India, China and Brazil have become an important source of finance, technology and infrastructure for African agriculture. Private enterprises and state-owned companies from these three emerging countries have started to invest in the agricultural sector in many African countries, ranging from agricultural inputs and irrigation services to farming, food processing and distribution.
For China and India concerns about their own domestic food security are the main driving force for their growing engagement with African agriculture. With huge populations, growing urbanization and a rising middle class in both countries, demand for food is expected to outstrip the capacity of local production due to diminishing arable land and serious water shortages for irrigation.
In turn, African governments have been willing to put huge tracts of land at the disposal of foreign investors for the purpose of growing commercially viable agricultural products, such as cut flowers, biofuel crops, cotton and some edible produce. These large-scale land investments by foreign investors have received mixed responses.
However, foreign direct investment (FDI) can become a catalyst for modernizing Africa’s low-technology subsistence agriculture if it is placed within a broader national strategy on rural development that gives priority to improving the productivity of local farmers. No country has ever made the transition to industrialization successfully without first developing its agricultural sector, and Africa certainly needs to transform the sector radically. Agricultural research, supportive rural infrastructure, adequate development finance, skilled personnel and strong institutions have remained relatively underdeveloped. National budgets devoted to the agricultural sector remain low and few African countries have a coherent strategy to mobilize resources domestically. Given the urgency of raising agricultural productivity on the continent, attracting FDI should be a priority for African governments, since such investment can play a critical role in addressing longstanding constraints. At the same time, initial efforts by a handful of African governments to attract FDI to the agricultural sector have met with scepticism. Activist civil society organizations point out that FDI in African agriculture has largely contributed to the displacement of subsistence farmers and pastoralists from the land they depend on and that most of these investments are directed at producing non-food items, such as cut flowers and biofuel crops, and not necessarily food for local consumption. Where the critics go wrong is in apportioning blame to foreign investors. One of the major problems has been the failure of host governments to take decisions on land leases in light of a broader strategy on rural development. While corruption remains a problem, many African countries lack the technical and human resources to monitor and regulate large-scale agricultural projects. Not all land deals, whether with foreign or domestic investors, are implicated in the dispossession and wanton destruction of the livelihoods of local communities. If undertaken with due diligence, large-scale land investments can create opportunities in food-deficit African countries. Such investments could improve the local infrastructure and economy, ensure technology transfers and provide long-term employment. The real focus of the critics should be on the role and responsibilities of national governments in establishing the ground rules for FDI in African agriculture, and in ensuring that they get the best out of any investment deals. Africa’s need for development finance, technology and human capital development is huge and cannot be met with local resources alone. The exclusive focus on ‘land rights’ or ‘land grab’ unfortunately leaves little room for a thorough evaluation of the potential contribution of FDI to asset creation through capacity building and skills development in farming, enhanced transfers of appropriate technology and the provision of finance for infrastructure development – all of which are critical to a successful agrarian revolution in Africa. Moreover, pejoratively equating all FDI in agriculture with ‘land grabbing’ could stop investment altogether as potential foreign investors try to avoid reputational and financial risks. The role of a vigilant civil society and the media is indispensable in holding national governments accountable so that the benefits of international investments are channelled to strengthen the productivity of small-scale farmers, promote value addition through technology transfer and innovation, expand opportunities for non-farm employment by diversifying the rural economy, and improve competitiveness and economic transformation. This approach demands high and sustained levels of investment in key public infrastructure (such as rural roads and irrigation), in agricultural research and new technology, and in input-related industries in areas such as fertilizers and seeds – all of which can be provided sufficiently by China, India and Brazil.
On 28 October 20013 Renu Modi is in The Netherlands to give the SID-lecture on South-South alliances and tri-angular cooperation.