49 The Impact of Increasing Capital Flows to Rural Areas

Experiences in Sub-Saharan Africa

Organizers

  • USAID
  • European Commission
  • Global Donor Working Group on Land: A network of donors, IFIs and international organisations committed to improve global land governance

Abstract

Increased capital flows to rural areas are transforming Sub-Saharan Africa, with profound impacts on farm structure, urbanization, and the security of land tenure. From public investment in infrastructure to a growing urban-based elite with capital in search of land as a stable, valuable asset, much of these capital flows originate from domestic sources and have received far less attention than international land-based investments. Thus the extent of domestic capital flows and its implications for land tenure, food security, and agricultural transformation are still not well understood. Most policy and research focuses on foreign investment, but this is only one part of the process currently unfolding. This session explores from multiple vantage points the various aspects of increasing capital flows to rural areas in Sub-Saharan Africa and the implications for land policy and agricultural transformation in the region.

Key speakers/presenters

  • Caleb Stevens, Land and Resource Governance Specialist at USAID (moderator)
  • Harold Liversage, Lead Land Tenure Technical Specialist at IFAD and chair of the Global Donor Working Group on Land
  • Jesse Coleman, Legal researcher at Columbia Center on Sustainable Investment  
  • William Cobbett, Director, Cities Alliance
  • Milu Muyanga, Assistant Professor of International Development, Michigan State University
  • Keith Polo, Managing Director of Cultivating New Frontiers in Agriculture

Summary

The main issues discussed included:

  • The main drivers and impact of urbanization in SSA
  • Evidence on the characteristics of domestic investments in SSA
  • The causes and consequences of changing farm size distributions in SSA
  • The “missing middle” of agricultural enterprises in SSA

As the world becomes increasingly urban policy makers need to embrace more integrated planning. Recognizing and investing in the urban-rural continuum is globally the cheapest way out of poverty. The experience of Cities Alliance shows that the non-function of urban environments is a consistent feature facing the poorest countries. Several challenges must be addressed: lack of decentralized authority, which prevent more efficient, local-based solutions; the development community operating in silos; and the lack of disaggregated data to compare cities and the impact of urban growth on property rights.

Understanding the structure of domestic investments, that tend to originate from urban-based elites, is difficult between the distinction between domestic and international is blurred. Most available contracts involve a domestic subsidiary owned by an international parent. Some have suggested that domestic investors face less pressure from NGOs regarding compliance with international standards and best practices. And communities affected by the project may receive less support from civil society in, for example, challenging violations of land-related rights, and the corporate structures may help to veil beneficial ownership.

Milu Muyanga presented evidence of the rise of medium-size farms in different Sub-Saharan countries. The data shows that the areas under small farms are declining, and the number and area coverage of medium-scale farms is growing rapidly (and these farms tend to be held by men and more productive than small farms). The major challenges are how to effectively strengthen land use planning to identify surplus agricultural land; how to encourage access to unutilized land to those who can raise agricultural productivity; and how to provide stronger land rights for women.

The last speaker, Keith Polo, provided the perspective of an organization that works directly with the private sector. He talked about the strong role of SMEs to national economies (51-52% contribution according to the World Bank) and mentioned three main areas where the alignment of the development community and investors are paramount. They include: finance; technical assistance; and infrastructure.

Key outcomes/take away messages

  • Medium-size farms are an important area of investigation and should be considered in the design of land tenure policies and programmes.
  • New approaches are needed that move from the administrative recognition of property to the recognition of human rights.
  • Africa’s economy will be largely urban based in the future. Thus, poverty alleviation in rural areas will depend a lot on how effectively cities function in 30-40 years.
  • The private sector can play an equalizing role by operating in a responsible manner, since power networks are often invisible
  • The issue of insufficient data needs to be addressed; clarifying who owns the land (and how) can help to hold the governments more accountable to their citizens
Side Event - 49 - The Impact of Increasing Capital Flows to Rural Areas