6 Mar 2018

Imperialism in disguise: land grabs in Africa

Phillip writes:*

In the 1970s and 1980s, most African nations faced a deteriorating economic situation and rapidly increasing debt levels. Affected governments saw themselves confronted with two choices: they could either turn to the IMF and World Bank for loans, or witness the collapse of the states they were struggling to build. The Bretton Woods institutions, understandably sceptical about the borrowers’ ability to eventually repay the loans, agreed to lend more money to the indebted governments, but tied the credits to strict conditions. These measures, to be implemented by the recipient countries, are commonly known as the Structural Adjustment Programs (SAPs).

The controversial SAPs left most of the continent in a situation where spending on education, public healthcare and environmental protection was limited, primary resources were exported in great quantities at low prices, and the development of domestic manufacturing sectors hindered. The agricultural sector was hit especially hard by these reforms. Heavily subsidised and cheap produce from Europe and the US flooded African markets, outcompeting domestic farmers. As a result (among other factors), more and more Africans are now migrating from rural to urban areas, hoping to make a living in cities. If you are interested in how exactly these mechanisms work, I recommend  Africa since 1940 by Frederick Cooper.

Why am I telling you all this? First, to give some context and an idea of how much bargaining power small scale farmers in Africa usually have. Second, because SAPs paved the way for a phenomenon which is currently taking place on the African continent: land grabbing (p.55).

Rural-urban migration may shift the population to cities, yet agricultural and fertile lands remain, and thanks to the SAPs, they are “up for grabs” by financially strong developers. Most of these foreign investors are, by default, not very interested in the socio-economic development of African countries. Much rather, they want to extract value and resources from the land to secure a return on their investments. As a result, the focus of these projects is mostly on cash crops, such as sugar cane or soy, to be exported and consumed in economies around the world. The few remaining subsistence farmers are commonly chased off their lands after an area is sold or leased to the highest bidder. This procedure is facilitated by the fact that land is often cultivated by squatters, who are tolerated, but do not have pronounced land tenure rights as is the case in the western world.

The problem is that investors often turn land that was mostly cultivated by subsistence farmers into large-scale mono cultures. Next to the obvious social costs, such practices often lead to soil degradation, deforestation, excessive pesticide use, groundwater contamination and depletion, and a loss of biodiversity. These costs, however, are imposed on the host country and the poorest of its residents, not on the international investors. The public-private Africa Agriculture and Trade Investment Fund (AATIF) and its involvement in Zambia serve as an example for such practices. The AATIF co-finances agricultural projects; in this case it contributed $10 million to a project run by the agribusiness company Chobe AgriVision. It promised 1,600 jobs to the government, in return for leasing the agricultural lands. However, most employment is only seasonal, and most processes on the plantations are automated and mechanised anyways. In fact, the company only employs about 200 people at max, which is fewer than before it got involved. At the same time, local farmers are complaining about water shortages and pollution, caused by the large concern that now cultivates the land that previously belonged to them.

Do you find such projects concerning? In fact, you are actually co-financing similar projects with the taxes you pay. In this case, the AATIF was founded by Germany’s Federal Development Ministry. Interestingly, the set-up of the AATIF is based on a cascading system. The Development Ministry (again, financed with your money) bears the greatest risks, followed by banks, followed by private investors. In order to attract private investments, returns are distributed in the reverse order: first investors, then banks, then the ministry. (Fun fact: the investment fund could not be established in Germany, as local laws do not allow for such a set-up. Instead, it is simply located in the tax haven of Luxemburg.)

It is hard to say what’s more frustrating: the fact that international development aid for Africa hasn’t lost any of its imposing character, or the fact that European tax money is financing businesses under the guise of sustainable development.

Bottom line: European tax money is used to co-finance large-scale agricultural development in developing countries. These projects, under the guise of sustainable development, often kill jobs and degrade natural environments to the detriment of current and future generations.

* Please help my environmental economics students by commenting on unclear analysis, other perspectives, data sources, etc. (Or you can just say something nice :)


kiki said...

