Bank 2009). Such an approach can have a substantial
impact on rural poverty by improving rural incomes, which are
currently at extremely low levels. It is also likely to enhance
local food security as in many cases large scale agricultural
production is focused on export crops.
CDC should be examining the potential for making
a positive financial return while at the same time alleviating
poverty by investing in smallholder-centric agricultural schemes.
There are many examples of success in such schemes, for example
smallholder rice production in Thailand (op cit, World
Bank 2009) and small-holder based models for coffee and cocoa
production, processing and export in Tanzania.
Such an approach will have the added benefit of providing
competition to the financial and foreign sovereign purchasers
of agricultural land and providing an alternative, pro-poor model
for agricultural development.
|
