Mozambique is a development paradox. Rural poverty is increasing despite high growth rates and billions of dollars in aid. Now the country has been targeted by two contrasting models of agricultural development. The Obama model was backed by the G8 in Washington in May, while the Annan model was proposed by the Africa Progress Panel (APP). Which works better for the poor?
The APP is heavyweight and conservative, chaired by Kofi Annan and with members including a former IMF head and a former US Treasury Secretary. It says one of the biggest dangers in Africa is the growing inequality between rich and poor, which is creating a threat of social instability. In sub-Saharan Africa “the current pattern of trickle-down growth is leaving too many people in poverty.” And the panel warns that Mozambique is one of the more unequal countries in Africa. The APP points out that Mozambique is a net importer of staple foods, despite having huge agricultural potential.
The APP report calls for “fundamental change” in both donor and African government policies. “Raising the productivity of smallholder farmers is critical. Smallholder agriculture must be placed at the centre of a green revolution in Africa.” This will require more government action and more support for small farmers.
Let’s call this the Annan model.
The second agricultural model for Mozambique was agreed in Washington in May, when G8 leaders adopted a New Alliance for Food Security and Nutrition proposed by President Barack Obama and USAID. The idea is to use giant agribusiness to end hunger in Mozambique and five other countries. The first project in Mozambique will be to support Cargill, the giant grain trader and largest private company in the world, to take 40,000 hectares of farmland. US officials say this will include some small-holder contract farming, which means Cargill will not make enough profit from the investment, so the giant transnational grain trader must be subsidised from G8 aid.
Let’s call this the Obama model.
The two models are incompatible. The Africa Progress Panel report points specifically to the very large land concessions in Mozambique,
and warns that “for Africans, the benefits of large-scale land acquisitions are questionable.”
The United Nations Development Programme (UNDP) recently issued its Africa Human Development Report 2012 which points to “the recent international scramble for land in sub-Saharan Africa” and urges caution on big foreign investors.” Much agricultural technology for producing crops is scale-invariant (it is as efficient on small farms as on large), so large farms should not be expected to be inherently more efficient.” The report warns that “private investors naturally prioritize their own objectives, not the well-being of the poor and vulnerable.”
To be fair, Mozambique’s experience with large investors has not been all bad. Indeed, a single US multinational has probably done more to reduce poverty in Mozambique than any donor action – and without subsidy and without grabbing any land. Universal Leaf Tobacco has agreements with 150,000 peasant families, and their earnings from tobacco have lifted thousands of families out of poverty. How ironic that the antidote to poverty should be a poison, tobacco.
But Universal’s success is due to a different model to that of Obama – out-grower or contract farming. The company provides seeds, fertiliser and other inputs as well as extension services, and guarantees to buy the crop. In return, the farmer must sell her tobacco to Universal. This package works because of two factors: first, risk is shared, so if a drought or cyclone destroys the crop then farmers do not have to pay Universal for the seeds and fertilisers they received. Second, the market is guaranteed; if a farmer grows tobacco, she can be sure to sell it.
Elsewhere, Mozambique has the lowest agricultural technology levels in southern Africa, because under the present free market policies, peasants are expected to carry all the risk – of weather, pests and a lack of market. Mozambican farmers are very poor – the average rural cash income is $31 per person per year. That is less than the price of a bag of fertiliser. Very few peasant farmers are willing to risk their whole year’s income on fertiliser, or better seed, or a different crop. The problem for Mozambican peasants is that foreign companies will only share the risk with tobacco and cotton, and are not interested in other crops. And under the present free market system pushed so hard by the international community, the state is not allowed to share the risk for maize and other domestic food crops.
Nearly all Mozambican farmers still use only a hoe, and do not have a tractor or oxen to plough, so they can only farm 1.5 hectares. Now, international investors are noticing that this leaves vast tracts of underused land. The difference between the Annan and Obama models is how that land is to be used. The Obama model is that giant northern agribusinesses like Cargill with G8 help should take that land and end poverty through what the APP calls “the current pattern of trickle-down growth”. The Annan model would upgrade million of peasant farms to up to 5 hectares each, using most of the available land, but providing initial support with mechanical ploughing, inputs and assured markets.
Will the Annan or Obama model lead to the biggest reduction of poverty and the best use of Mozambique’s land?
Joseph Hanlon is visiting senior fellow at the Department of International Development of the London School of Economics and honorary research fellow in the School of Environment and Development of the University of Manchester. He has been writing about Mozambique since 1978,