Investments in the Agriculture chiefly involve speculation and profiteering on commodities and land. Some investors see agricultural investments as serendipity at best; others blame investments in land undifferentiated as land grabbing or new colonialism. However, as so often, the truth is not one-dimensional and lies somewhere in-between.
The secondary market is currently facing unstable times. Many investors are anxious and the demand for stable, tangible assets to invest in is growing steadily as evidenced by an increased interest, among other things, in arable land. Investing in arable land seems like a safe bet: with population projections predicting human population to reach more than 9 billion, the FAO estimates that food production must increase by 70% by then to satisfy growing demand. Inevitably food as well as arable land will become increasingly valuable and more attractive for investing. Not to mention the impact of increasing competition between land for food and that for energy production.
Africa constitutes a focal point of agricultural investments in consequence of various reasons. Africa offers not only the largest share of arable land in the world; almost 80% of this “green gold” remains uncultivated. Like in other low-income regions Africa´s agricultural sectors has suffered from sustained underinvestment. For this reason, the productivity of African agriculture very low level which provides substantial opportunities for efficiency gains. International private investors started to recognise this opportunity. At the same time, governments are striving to attract foreign direct investments to agriculture with measures such as tax exemptions and minimal legal restrictions.The African Development Bank assumes that Africa would need between US$32 billion and US$39 billion in order to “achieve the full economic potential of its farm sector”. Governments too look forward to positive social impacts of private foreign direct investment in agriculture including increasing agricultural exports that will trigger wealth distribution.
To be sure, large-scale land acquisitions represent a threat to local community livelihoods. The Tirana Declaration of May 2011, approved by more than 45 countries, emphasizes the imperative of secure and equitable access to and control of land for the poor. Access to land is a basic requirement in order to reduce poverty and promote sustainable development. For more than 2/3 of Africans small scale-farming is the primary source of livelihood and 90% of Africa´s agricultural production comes from small-scale farming.In 2009 alone 60 million hectares were purchased or leased in Africa by international investors; many of these investments are criticized as “land grabbing.” Surely, private investments in African agriculture can contribute to poverty eradication and sustainable developments if business models are developed that allow investors to make money while bringing benefits to local people. Respect for local rights, livelihood of farmers and the sustainable use of resources must be the foundation of these kinds of investments. Agriculture is a vital necessity for every society and in the end for every individual. Therefore, investments in agriculture should not be conducted under the premise of profit maximization at any cost but should respect human rights and follow a strict code of conduct.
Alternative Investments Africa (ALTVEST) is a private company that aims to tap the great potential of African agriculture whilst empowering smallholder farmers. It was founded in 2011 by two Zimbabweans in cooperation with a German fund manager based in Italy. ALTVEST identifies small-scale farmers and organizes them into business units in order to produce crops for exporting. Farmers are provided with financial support, agricultural extension services, market access, and a professional risk management. This kind of investing into the value chain strives to combine sustainable returns for the investors and a long-term positive impact on the local communities. This approach is an alternative model to large scale land acquisitions that traditionally leave the locals without any land. The smallholders remain the owners of their land and benefit from the integration into a professionally managed value chain. However, this approach needs sophisticated management to coordinate and align thousands of smallholders. For this reason ALTVEST cooperates with strong partners like Rollex, the largest handling facility and transporter of fresh produce in Southern Africa markets, and World Vision, a Christian development aid agency. In a first joint project, taking place in the southeast of Zimbabwe, 200 farmers are contracted contributing on average 0.2ha for producing fresh vegetables.The question remains how profitable these kinds of investments really are compared to large scale land acquisitions. However, the continuous trend of social impact investing shows that not all investors solely seek for profit maximisation and return on investment can be also seen as a combination of monetary and social earnings.
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