Offshore agricultural investments pose major risk: Report
In the wake of the 2008 food price shock, and facing ever-growing demand for food, many GCC states have invested in, or bought outright, agricultural land and operations in Africa, Eastern Europe and other regions, in order to ensure food security. But a report from the Economist Intelligence Unit suggests these investments will not last without careful risk management.
Lack of transparency
“Key issues raised include ensuring a transparent land valuation and transfer process, ensuring a broader range of stakeholders than just governments, providing clear and visible benefits for local communities, and respecting the country’s trade rules, export regulations and obligations to international trade organisations. A complicating factor is that in some developing countries land ownership is not always transparent and the very idea of land ownership may be poorly accepted,” said the GCC in 2020 report.
The report gives an example of working land that appears to be in disuse – but is actually used by pastoralists or farmers with traditional claims to the land, or has been left fallow for environmental reasons. It also suggests that wider buy-in with local communities – and not just governments – will help secure the long-term future of these projects.
The report quotes Iggy Bassi, co-founder of GADCO (Global Agri-Development Company): “You don’t have full legal transparency, and in some cases state land is being sold below market price by someone who is part of a political patronage system.”
Bassi also makes the point that deals made with elected officials may not last, if food supply is a sensitive subject: “One minister may be in power for five years, but food security is not a five-year issue. Food security requires a long-term synthesis between the public and private sectors.”
Engage with owners and farmers
“Investments need to be well structured, involving negotiations with local landowners as well as the government and, possibly, with local tribes, to make sure all the parties are signed up. If Gulf investors take a long-term view—for example, accepting lower returns to ensure that local communities receive a percentage of the output—then there is potential to meet food security requirements,” said Neil Crowder, managing director of Chayton Capital, quoted in the report.
One strategy for Gulf states is to bring investments in agricultural technology to these regions, allowing overall yields to grow and creating a food surplus – which can then be exported. The report cites an International Food Policy Research Institute study stating Africa needs US$37bn in agricultural investment per year, and suggests Gulf states could supply a significant proportion of this.
Investors could also engage directly with local farmers, said Devlin Kuyek, a researcher at Grain, an NGO, in the report: “Gulf states should consider consulting and negotiating with local farmers. One of the problems is that farmers are often left out. Of the bottom billion poorest people in the world, 80% are food producers.”