Global Forum on Food Security and Nutrition (FSN Forum)

Land: Impact FDIs vs “100% Exporters”

Ms. Bookie Ezeomah’s questions about land-grabbing and the potential negative effects of FDI (Foreign Direct Investments) on trade and local African markets is important to the discussion of trade policy & food security.

There are at least three immediate negative impacts of FDI and foreign acquisition of farmland that one must be careful to avoid:  1) acquiring land rights from the national government without permission from the local tribal owners; 2) selling (or giving away) food that drives down the local price of food; and 3) producing food purely for export to the home country, effectively removing (potential) farmland assets from providing food security for local population.  Additionally, there are the negative longer-term environmental effects of water usage, pollution, and mono-farming. 

First, permission to farm land should be negotiated at both the national and local level, customized to each individual countries unique structure and tribal culture.  This is more complex, but would avoid much of the abuses we have seen from many African land grabs.  Essentially, the private company should conduct themselves as a citizen of both the national government and the local tribe and village region.   Local partnership is crucial to success.  

Bottom line, unless the investors behind the FDI are Impact Investors, or Social Investors, where the goal is to both make a return on capital while positively affecting the holistic food value chain, it is very difficult to achieve this “human rights” and “positive local citizenship” goal.

A second, more rare situation is where FDI is adversely affecting local food prices by flooding local markets with too much food.  Most FDI cannot afford that luxury, even if they are Impact Investors.  However, it does occasionally happen, where food surplus is so high that it drives down prices temporarily and causes famers to stop growing surplus food. One solution which we are using to avoid this affect is to purchase surplus grain from local farmers, and add that to our Food Value Chain.  We are actually encouraging local farmers to produce surplus grain that we will purchase, store, transport and sell, just as a farmer cooperative would - but on a larger scale.  Our pilot test of this approach nearly doubled local food production in a single year, as the farmers were confident they had a willing buyer of their surplus grain.  BTW, the farmers used the same inputs and their traditional farming methods, yet doubled their production.

The worst situation, in my opinion, is where the FDI acquires (vacant or otherwise) farmland with the express goal of producing food for export to the home country.  Currently, there are FDI investors from China, India, and the Mideast who are seeking as much farmland as possible in order to produce food solely for export to their home markets.  In five years, if these projects are approved and implemented, the amount of “available” farmland necessary to feed local populations will be significantly reduced.  It is quite possible to have a situation where local farm production is high, but the local population are food deficit/food insecure because FDI food production is exported without the possibility of local sales.

There are multiple ways to restrict or inhibit the “100% export” FDI from acquiring (vacant or otherwise) farmland.  Insisting on both national and local permission to farm, a percentage of local ownership, and due diligence of potential FDIs are some of the approaches that could be utilized.  Restricting exports to a percentage of the total is also possible, but more difficult to craft in legal language that encourages FDI while protecting local food security.  Again, Impact FDI are less of a concern in this, because it would be unusual for them to be acquiring land for 100% export.

Much of the negative environmental effects Ms. Ezeomah and others have mentioned should be able to be avoided with Impact FDI’s, as opposed to the “100% Export” FDIs.  FDIs that are serious about good local citizenship will by definition be sustainable, and long-term stewards of the land, people and resources.  Often the 100% Exporters are solely interested in local land exploitation, to the detriment of the local people and eco-system.  

This issue of sustainability and good local citizenship is going to become even more important as countries with large wealth funds and foreign currency reserves seek to acquire land resources in Africa primary to secure scarce African farmland resources.  Some have observed that this is similar to the colonial rush for mining resources, or the rush for oil, which is then restricted to the foreign owners sole benefit.  The 2015 SDGs should help address these concerns, but the international trade and food security negotiations around this issue are going to be “challenging”.

Dennis Bennett

CEO, AfriGrains