Sino-African Foreign Direct Investment in Land: Problems and Prospects

Introduction

The African population, 60 to 70 per cent of which reside in rural areas, is largely dependent on low-productivity traditional agriculture as a means of livelihood. Consequently, in the growing discourse on Africa’s structural transformation, agriculture has been identified as a crucial driver of economic transformation, with potential to increase food supply, rural incomes, exports as well as inputs for industry. Agriculture also has a huge potential to distribute labour to the industrial and adjoining service sectors. In this way agricultural productivity has financed most industrialization experiences in Africa (African Center for Economic Transformation, ACET, 2014). Land holdings for agricultural use thus contribute to economic development. Empirical evidence is replete on the channels through which agricultural productivity reduces poverty, increases income, employment, as well as its rural non-farm multiplier and food prices effects. Nonetheless, levels of technology adoption, initial asset endowment and the extent of market access places a limit on the capability of the poor to contribute to the gains that accrue from growth in agricultural productivity (Schneider & Gugerty, 2011). Thereby, limited access to land can reduce the contribution of smallholder-driven agricultural development to poverty reduction (Cervantes-Godoy & Dewbre, 2010; Schneider & Gugerty, 2011).

On the whole, about 2.5 billion people in developing countries secure their livelihoods by engaging in agriculture; also far reaching is how the agricultural sector links to other sectors of economy (DFID, 2005). Not only is agriculture a source of input for other industries, it generates foreign exchange, value added and has multiplier effects across the economy (Mucavele, 2010). There are examples across Africa of how agriculture contributes to employment, growth and poverty reduction. In Malawi, agriculture accounts for 39 per cent of Gross Domestic Product (GDP), 85 per cent of labour force and 83 per cent of foreign exchange earnings and by 2010 it contributed 33.6 per cent to the Malawian economic growth. Also, in Mozambique agriculture is the main stay of the economy, employing 90 per cent of rural households (80 per cent of total population). 97.4 per cent of rural households in Zambia are engaged in agriculture (amounting to 45 per cent of the population), with most of the farming households being smallholder, subsistence farmers (Mucavele, 2010). Thus, wherever agricultural production is prime, such as in Africa, land is capital.

The strategic nature of land capital dates back to the 18^th Century, during which period Physiocrats posited that land was the ultimate source of value, thereby investing heavily to secure it. In the 19^th and 20^th centuries respectively, labour and capital were perceived to be more important factors of production. Notably, the turn of events in the 21^st century has resulted in the renewed pursuit of land as a strategic asset (Adusei, 2010). Land is a vital part of social, economic and political life in most parts of Africa. It is also of historical and ancestral significance to the African people, thus making the management of land rights a central concern of African governments and cooperation agencies (Quan, Tan & Toulmin, 2004). Moreover, the rapid growth of population and expanded markets puts increasing pressure on land resources which before seemed inexhaustible. The limited coverage of formal land institutions and weakened nature of customary land management, results in insecurity of property rights for the grassroots in Africa, a major factor relegating Africa’s development (Quan, Tan & Toulmin, 2004). Hence, a scramble for foreign investment in land (especially for agriculture) is with the hope that investment in land would facilitate the diffusion of modern agricultural technology, enhance domestic capacity and skills, invigorate low productive agro-sectors and lead to sustained increases in agricultural output (Adusei, 2010).