December 12, 2011

The African Land Grab: Here’s How to Make It Right

Foreign direct investment in Africa has pushed aside local interests, say critics. But a distinguished panel of experts argues that Africans need to look out for themselves.

Sharon Kahn

It’s a basic principle of economics: countries with a trade surplus need to park all those excess assets somewhere. Some countries buy up foreign financial instruments, as China has done recently with US Treasury bonds. Another option is to acquire physical assets through foreign direct investment, or FDI.

But FDI can cause political ripples — or, in the case of land acquisition in Africa by foreigners — an out-and-out tidal wave of controversy, as discussed during a recent conference, “The Resource Boom and FDI in Africa,” sponsored by the Vale Columbia Center on Sustainable International Investment.

According to the Oakland Institute, nearly 60 million hectares in Africa — an area the size of France — were purchased or leased by Western, Indian, and Chinese investors in 2009 (the latest year for which figures are available), compared to an average of fewer than 4 million hectares purchased annually before 2008. Although the investors, which can be either government entities or private backers such as hedge funds, say they bring much-needed money and expertise, the development of foreign-funded plantations is “a curse disguised as a blessing,” Belay Begashaw told the packed house at Columbia University. Begashaw is director of the MDG Center for East and Southern Africa, an organization founded by Columbia University’s Earth Institute to tackle the United Nation’s Millennium Development Goals to end poverty.

Panelists at the conference argued that few of FDI’s benefits trickle down to local residents. Crops of choice are often plants used for biofuels or flowers cultivated for export, rather than food grown for local consumption. Forests have been cleared and water dammed to support FDI plantations. Indigenous farmers have been ousted to make way for the plantations. “At issue is how the system can be made inclusive to ensure that income reaches the local population — not just governments,” said Begashaw. Recognizing that Africa needs both FDI and foriegn expertise, he called for a more thoughtful approach that would protect the land and preserves locals' rights. “It’s about ‘how can we insure justice?’” Begashaw said.

A Call to Action

Countries need an informed strategic vision when it comes to stewardship of their natural resources, agreed Lorenzo Cotula, senior researcher at the International Institute for Environment and Development.

Panelists unanimously called for legal reforms, contract transparency, and political accountability. In particular, they proposed increasing regional cooperation as a way to ensure that competition for FDI doesn’t result in land giveaways, unreasonable tax holidays, and strain on inadequate infrastructure. “By banding together, countries can strengthen their bargaining positions,” said Olivier De Schutter, United Nations Special Rapporteur on the Right to Food. Given the lack of oversight on FDI, African countries should take on the responsibility of imposing restrictions, rather than wait for a move by the United Nations or other NGOs. “It’s difficult to achieve consensus when an NGO has to reconcile not just local issues but those of China, the United States, and other investor countries,” De Schutter explained. ”Reforms can be done easier on a regional level, say, within West Africa,” he said.

De Schutter also called on African leaders to question the “widespread assumptions that plantations are the best approach.” One alternative that he favors is farmer cooperatives. Strength in numbers “gives small-scale farmers a critical voice” in negotiating with investors, suppliers, and customers, he said. Indeed, the co-op approach has proved successful in Ghana, agreed Cotula. He pointed to Divine Chocolate Ltd., a U.K.–based company in which 60,000 local cocoa farmers hold a 45 percent stake.

Finally, panelists made a case that local participation benefits long-term investors. Darius Mans, president of Africare, a United States–based aid organization, noted that governments come and go. Said Mans: “The best insurance that a long-term investor can have is a commitment to doing the right thing for locals.”

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