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Precious soil

by Lorenzo Cotula, Sonja Vermeulen
International investors have recently shown a fast growing interest in land in developing countries. In spring, the IIED, the FAO and IFAD drew attention to the phenomenon of large-scale real-estate purchases. In our essay, two of the study’s authors bemoan that international media coverage has since emphasised the risks involved – without much regard for opportunities. [ By Lorenzo Cotula and Sonja Vermeulen ]

Quantitative inventories of land allocations in five African countries (Ethiopia, Ghana, Madagascar, Mali, Sudan) suggest the following:
– Levels of activity are significant: approved land allocations in the five countries since 2004 amount to about 2.5 million hectares of land (slightly less than the size of a country like Albania); this includes allocations to both national and foreign investors, and excludes allocations below 1,000 hectares and pending negotiations. Due to incomplete datasets, this is a conservative figure – and it is much higher if deals still under negotiation in the four countries are included.
– Land-based investment has been rising over the past five years, with an upward trend in both project numbers and allocated land areas in all these countries and anticipated growth in investment levels in future;
– The size of single acquisitions can be very large, though with considerable variation among countries – approved land allocations include a 452,500 hectares biofuel project in Madagascar, a 150,000 hectares livestock project in Ethiopia and a 100,000 hectares irrigation project in Mali;
– Private sector deals are more common than government-to-government ones, though governments are using a range of tools indirectly to support private deals, and levels of government-owned investments are significant and growing.
– Large-scale land claims remain a small proportion of suitable land in any one country, but most remaining suitable land is already under use or claim, often by local people, and pressure is growing on higher-value lands (for instance, those with irrigation potential or closer to markets).

Concerns about food security (compounded by water shortages in key investor countries and by the food price hikes of 2008) and the biofuels boom are key drivers, but other factors are also at play – such as business opportunities linked to expectations of rising food prices, agricultural commodity demand for industry and policy reforms in recipient countries aimed at improving the attractiveness of the investment climate.

Mitigating risks, seizing opportunities

For people in recipient countries, this new and fast-evolving context creates risks and opportunities. Increased investment may bring macro-level benefits (GDP growth, greater government revenues), and create opportunities for raising local living standards. Investors may bring capital, technology, know-how, infrastructure and market access, and may play an important role in catalysing economic development in rural areas.

But as outside interest increases and as governments or markets make land available to prospecting investors, land acquisitions may result in local people losing access to the resources on which they depend – land, but also water, wood and grazing. While there is a perception that land is abundant in certain countries, these claims need to be treated with caution. In many cases land is already being used or claimed – yet existing land uses and claims go unrecognised because land users are marginalised from formal land rights and from access to the law and institutions. Even in countries where some land is available, large-scale land allocations may still result in displacement as demand focuses on higher value lands (for instance those with greater irrigation potential or proximity to markets).

Ultimately, the extent to which international land deals seize opportunities and mitigate risks depends on each project’s terms and conditions: how are risks assessed and mitigated – for instance through considerations in project location? What business models are favoured in project implementation (from plantations to contract farming, purchase agreements, policy incentives or joint ventures)? How are costs and benefits shared – for example, in terms of safeguards against arbitrary land takings, or revenue-sharing arrangements? And who decides on these issues and how?

Although the terms and conditions of investment display a huge diversity among countries and even individual projects, the analysis of a small number of international land deals from five African countries suggests that:
– Land deals must be assessed in the light of the often complex overall package they are part of, including commitments on investment, infrastructure development and employment - the “land grab” emphasised by some media is only part of the equation.
– Land leases, rather than purchases, are predominant in Africa, and host country governments tend to play a key role in allocating them.
– Land fees and other monetary transfers are generally small (for instance, three dollars to $ 12 per hectare per year in Mali and Ethiopia), not least due to the difficulty of setting land prices in absence of well-established formal land markets.
– Host country benefits are mainly seen in the form of investor commitments on investment levels, employment creation and infrastructure development – though the structure of current land deals suggests that these commitments may be difficult to enforce.

Many countries do not have in place legal or procedural mechanisms to protect local rights and take account of local interests, livelihoods and welfare. Even in the minority of countries where legal requirements for community consultation are in place, implementation of these policies and processes to negotiate land access with communities remain unsatisfactory. Lack of transparency and of checks and balances in contract negotiations creates a breeding ground for corruption and deals that do not maximise the public interest. Many factors undermine the position of local people:
– insecure use rights on state-owned land,
– inaccessible registration procedures,
– vaguely defined productive use requirements,
– legislative gaps, and
– compensation only for loss of improvements such as crops and trees, with no compensation in most cases for loss of land.
Investors that aim for good practice suffer from a lack of clear government procedures and guidelines.

Some land contracts appear rather short and simple, particularly compared to contracts in other sectors such as extractive industries. Key issues like promoting business models that maximise local content, strengthening mechanisms to monitor or enforce compliance with investor commitments, maximising government revenues and clarifying their distribution, as well as balancing food security concerns in both home and host countries, may be dealt with by vague provisions if at all.

What needs to happen

The land investment story currently unfolding reflects deep global economic and social transformations. These ongoing processes have profound implications for the future of world agriculture. Decisions taken today will have major repercussions for the livelihoods and food security of many, for decades to come. This means that choices made now must be based on strategic thinking about the future of agriculture, the place of large and small-scale farming within it, and the role and nature of outside investment. While bilateral negotiations are unfolding fast, there is a need for vigorous public debate in recipient countries.

Where international land deals emerge as a way forward, governments must ask hard questions about the investor’s capacity to deliver on very ambitious projects. Sensible regulation, skilfully negotiated contracts and robust social and environmental impact assessments are key. Host governments must create incentives to promote inclusive business models that integrate rural smallholders and family farms, and ensure the respect of commitments on investment levels, job creation, infrastructure development, public revenues, environmental protection, safeguards in land takings, and other aspects. Some recipient countries are themselves food insecure, and workable arrangements must protect local food security, particularly in times of food crisis.

As interest in land grows, efforts must be stepped up in many countries to secure local land rights, including customary rights, using collective land registration where appropriate and ensuring the principle of free, prior and informed consent, robust compensation regimes, the provision of legal aid, and good governance in land tenure and administration.

The role of development agencies

Development agencies can play a useful role in catalysing positive change, by engaging with investor and recipient governments, private sector and civil society to ensure that land deals maximise the investment’s contribution to sustainable development. This may include:
– creating space for public debate, and supporting policy reform in recipient countries to maximise positive outcomes (for instance through greater public oversight of negotiations, or stronger incentives for collaborative business models),
– strengthening host government capacity to negotiate contracts, and civil society capacity to scrutinise negotiations,
– supporting efforts to secure local land rights and assist local groups in negotiations with government and investors, including through collective action and legal advice,
– providing lessons from international experience, capacity building and other support for governments, private sector and civil society, for instance with regard to tackling food security issues, or to developing business plans that build on know-how of the wide range of business models for agricultural production beyond plantations,
– ensuring that any international processes and codes of conduct on land acquisition include participation by recipient as well as investor countries, incorporate human rights principles, and are quickly and easily translatable into national-level regulations, and
– reviewing the lending conditionalities of international development funds available to private sector investors, to provide incentives for better practice in land acquisition.