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September 16, 2014

Why is economic orthodoxy so resistant to change? The art of paradigm maintenance.

September 16, 2014

Not so mega? The risky business of large-scale public-private partnerships in African agriculture

September 16, 2014
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Oxfam policy adviser Robin Willoughby shrugs off the big ag groupthink and argues that the current trend of mega projects in African agriculture is aRobin Willoughby risky and unproven way to help poor farmers.

Last week, I attended a large summit on the future of African agriculture in Addis Ababa, hosted by A Green Revolution for Africa (AGRA).

My participation really made me reflect on the problems of ‘groupthink’ within these types of conference, with each of the participants taking it in turns to stand on the podium and agree with one another more and more vociferously. The buzzwords were ‘investment opportunities’, ‘transformation’ and ‘public-private partnerships.’

This narrative is to be expected at a private sector agri-investment conference – but seems confusing when this type of meet-up is designed by philanthropic organisations to address rural poverty and the widespread challenges in African farming. Despite the worthy aims of AGRA, discussion of poverty, rights, gender or inequality was almost entirely absent from the plenary.

As one of the other participants said to me: “if everything is going so well – why are we all here?”

At the summit, I launched an Oxfam Briefing Paper on large-scale public-private partnerships initiatives, which echoes some of these themes.

The report points out that despite the large amount of hype around mega-PPPs such as the New Alliance for Food Security and Nutrition, GROW Africa, and numerous growth corridor initiatives – there is very little robust evidence on the proposed benefits of these arrangements, around who bears the risks or who holds the power in decision making.

So where do the risks and benefits lie?

Moral-Hazard fig 3 map 060814The paper shows that public-private partnerships can play an important role in supporting farmers. For example, smaller-scale initiatives such as micro-credit, weather-index insurance and attempts to link farmers into markets offer useful examples of PPPs – particularly when they are co-designed with end-users and local communities.

Oxfam’s work with consumer goods company Unilever in a targeted partnership called Project Sunrise shows that well-designed partnerships can also be used for innovation and learning.

But the risks of mega-PPPs are enormous, particularly in the areas targeted for investment.

Threats to land rights:

Land transfers are a core component of the mega-PPP agenda. The total amount of land pegged for investment within just five countries hosting growth corridor initiatives (Tanzania, Mozambique, Malawi, Ghana and Burkina Faso) stands at over 750,000 km² – the size of a country such as France or Ukraine.

Not all of this land will be leased to investors, but the initial offering in these countries stands at 12,500 km² (over 1.2 million hectares) – the amount of land currently in agricultural production in Senegal or Zambia.

In the context of weak land governance and insecure land tenure (estimates suggest that only 10 per cent of rural land in Africa is registered), there is a serious risk that mega-PPPs will lead to the dispossession or expropriation of local communities in the name of investment.

The pricing of land can also be set at extraordinarily low levels. The GROW Africa initiative advertised land for lease in Mozambique for $1 per hectare per annum over 50 years. This is around 2,000 times cheaper than comparable land in Brazil – raising concerns that African governments are seriously undervaluing their core assets.

Worsening inequality:

Inequality is already significant in Africa. Measurements such as the Gini-coefficient show that inequality on the continent is second only to Latin America in its severity.

Land transfers to investors threaten to worsen this inequality by creating ‘agricultural dualism’ between large and small farms. This process will remove china_zambiafriendshipfarmcropalready diminishing plots of land from family farmers; while the co-existence of large and small farms has been shown to drive inequality and conflict in other contexts.

Also, equitable agricultural development requires diverse forms of support to account for ‘different rural worlds’, including contract oversight for commercial producers, the development of local markets for poorer farmers, and job-creation and social protection for marginal groups.

Mega-PPP projects are unlikely to deliver this type of agenda, instead focussing on wealthier, more ‘commercially viable’ farmers and bigger, politically well-connected companies.

Asymmetries of power:

Finally, for any form of large-scale public-private partnership to be effective, it requires effective governance to ensure a fair sharing of risks and benefits; and regulation to ensure that more powerful players do not use political and economic clout to capture a dominant position in the market.

These conditions of good governance do not exist, on the whole, in most African countries.

The asymmetries of power within these arrangements can be enormous. In the SAGCOT programme (a mega-PPP in Tanzania), four large seed and agrichemical companies involved in the initiative have combined annual revenues of nearly US$100 billion. That is more than triple the size of the Tanzanian economy.

This raises serious concerns that these companies could lobby for policies that are in their interest and squeeze out small- and medium size enterprise from burgeoning domestic markets.

What are the alternatives?

