22 June 2010, Rome - New research shows how agricultural investments in developing nations can be structured as alternatives to large-scale land acquisitions. It documents a range of more inclusive business models that can bring benefits to small-scale farmers and protect their land rights, while also ensuring returns to companies.
The report, published today by the International Institute for Environment and Development (IIED), was commissioned by FAO, the International Fund for Agricultural Development (IFAD) and the Swiss Agency for Development and Cooperation (SDC).
It shows that any international guidance on agricultural investments should go beyond minimizing the possible negative impacts of large-scale land acquisitions, to also promote investment models that maximize opportunities for local smallholders.
It shows a range of ways for big investors and local smallholders to collaborate that can be mutually beneficial. It discusses these options under six broad headings: contract farming, management contracts, tenant farming and sharecropping, joint ventures, farmer-owned business and upstream/downstream business links.
No single model emerges as the best possible option for smallholder farmers in all circumstances. In order to benefit smallholders, while still remaining attractive for investors, each specific context must take into account the local land tenure, policy, culture, history, and biophysical and demographic considerations.
Fair and more inclusive
There are many ways for companies to do business in more inclusive ways whilst minimising risk and still turning a profit, says the report. This can mean closer working relationships with local partners, landholders and farmers, and more sharing of the value generated by the investments.
The report focuses on the way alternative business models can share value — in terms of risk, reward, ownership, and voice in influencing business decisions — between the investor and local partners. It analyses the advantages and disadvantages, opportunities and constraints, and options for scaling up each of these alternative business models.
According to the report, for more inclusive land agreements to work, companies need to embrace them as a genuine economic component of their business and not just as part of a corporate responsibility programme. The report also states that action to strengthen the negotiating power of local farmers is crucial.
The report says governments and development agencies can do much to promote fairer, more inclusive business models, and support smallholders in their relations with government and investors.
Co-author Lorenzo Cotula, a senior researcher at the International Institute for Environment and Development says: "Agricultural investment can bring benefits to developing nations, but large land deals carry big risks as local people may lose access to the land and resources they have used for generations. The more promising investments are those that involve supporting local smallholders, rather than large plantations."
Andrea Ries, Head of the Global Program Food Security of the Swiss Agency for Development and Cooperation says: "The report highlights the crucial role for development partners to support and strengthen the dialogue between smallholder communities, governments and investors in promoting sustainable and inclusive investments in agriculture."
Harold Liversage, IFAD Land Tenure Programme Manager says: "At IFAD we believe that secure land rights and equitable access to land — especially for smallholder farmers — are essential for economic growth and poverty reduction. Partnerships between potential investors and local smallholder farmers can provide important opportunities but such partnerships don't require large-scale transfer of land rights."
Alexander Müller, FAO Assistant Director-General says: "The report shows various ways in which investments in agriculture in developing countries, including large-scale and international investments, can maximize opportunities for small-scale farmers. This will help to assess and design agricultural investment projects to improve food security for all."