This document discusses large scale land acquisitions in Africa by foreign investors. It outlines several reasons for the increasing interest in large scale land deals, including rising food and commodity prices, biofuel policies, and land speculation. Both opportunities and challenges of these land acquisitions for local communities are presented. Opportunities include access to new markets, infrastructure development, and jobs. However, smallholders often face constraints to benefitting from these deals due to lack of access to capital, technology, and difficulties meeting market standards. Infrastructure needs are also often beyond the capacities of smallholders and governments.

1. The Water-Energy-
Food
Security Nexus
Winter Semester 2011 /
2012
Lecture Series
Conflicts over land and water: The role
of large scale investors in Africa
Dr. Michael Brüntrup,
German Development Institute / Deutsches Institut für
Entwicklungspolitik
Tanja Pickardt
Deutsche Gesellschaft für Internationale
Zusammenarbeit
Monday, 14.11.2011

2. 2
Lecture Series „The Water-Energy-Food Security Nexus“
Winter Semester 2011 / 2012
Cologne, 14. November 2011
2
Conflicts over land and water:
The role of large scale investors in Africa
Michael Brüntrup, DIE
© 2008 Deutsches Institut für Entwicklungspolitik

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3© 2008 Deutsches Institut f¸r Entwicklungspolitik
Background – reasons for growing large scale land acquisitions
 The boom of mainly government-induced biofuel policies in several countries
 Rising world food market prices since about 2005, particularly since food price
crisis 2007/08
- food security
- profits
 Search of financial investors for alternative investments, possibly long-term,
stable, and countercyclical to increasingly volatile and risky traditional financial
products
 Sale of certificates for reducing emissions from deforestation and forest
degradation (REDD)
 With rising oil and energy prices, biomass becomes an interesting (not policy
induced) feedstock for energy production and petrochemical industry
 Land speculation
 Globalisation of agricultural trade (demand, information, standards ..)
 Technology development (overcoming small farmer advantages)

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4© 2008 Deutsches Institut f¸r Entwicklungspolitik
Actors involved in LSLA
Lokal
Traditional/
indigenous
authorities
Government
sector structures
Local
communities
Rural households
-displaced
-losers of
access to NR
-downstream
water users
-workers
-contract
farmers
-other locals
-in-migrants
Transnational organisationsNGOs
Investor
Districts
Inter-
National
National

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5© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities of LSLA
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public regulation and private
standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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6© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public regulation and private
standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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7© 2008 Deutsches Institut f¸r Entwicklungspolitik
Dynamics of agricultural trade, Subsahara
Africa and World
Aksoy / Akaman (2010)

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8© 2008 Deutsches Institut f¸r Entwicklungspolitik
To capture more of value addition in a market chain,
farmers need to invest and organise
UNCTAD (n.d.)

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9© 2008 Deutsches Institut f¸r Entwicklungspolitik
Agricultural commodity prices are only a fraction of total food cost in
agro-industry value chains (example: USA)
Rozanski / Thompson1 (2011)

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10© 2008 Deutsches Institut f¸r Entwicklungspolitik
To access many of these markets, supplies have to be …
Aksoy / Akaman (2010)
competitive
of constant, reliable high quantity
of high, constant apperance and quality
increasingly traceable

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14© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which
handed over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public and private standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

12. • High transaction costs for both borrowers and lenders
• Generally lower population density and dispersed demand
• Often limited economic opportunities available to local populations
• High risks faced by potential borrowers and depositors due to the variability of incomes,
exogenous economic shocks and limited tools to manage risk
• Seasonality – potentially affecting both the client and the institution
• Heavy concentration on agriculture and agriculture related activities exposes clients and
institutions to multiple risks, both idiosyncratic (one household) and covariant (entire region or
country)
• Lack of reliable information about borrowers
• Lack of market information and/or market access
• Weak institutional capacity – including poor governance and operating systems, low staff and
management skills
• “Crowding out” effect due to subsidies and directed credit
• Increased risks associated with the concentration of a portfolio on agriculture activities that are
most prevalent in the area
• Lack of adequate or usable collateral (lack of assets, unclear property rights)
• Risk of political intervention, which can undermine payment morale through debt forgiveness
and interest rate caps
• Inhospitable policy, legal and regulatory frameworks
• Undeveloped legal systems, inadequate contract enforcement mechanisms
• Undeveloped or inadequate infrastructure
• Land held may be too small to be sustainable or located too remotely to be reached efficiently
• Individuals may be dependent upon only one crop with no other external sources of income12
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15© 2008 Deutsches Institut f¸r Entwicklungspolitik
Smallholders are constrained by access to and
unfavourable conditions for capital
Andrews (2006)

