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July 31, 2012

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July 31, 2012

Obama v Kofi Annan: Who has the best model for agriculture in Mozambique?

July 31, 2012
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This guest post from Joseph Hanlonhanlon (right) was also published today on the Guardian’s Poverty Matters blog

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,

Annan model

Annan model

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.

      Obama model

Obama model

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,


  1. The Annan Model appears to be ideal and most beautiful but also it appears to more than difficult to execute. Peasants are difficult to rely on if you give them money to produce as they face many problems – lack of technology, whether, pests etc. After receiving funds the likelihood of saying do not have it to return is more than high. By taking into consideration these factors lead me to choose the Obama model! The private sector brings development but unfortunately this goes together with inequality. However there is no way to escape from this!

  2. great piece joe

    I choose the Annan model every time. Mozambique’s agriculture is trapped in the low productivity trap that is familiar across Africa. We need public investment in seeds, extension and inputs such as fertiliser to break this cycle, as has been demonstrated in Malawi. Much better to spend crucial and declining aid resources on this than on subsidising Cargill and land grabbing.

  3. Of course there is a third model. The Annon model appears to be similar to the contract farming model for cotton that Mali has been using for decades and that has largely failed.

    In Mali we are promoting an third model which by working through women’s savings groups initially focuses on building the fertility of the soil and raising the water table with cover crops and providing shade with glericidia trees. This will establish the conditons for increasing production oriented largely to the first market “the stomach” and selling any surplus locally.

    Jeff Ashe
    Director of Community Finance
    Oxfam America

  4. Donor agencies seem anxious to keep small farmers small — improving soil fertility and planting trees, but not making the key technological leaps that allow expanded area. Mozambican farmers will not be able to feed themselves and earn enough cash from the average 1.5 hectares they farm now.

    The essential transformation is to increase the land to 5 ha and raise productivity from less than 1 tonne of maize per hectare to 3 tonnes or more. Zimbabwean land reform farmers have shown that this can be done.

    But it requires substantial changes — it requires serious credit, not simply microcredit and savings clubs, and it needs subsidised inputs, mechanisation (animal traction or small tractors) and guaranteed markets.

  5. The Brazilians will be promoting their model, which is a self-conscious combination of mega-business and large investments in small scale farmers, the source of much of the food. There is no doubt that mega-agro is an important part of Brazilian growth, but the change in policy under Lula to invest in small farmers as well has led to poverty reduction, increased food production and an increase in demand, further driving economic growth. In other words, it may not need to be an either or. JG

  6. Brazil is indeed becoming a big player in Mozambique. Pro-Savana is a three way Brazil (technical assistance)-Japan ($)-Mozambique programme which really only started this year. They want to do a mix of large, medium and small farms. Embrapa (The Brazilian Agricultural Research Corporation) is taking the lead, and it has a lot of experience in making smaller farmers more commercial and thus raising incomes. Their model of state-led agricultural development of smaller producers is really similar to what I called the Annan model. In parallel there is Brazilian interest in very large highly mechanised farms, and I have a sense that there is some tension between the Embrapa approach and the would-be latifundiários.

  7. It might come to an interesting mixture of what you call the Obama and Kofi Annan Model, if Cargill´s and other company´s investments were based on the small scale agriculture. The Mozambican Agriculture, not only in the North, will need strong business actors to overcome infrastructure problems, extremely high fertilizer prices and low management skills of the smallholders and to organize and structure the value chain. But these “strong actors” need not necessarily invest in land aquisitions and produce the soy itself but act as a leader of the supply chain management and as a strong buyer. So, there might be a lot of chances for “inclusive business models” in Mozambique in the near future. Of course new and modern and inclusive agricultural and industrial policies of the government would be very helpful…

  8. Even if ‘Annan model’ looks nice in this article, mind the Annan is the chairman of the Alliance for the Green Revolution in Africa (AGRA) funded by Gates Foundation and Rockfeller Foundation, with their own stakes…
    The real interest of the small scale farmers are not defended by those models.

  9. What I find interesting is the mix between a state-led approach and the aim to involve private financing. Reminiscent of the Asian tigers approach to the economy in general.

    The market is an excellent servant, but a terrible master.

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