Improving Large Scale Agriculture Investments

Photo by: Agrilinks

Originally appeared on Agrilinks.

Successful agricultural development initiatives associated with poverty reduction have seldom included large-scale land-based investment. Feed the Future focuses on smallholder-led agricultural growth as the principal engine of poverty reduction and food security. Investment in agriculture of all sizes, however, can be constructive and is encouraged by the U.S. Government, but investments must take into account specific country contexts and circumstances and respect the rights of local populations.

Large-scale land-based investment in agriculture, if approached in an equitable and sustainable way, can hold unique benefits that complement smallholder agriculture: it can bring new technologies, crops and/or market opportunities to a region, and, through associated out-grower or contract farming schemes, to smallholder farmers within the region. The result can be a mutually beneficial model where large investments create new opportunities for adjacent communities and farmers. Nevertheless, this model has come under heavy criticism for failing to recognize smallholder property rights, thereby potentially harming the people it aims to help. Consequently, there is all the more need to improve land governance and focus on assisting all investors to better understand the needs and tools for responsible land-based agricultural investment.

Successful commercial investment in agriculture is dependent upon access to clear and uncontested land rights. In environments where land rights are undocumented or poorly protected, medium to large commercial investments in agriculture could lead to displacement, loss of livelihoods and more limited access to land for the local population, in particular indigenous and nomadic communities. These negative outcomes not only undermine the U.S. Government’s development and poverty reduction objectives among the populations it aims to serve but also significantly increase reputational risk for the U.S. Government, its development partners and the private sector. Conflicts over land rights can also significantly augment the financial risks for companies investing in commercial agriculture due to delays or disruptions in operations.

There are good examples and unintended consequences of large-scale land-based investments. Taking time to get investments right can yield sustained, positive outcomes in food production and safeguard the property rights of local communities. Expropriation without due process or fair, prompt compensation and the loss of access to vital resources for food security and livelihoods are real. Positive impacts are more likely when existing rights are respected, as evidenced by a vegetable oil project in Uganda where benefits are shared and tenure is more secure. A National Geographic article on land investments in Mozambique warns of similar risks.

Reputation, financial, timeline and productivity risks associated with land tenure issues lead to higher start-up costs, higher ongoing costs, damage to crops and property, delay and even collapse of projects that do not recognize local land rights. The Munden Project (2012) quantifies these costs to investors. In Ghana, land experts helped Weinco Ghana Ltd. set “working principles” for engaging smallholders and shaping their investments in line with the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests and forthcoming Responsible Agricultural Investment (RAI) principles. These template agreements enabled recording of local tenancies in pilots in Ghana and Benin.

Read more about how USAID is partnering with the private sector to better understand and mitigate land tenure risks associated with agribusiness investments in the developing world through USAID’s Responsible Land Based Investment Pilots.