Thursday, 17 November 2011

Central Africa - next major growth region of the world?

Nothing like a major investment in Central African agriculture to illustrate the mood of the market. PensionDenmark has invested 43-million Euros in a fund (Silverland Fund) that will invest in Africa's agricultural sector and the figure is expected to grow.

The logic behind the investment is that this region has high yields, two harvest seasons a year and significantly lower land prices than some other markets. While many activists are objecting vociferously to international investment in African agriculture (see the land grabs hysteria), this could well be a very good thing for Africa. Over the decades there has been a shift away from seeing agriculture as a driver of development to the idea that manufacturing is the only way to grow. This is based largely on the development of East Asian Economies - a development path that will not work in Africa. Agriculture, on the other hand, has all the hallmarks of a real comparative advantage area for Africa.

Foreign investment in the sector can help to build up African agriculture and set us on a growth path that could be really, really good for the continent. The move by PensionDenmark is particularly encouraging because it is an investment not out of some sense of moral obligation to help the poor, African children but based on the business imperative of return on investment. Agriculture, as a sector, has sufficient potential to guarantee return on investment for foreign funds. Here's hoping the development industry continues to recognise it's potential as a livelihood security sector, too.

2 comments:

  1. Would have loved to have stumbled upon your blog a little earlier, but seriously; do your homework. The reason why there has been a hysteria around landgrabbing is simply that there's a reason to be hysterical. Instead of becoming hysterical myself, and begin talking about how we need to help the poor etc. (which i do believe we need to, but definitely through private investments as well), I will point to some facts about this investment, with Zambia as the example.

    Academic evidence points to the fact that, although Zambia has had a land reform (in concordance with conditionalities set by the World Bank), there isn't equal access to land for everybody. The people who "own" land in Zambia (you cannot actually own land in Zambia, rather it's a statutory lease-hold system) thus capitalize on above mentioned investments, and those who "own" land are chiefs, government officials etc. So, when the ceo of Silverland Fund says "we buy all land from private land owners, and not through the government" (paraphrased), it is either an outright lie, since it's a LEASE of state land, and thus, by proxy, through the Zambian government, or just stupidity. Since the land is owned, not by the poor, but rather by the rich and/or influential people, the ones who capitalize on the investment are the ones who always seem to capitalize on investments in Africa; foreigners and the rich in influential, which, as we know from all previous experience in Africa, don't really tend to care about the poor whatsoever. Remember, there are no structures in a country like Zambia, where e.g. increased revenues benefit the poor, bureaucrazy is, well, crazy, skewed or just non-existent, and "cold water/clientilism" is rampant, a system which, by definition, is detrimental to the lives of the poor. And, as the CEO also said, there are no indications as to falling prices on food, which would otherwise benefit the poor. Actually, he said, to the contrary, that revenue from a ton of wheat would be double that of the revenue in e.g. America.

    So please, do yor homework before writing a post like the above. By the way, I am from Denmark, and I am not proud of it.

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  2. I think perhaps you have Zambia confused with another southern African country. Zambia last year elected a strongly progressive presidential candidate who is working hard to prevent exploitation of Zambians by foreigners. The country has been able to limit the impact of international food price increases and this year, in spite of poor rains causing production shortages, is able to compensate using locally grown maize. Given the land tenure system, Silverfund also does not "own" the land but instead has invested in Zambia's highly profitable and growing agriculture industry. The country has exceptional natural potential to become an agricultural hub and with investments from the private sector, combined with the existing investments by IFAD, USAID's Feed the Future and others should be well on its way to moving beyond its recently acquired middle-income status. It's a strong and growing economy with a government concerned for the welfare of all Zambians, poor and rich, and foreign investment should not be vilified because people can't see that change happening.

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