Is there an alternative to the mega-PPP vision of agricultural development? I think so:

Public sector investment in research and development, extension services and targeted subsidies for credit can spread the benefits of agricultural investment widely and encourage private sector participation in the sector. Currently, governments in Sub-Saharan Africa only spend 5 per cent of their total annual budget on the sector, which is unforgivably low.

Securing land rights for local communities. This will help to ensure that communities within the target area for these schemes are not dispossessed in the name of investment. Secure land tenure also encourages smallholders to invest for themselves in land and productive activities.

Finally, alternative business models such as the development of producer organisations and the clever use of subsidies to encourage local processing facilities can develop agricultural markets without the need for ‘hub’ plantation farms or growth corridors. These models should be explored in more depth as part of a more inclusive PPP agenda.

With some US$6 billion of donor aid committed to further the aims of the New Alliance and $1.5 billion earmarked for growth corridor initiatives, mega-PPPs lead to a fundamental question. Would this money be better spent on lower risk models of agricultural development that give a greater share of the benefits to the poor?

 

 

 

 

 

4 comments

  1. I am outing some great questions that were sent to me through email by an international commentator who prefers to remain nameless. Here they are below.

    ‘Good blog…kept me entertained during a very long queue at customs. …naturally, got some devil’s advocate questions:’

    Q. Do donors not have an interest or responsibility in promoting better governance? Do we not trust them at all?

    ME: Yes – in some cases PPPs do present an opportunity to press for better governance. However, the evidence from the paper shows that policies are, on the whole, being changed to incentivise investment rather than ensure a fair sharing of benefits.

    Also, the measurements or metrics are not in place to determine who wins and who loses. Both GROW Africa and the New Alliance measure success by total amount of investment, policy changes implemented, smallholders reached and no of jobs created.

    This doesn’t really capture any details of impact. Nor is there a counter factual or any feedback on unintended consequences. My personal view is that the risks of these arrangements are high and donors are not sufficiently focussed on these risks.

    Q. Do PPPs only work when NGOs are involved?

    ME: No – in some cases these don’t work either. The paper is more nuanced on this and talks about challenge funds, micro-insurance, and infrastructure PPPs that can be useful in cases. They do require strong governance though to ensure a fair sharing of risks and benefits.

    Q. Why are the corridors inherently bad? There are large returns to poverty reduction from infrastructure development, particularly roads. It is second to agriculture. Most of the more well-off farmers also live/work in peri-urban areas…the lands usually more favorable and better access to input & output markets usually gives the farmer more choices and opportunities…

    ME: Yes they could have spill-over benefits in terms of infrastructure spending. However, there are huge risks – particularly in terms of land rights within the investment area. Land transfer forms a core component of the growth corridor model in the examples that we analysed.

    In the case studies, the agricultural model within the corridors promotes ‘hub and spoke’ plantations surrounded by smallholders. This is a less equitable model of development than other alternatives – and leads to an ‘agricultural dualism’ between large and small farms. This is discussed in more depth in the paper.

  2. Rural Africa is village after village surrounded by land with clearly understood boundaries. These villages and their land identify a people, more than their identity as a tribe, much more than they identity as a nation. When this land is taken out of their control and given to investors, it is a cultural genocide. It is wrong to use their poverty as an excuse to take land from African people, it is the same as taking away their identity.

  3. Two other important things that are ignored by advocates of mega PPP based on intensive farming are the risks to soil and groundwater. The latter is vital in many regions and it would be disastrous if it was polluted with nitrates or pesticides as the option to treat water to remove pollutants or to dilute the pollution from cleaner sources may not be available. The impact of intensive agriculture on soil here is slowly being acknowledged as one of the reason why the genetic potential of new varieties of wheat and oilseed rape are not being realised on commercial farms having performed well, compared to existing varieties, in variety trials. There is every reason to expect African soils to be more vulnerable and liable to erode in extreme rainfall events as well.

  4. Most of rural Africa, especially sub-Saharan Africa, comprises of small holder, peasant farmers, who form the backbone of agricultural production, for most African countries.

    Land ownership or having unrestricted access to land use, is vital and critical, for the very survival and sustainable lives, of such rural populations.

    These rural communities, lead by women and youth, produce nearly all the food, which feeds Africa’s ever increasing urban and semi-urban populations, yet they have been marginalized and often forgotten by their own governments, when it comes to planning and distribution of vital resources, to invest in their capacity building and strengthening their resilience and sustainable resolve, to mitigate and combat climate change and improve agricultural productivity, for food security, safety and sustainability, to make poverty a thing of the past.

    They need to be left on their own plots of land, while they should be empowered to acquire some more land and to use it more efficiently, as opposed to being chased off land, in favour of large scale commercial farming.

    The rural farmer should be strengthened and not destroyed.

    Augustine Yada. Founder/Executive Director. Project Green Villages Africa Institute.

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