A report from the United Nations Conference on Trade and Development (UNCTAD) in 2009 showed that Africa`s inward foreign direct investment (FDI) stock in agriculture represented only seven per cent of the total stock in developing countries. But the situation is starting to change for two reasons:
The first is that food production is being outpaced by rapid population growth and increasing per capita incomes. If current demographic and agricultural output trends persist, sub-Saharan Africa would depend on imports to guarantee 77 per cent of its two billion population's food needs by 2050.
The second reason is that food importing countries and foreign investors are turning to Africa for alternative sources of supply and growth opportunities. Since the 2008 financial crisis and the subsequent hike in food prices, food security has become a major global concern and demand for fertile soil has increased substantially. Foreign investors are also attracted by the low cost of local inputs and prospects of high returns.
Higher global food prices combined with increasing internal and international demand is expected to make Africa`s agriculture more profitable. Governments, companies and investment funds are now competing for African land. The World Bank has recently estimated that Africa`s food system could become a US$1 trillion market in 15 years.
Since 2012, private investment and official development assistance (ODA) towards Africa`s agriculture have been increasing. A number of initiatives are under way. Brazil and India have set up south – south cooperation models with their African counterparts.
Another initiative is the New Alliance for Food Security and Nutrition, a joint partnership between African governments, G8 countries - the leading industrialised economies in the world - and the private sector.
The goal of the alliance is to transform the nature of agriculture and food production in a number of world regions, including sub-Saharan Africa. Twelve African countries, including Ethiopia and Malawi, have joined the initiative, and pledged to improve investment opportunities by easing export controls and tax laws.
Seventy private foreign companies, including the Swiss food multinational, Nestle, the Norwegian fertiliser company, Yara, the Swiss agribusiness company, Syngenta, and the Anglo-Dutch multinational, Unilever, have committed to invest a total of US$3 billion in the agricultural sector. Donor states have pledged to guarantee that cooperation frameworks are established to coincide with national food security plans.
Countries which have their own food security concerns are buying or leasing land to produce cash crops that are exported to their countries. These deals usually result in the adoption of large-scale and capital-intensive production systems under the investor`s direct control.
China is looking at investment in Africa because land, water and rural labour constraints are expected to reduce agricultural output in the next decade, according to the OECD-FAO (Organisation for Economic Cooperation and Development – Food and Agricultural Organisation of the UN) outlook 2013-2022. Saudi Arabia and South Korea also have concerns over food supplies and agricultural commodities.
In the best case scenario, investments, when aligned with a country’s agricultural and food security plans, could bring substantial benefits for local populations, including employment, the development of research and innovation centres to attract rural youth, and the connection of farmers to markets.
But while African countries need foreign investment to fill the finance gap for agriculture and unlock the sector`s potential, there is concern that if future investment is not adapted to local realities and needs, and not in line with the priorities of individual governments, the competition for land could prove disastrous for Africa`s agriculture and compromise food security in the region.
In Madagascar, Mozambique or Tanzania there have been popular protests against land deals. Leasing or buying land in overpopulated areas or in regions where agriculture represents a major source of livelihood, may lead to a worst case scenario where food security, social cohesion and political stability are compromised.
By Guylain Gustave Moke
African Affairs Expert