Land is fundamental to the lives of rural people. It is a source of food, shelter, income and social identity. Secure access to land reduces vulnerability to hunger and poverty. But for many rural households in developing countries, access is becoming more tenuous than ever. Protecting their land rights is a matter of basic social and economic justice.
Sub-Saharan Africa provides an overall case in point. The continent has seen remarkable growth over the past decade. The sustained boom in commodity prices, the information and communications technology revolution, rapid urbanization and the demographic shift to a younger population present exciting opportunities.
But this growth also brings new challenges as a flood of national and foreign investors aim to exploit Africa’s still-untapped potential. Despite the enormous advancements that have taken place, job growth remains low and poverty high, and most Africans are not yet reaping the benefits of expansion.
It is clear, advocates say, that ‘business as usual’ is no longer a valid response. Instead, innovative structural reforms and investments will be needed to sustain Africa’s growth while creating jobs and shared prosperity.
Structuring investments fairly
Such reforms and investments are a high priority for the International Fund for Agricultural Development (IFAD), the United Nations rural development agency. Through loans and grants, IFAD and its partners finance projects enabling smallholder farmers and other rural people to grow and sell more food, increase their incomes and determine the direction of their own lives. And IFAD is not alone. While rural areas still suffer from a wealth gap with urban centres, recent years have witnessed a renewed interest in agricultural investment worldwide, including investment in sub-Saharan Africa.
This new momentum has resulted in large-scale acquisitions of farmland in developing countries, said Harold Liversage, IFAD’s Regional Land Advisor for East and Southern Africa. “Partly as a result of sustained media attention” Liversage noted, “these acquisitions have triggered lively, often polarized, debates about ‘land grabbing’. Less attention has been paid, however, to ways of structuring agricultural investments that do not undermine the livelihoods or land rights, and other natural resource rights, of poor rural communities.”
IFAD recently held a workshop at its Rome headquarters focusing on just that: how to structure investments that contribute positively to the land security and natural resource rights of rural people. The event brought together a range of stakeholders from IFAD-financed projects and programmes, as well as representatives of international development organizations, research institutes, governments and the private sector.
Inclusive business models
During the workshop, IFAD project management teams from two regions — West and Central Africa and East and Southern Africa — talked about what has worked and what has not in the inclusive business models currently in practice. The models under discussion, all supported by IFAD, included the following:
- Commercial oil palm farming in Uganda. The Vegetable Oil Development Project was designed to alleviate Uganda’s dependence on imported vegetable oils by supporting the domestic production and processing of palm oil. The project negotiated a tripartite agreement between the government, the private company Bidco Oil Refineries Ltd and smallholder farmers to establish processing plants, a nucleus estate plantation and a smallholder farmers’ outgrower scheme for vegetable oil production. Through the project, the government acquired private and public land, and leased it to the company. Public land was also allocated to landless households. With their increased income, tenant farmers have been able to buy land from owners.
- Integrating smallholder farmers in Swaziland’s sugar industry. The Lower Usuthu Smallholder Irrigation Project is part of a large-scale irrigation infrastructure effort. It focuses on the intensification and diversification of high-value crops, and integration of smallholders into the commercial economy. The project has linked farmers growing sugar cane to the nearby Ubombo Sugar Ltd processing mill. Small growers are organized into farmer-owned companies and commit their land to crops grown for the companies. In return, they acquire a share in the business and get dividends from the profits, while the companies receive documented land-use rights.
- Building farmers’ income and safety nets in Burkina Faso and Mali. Mali Biocarburant SA (MBSA) produces non-polluting biodiesel from the energy crop jatropha. Its inclusive business model brings together outside investors and smallholder farmers in Burkina Faso and Mali. MBSA has set up local foundations in the two countries to help strengthen the capacity of the farmers and their cooperatives. The farmers’ plant and harvest jatropha, and their cooperatives sell the jatropha nuts to MBSA, either in Burkina Faso or Mali, where the oil is then extracted. The product is sold exclusively to local markets. By planting the jatropha trees, farmers have been able to strengthen their user rights, as the planting of permanent crops, in general, strengthens land rights.
- Organic and Fairtrade cocoa production in São Tomé. The Participatory Smallholder Agriculture and Artisanal Fisheries Development Programme has set up partnerships between the São Tomé Government, IFAD, the Agence Française de Développement and European companies – all aimed at developing entire value chains, from production to market, within an ethical framework. These partnerships enhance returns on investments in traditional cocoa value chains through the use of organic and Fairtrade certification, and by linking growers to European markets. The smallholders involved in the project benefited from the land distribution process when old state farms, originally colonial plantations, were split up and land parcels of various sizes were handed over to ex-plantation workers.
- Smallholder tea production in Rwanda. The now completed Smallholder Cash and Export Crops Development Project forged a partnership between two tea-producing cooperatives and private investors. Tea factories established by the private-sector partners bought tea directly from the cooperatives, which participated as equity shareholders in the factories. The same model is replicated in the new Project for Rural Income through Exports, which continues to promote investment in the rehabilitation of existing tea plantations and the establishment of new ones. At the same time, farmers have benefited from the government’s land registration programme, also supported by IFAD.
- A responsible approach. Following the discussion about these business models, workshop participants further defined the key priorities and risks involved in making agricultural investments that ensure just and secure land and resource rights.
“There is a need to invest in local community and farmer organizations, which are a critical element for these investment projects” said Pascal Liu, team leader at the International Investment in Agriculture, Trade and Markets Division, part of the Food and Agriculture Organization of the United Nations. “Most investments come from smallholder farmers themselves, so they need more support.”
Liu went on to say that investors should be informed about the growing number of tools available to help manage the risks of investing in agriculture in developing countries. “We need to help investors understand that having a responsible approach to agricultural development, and choosing inclusive business models, makes good business sense for them. It is in their interest,” Liu said.
David Norman, Senior Manager for Sustainable Development Policy at SABMiller, agreed. SABMiller is one of the world’s leading beer brewers and one of the largest bottlers of Coca-Cola products.
“We need, as a business, to have a long-term, secure, sustainable supply of good-quality agricultural products and good quality, fresh drinking water” he said. “For us at SABMiller, the old model of seeking to do that through using financial muscle simply cannot stand the test of time.” As a large multinational company operating in developing countries, SABMiller has high visibility and exposure, Norman explained “and if we get things wrong, like the basics of being seen to suck the water table dry, we are in deep trouble in those settings” he said, “we just can’t afford to do that even if it was morally right, and it is not.”
Harold Liversage is Regional Land Advisor for East and Southern Africa at the International Fund for Agricultural Development. IFAD invests in rural people, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, it has provided about US$15.8 billion in grants and low-interest loans to projects that have reached some 430 million people. IFAD is an international financial institution and a specialized United Nations agency based in Rome – the UN’s food and agriculture hub.