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16© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public regulation and private
standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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17© 2008 Deutsches Institut f¸r Entwicklungspolitik
Infrastructure is indispensable, costly and beyond
smallholder, often even government capacities
African Development Bang Group (2011)

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18© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed
over to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public regulation and private
standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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19© 2008 Deutsches Institut f¸r Entwicklungspolitik
Typical improved technologies and obstacles to
adoption by African smallholders
Odoemenem / Obinne (2010)

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20© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public and private standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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21© 2008 Deutsches Institut f¸r Entwicklungspolitik
Also under low-input smallholder agriculture,
soil degradation can be a serious problem
Reich /
Eswaran (2004)

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22© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public and private standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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23© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public and private standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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24© 2008 Deutsches Institut f¸r Entwicklungspolitik
Opportunities
 Access to new, high price, high value addition markets
 Large marketing capacities
 Access to and favourable conditions to capital/credit, some of which handed
over to local actors (contract farming)
 Infrastructure investments, some for co-use by local actors
 Access to and development of new technologies, some of which handed over
to local actors (contract farming)
 Better soil fertility management (nutrient balance)
 Co-generation of and better adaptation to public and private standards
 New networking opportunities
 Formal, often relatively well paid and secured jobs
 Indirect effects (up- and downstream sectors, demand)
 Corporate Social Responsibility (CSR) projects
 Local taxes and levies

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25© 2008 Deutsches Institut f¸r Entwicklungspolitik
Agricultural wage labour is paid badly, but
they earn better than many smallholders
Oxfam (2004)
“Salaries in the sugar sector are low.
This is particularly true for farm
labourers and even more so for
labourers employed by smallholder
farmers. The latter are generally
employed on far worse terms than
workers on the sugar estates.”
‘Cutting sugar cane is difficult. I was not
very good when I started but I am better
now, faster. At the end of six months, if
they say I can keep working then I will. I
need to earn money to support the family.
Things are difficult here – I still get
blistered hands and the money is not really
enough, but I am glad to have a job.’
“From Mozambique to Malawi, Zambia to Ethiopia, sugar offers a lifeline for
countless families who work on sugar plantations or grow sugar themselves. They
earn enough to send their children to school, to buy food to feed them, and to
obtain at least some of the essential medicines they need to treat them when they
fall sick. “
In Sofala province in central Mozambique, employment figures have doubled since the
rehabilitation of two large sugar estates. As a result of trade in sugar, Sofala has been
transformed from the province with the highest poverty headcount in 1996-97, to
the province with the lowest incidence of poverty in 2002-03. This success story
could be repeated across the continent.

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27© 2008 Deutsches Institut f¸r Entwicklungspolitik
Large scale farms can create vibrant rural economies
through second-round effects, CSR and local taxes
Oxfam (2004)A Tale of Two Cities
On one side of the Zambezi river in the north east of Mozambique, is a township called Luabo.
In this town is an old factory where they used to make sugar. The Luabo sugar mill was one of
the biggest and most productive in the country. But then, during the civil war in Mozambique
the mill was damaged and had to close down. Many of the people fled to escape the violence.
Since then, the Luabo mill has remained shut. The old factory, once the pride of the area, now
sketches a sad iron skeleton against the sky. The community, formerly completely dependent
on the mill, has nothing. Many people do not have enough food, they can't afford to send their
children to school, if they get sick they can't afford medicine. There is no hospital in Luabo - it
closed down when the factory did.
Across the river is a working mill – Marremeo. People here have jobs, bicycles, uniforms,
houses, electricity and running water. There is a buzzing community around the plantation –
which employs around 8000 people in peak season. The mill has a hospital and the company
provides housing for its permanent staff.
The Marremeo mill is owned by the same company as Luabo. They have indicated, with
government backing, that they want to re-open the Luabo mill. This would provide jobs for
about 7000 people and rejuvenate the entire area. But the rehabilitation of Luabo depends on
the price that Mozambique can get for its sugar from the EU. With the world price of sugar as
low as it is, Sena Company needs to be sure of preferential access at high prices in order to
make their investment feasible.