Good example of international development aid that went extremely wrong. Reading you article makes me think that if we remove the SAP regulations, the country is independent again and able to make it's own decisions and invest in health, education and sustainability. However, corruption and self interest might prevent this development. How do the SAP's of Africa compare to other countries, like Greece during the financial crisis? Is there a way to escape of these SAP's?

David Zetland said...

SAPs were meant to help countries, by making their economies more market friendly (and removing government interference). Removing the SAP, as you suggest, might make matters worse for the country (see, e.g., Egypt, Turkey and Mozambique these days...) Phillip used a critical source that is more biased than I'd like (i.e., falsifiable), but he prefers a one-sided side of the land-grabs literature. He can do that in a blog post. I will see how his paper argues his point, as he will have to use better statistics and analysis.

As part of that discussion, I sent this in an email to him:

I think that the causal chain you are claiming is actually easy to dispute, as Margolis et al. are selectively linked events to create their own narrative. That's no surprise, but look at the full WB quote [from World Bank WDR 2008, p55]:

"Structural adjustment in the 1980s dismantled the elaborate system of public agencies that provided farmers with access to land, credit, insurance, inputs, and cooperative organizations. The expectation was that removing the state would free the market for private actors to take over these functions— reducing their costs, improving their quality, and eliminating their regressive bias. Too often, that didn’t happen. In some places the state’s withdrawal was tentative at best, limiting private entry. Elsewhere, the private sector emerged only slowly and partially—mainly serving commercial farmers but leaving many smallholders exposed to extensive market failures, high transaction costs and risks, and service gaps. Incomplete markets and institutional gaps impose huge costs in forgone growth and welfare losses for smallholders, threatening their competitiveness and, in many cases, their survival. The last 10 years have seen a broad effervescence in institutional innovations to fi ll the defi cits in land markets, fi nancial services, input markets, and producer organizations. Although signifi cant progress has been made, this institutional reconstruction of agriculture is still incomplete, especially for smallholders and more marginal areas. Moving forward requires more clarity on the roles of the state and the private sector—and more analysis of what works and how it could be improved "

yassine hattay said...

My friend, it is quite pleasant to read your blog and specially your interests in Africa the rich continent with resources but unfortunately the poorest globally. The questions why is this the situation resistant to all the aspirations for change by their populations? Corrupt elites, weak institutions, bad governance etc.. or there are other hidden factors? Will I say the problems of Africa and all the underdeveloped countries have internal and external factors?
If you want to focus on the relationship between international institutions as the IMF and underdeveloped countries in the case of land grab I will suggest you look to the World System Theory of Immanual Wallerstein that focus on the external factors.

Because the history and the world reality are interrelated, the biography of this country is a crucial factor, i.e., colonialism and power balance are important factors when we study the market failure in underdeveloped country or region. In your case study, to stick to an objective approach, you could use as first step in your political economic analysis the core-periphery theory that might help you to understand the underlying power relations between industrial economies and "rich with resources economies" (mostly poor countries). Wallerstein with his World System will give a different epistemological perspective with a more holistic framework. From development studies to the global affairs, this theory is very relevant in understanding the global trade mechanism and division of production factors that prison underdeveloped in poverty and dependency on foreign aids. In the light of this theory, the world is divided into core and periphery centres. A world capitalist system that gives priorities to the endless accumulation of wealth a perfect market is near utopia rather than reality. How is this possible when we are usually informed that a perfect market is a market with free competition and absolute gains? A free market actually should be an open system that ables unlimited competitors to supply the buyers with the most cost-efficient product. This will reduce the profits per individual supplier and reduce the price in the market. However, the perfect market is cost-efficient and free from constraints. that results in the decrease in profits per individual supplier to a minimal level. The results are relatively a decrease in the accumulation of capital. In the real world, the global neoliberal economy works differently. Th accumulation of capital is a priority and therefore dominants powers are established to protect the profits of industrial from the core countries. This is what we call in macro-economy monopoly market or in political economy a market failure. This non-perfect market where companies from the core countries (industrial countries) generate high profits at the expense of the poor but rich in resources countries is the most consistent with the reality. in other words to understand the reality we have to understand how this monopoly is globally established and how it keeps the accumulation of profits growing at the expense of poor countries.

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