24. Conflicts over land and water: The role of large scale
investors in Africa - Risks
Tanja Pickardt
University of Cologne, 14 November 2011

25. • Background: Investments in land
 Extent
 Risks
 Reasons for low level of partcipation of the population
– Examples from the field
 Mali
 Namibia
Structure

26. Global in-
vestment
in land
Source: HLPE 2011, p. 15.

27. Large-scale land acquisitions and leases, reported area
In developing countries, 227
million hectares of land has
been reported to be sold or
leased since 2001.
(Oxfam / Land Matrix Partnership 2011)

28. Source:
Deininger et al.
(2010)
Regional distribution and production orientation of
large scale investments in land

29. Actor Motive Country of origin:
characteristics
Country of origin:
examples
State
State-owned
enterprises
Satisfy the rapidly rising demand
for food, fodder crops and
agricultural commodities
High population pressure
Strong economic growth
South Korea, Japan,
China, Vietnam,
South Africa
State
State-owned
enterprises
Reduce dependency on world
market by cultivating own food
abroad
Food importing countries with
limited land and water
resources, but high capital
endowment thanks to oil
extraction
Bahrain, Libya,
Kuwait, Katar, Saudi
Arabia
State Reduce dependency from limited
available oil resources
Mitigate climate change effects
(focus on renewable resources)
Promotion instruments for
investments from industrialised
countries
USA, EU member
states
Private Sector Secure land for the cultivation of
agricultural commodities, to
profit from high world market
prices
Entrepreneurs from
industrialised, emerging and
developing countries,
investment agencies
USA, EU member
states, emerging
and developing
countries
Private Sector To realize short term gains from
land speculation
Entrepreneurs from
industrialised, emerging and
developing countries,
investment agencies
USA, EU member
states, emerging
and developing
countries

30. • Food security and water supply endangered: Potential human right
violation
• Resettlement without compensation, forced evictions: Human right
violation
• Aggravation of land conflicts: Increased rural exodus
• Local jobs at risk: Deterioration of livelihoods
• Race to the bottom: Negative impacts on human livelihoods,
environment, ecosystems
• Discrepancy between the availability of productive land and the supply
of water for irrigation: Overconsumption of water, negative impacts on
downstream users, negative impacts on ecosystems
• Insufficient contractual provisions: Negative effects on national
economies
 Many of those risks occur due to a lack of participation of the
affected population in decision-making and negotiation
Large-scale land investments: Risks

31. Reasons for a lack of participation of the local population in
negotiation, planning and implementation
• Information asymmetry and power imbalances between the
investor, the government and the affected population (the local
population is often not informed about their rights)
• Lack of information on the land rights situation (statutory law vs.
traditional land rights) as well as on sectoral plans
• Corruption
• Level of participation: often communities are “consulted” and give
their consent without being properly informed and involved in the
planning process. Principle of free, prior and informed consent ?
What level of participation is adequate ?
• Not all interest groups do have legitimate representatives, if
participation takes place

32. Case study 1: Interior Delta of the Niger River, Mali
Source: http://fr.wikipedia.org

33. Investment projects
Source: A. Sangaré: Etude rélative à l’établissement d’un bilan des ressources en eau

34. Water demand and contractual arrangements in the Interior Delta
of the Niger River
• 100 000 out of 1.8 Mio. ha presently cultivated (up to 350.000 ha are
estimated to have irrigation potential )
• The total number of awarded contracts is estimated to cover 761.000 ha. 4
contracts with international investors are known to be signed, with a total
surface area of 156.000 ha. All four investments have commenced or are
about to start.
• The new investments foresee two cultivation periods / year for rice, other
cereals and sugar cane
• Sufficient water availability during rainy season (June – December)
BUT
• Water deficiency in dry season (January – Mai) already at present: critical
mark (40m³/s) is regularly exceeded (especially due to sugar cane and rice
cultivation)
• Only 2 of the existing investment contracts make provision for water
rights; those require more than half of the dry season’s critical reserve, as
well as exclusivity of service in emergency situation

35. Case study 2: Overlapping sectoral planning, unclear responsibilities and lack
of information, Namibia

36. National Park and
Conservancies
Small Scale Commercial
Farming Areas
Agro-industrial Plantation
(International Investor)
Irrigation Scheme
Caprivi Region
?

37. Thank you for your attention !