Investments with Lessons from Tanzania
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Sub Saharan Africa’s Unfolding Tragedy in Mega Land Deals for Agro- investments with lessons from Tanzania Bede Lyimo Dar es Salaam, Tanzania FAO, Rome, August 2011 1 SUB SAHARAN AFRICA’S UNFOLDING TRAGEDY IN MEGA LAND DEALS FOR AGRO-INVESTMENTS WITH LESSONS FROM TANZANIA ABBREVIATIONS EXECUTIVE SUMMARY CHAPTER ONE: INTRODUCTION 1.1 Agricultural Transformation and Land Acquisition 1.2 Analytical and Presentation Framework 1.3 Changing Patterns of Global Investment in Agriculture 1.4 Trends in Agricultural Investments in SSA 1.5 Land Redistribution or Latifundia Choice for SSA 1.6 Crying Wolf on Loss of Bio-diversity 1.7 Unintended Policy Consequences 1.8 Relevance of the Tanzanian Experience CHAPTER TWO: LAND ACQUISITION IN SSA AND TANZANIA SINCE 2000 2.1 Incidence of Controversial Land Acquisition Deals in SSA 2.1.1 Status of Acquisition of Land Rights 2.1.2 Status of Access to Water Rights 2.1.3 On Farm Sizes and the Largest Farm in the World 2.2 Acquisition of Land User Rights in Tanzania 2.3 Perspectives to an Elusive Problem in Tanzania 2.3.1 The Colonial Heritage and Essence of Liberation Wars 2.3.2 Heritage of Second Post-independence Generation to Posterity 2.4 Policy Capture and the Path to Latifundia 2.4.1 Latifundia Path to Growth and Development 2.4.2 Land Redistribution and Industrialization Growth Model CHAPTER THREE: TANZANIA’S LAND ADMINISTRATION FRAMEWORK 3.1 Land Act No. 4 of 1999 and Land User Rights 3.2 Derivative User Rights for Foreign Investors 3.3 Secondary Legislation and Institutional Framework 3.4 Strategic Plan for the Implementation of Land Laws (SPILL) 3.5 Availability and Status of Distribution of Arable Land 3.6 The Enabling Environment for Agricultural Investments 2 3.7 Experimentation with Best Practice Instruments in Tanzania 3.7.1 Interventions for Agricultural Transformation 3.7.2 Omerta the Conspiracy of Inaction and Silence CHAPTER FOUR: GOOD PRACTICES IN AGRICULTURAL INVESTMENT 4.1 Seven Principles of Responsible Investments in Agriculture 4.1.1 Respect for Land and Resource Rights 4.1.2 Food Security 4.1.3 Transparency, Good Governance and Enabling Environment 4.1.4 Consultation and Participation 4.1.5 Responsible Agro-Enterprise Investments 4.1.6 Social Sustainability 4.1.7 Environment Sustainability 4.2 Agricultural Business Models and Investment Funds 4.2.1 Contract Farming and Out-grower Schemes 4.2.2 Leases and Management Contracts 4.2.3 Tenant Farming and Sharecropping 4.2.4 Joint Ventures 4.2.5 Farmer-owned Businesses 4.2.6 Upstream and Downstream Business Links 4.3 Role of Investment Funds and Other Parties 4.3.1 Funds Intervention Strategies 4.3.2 Investment Funds, Financial Organizations and BDS Providers 4.3.3 Investment funds Targeting SSA 4.3.4 New Sources of Funding in Emerging Economies 4.3.5 Government Institutions and Farmer’s Business Organizations 4.4 Benefits for Whom? CHAPTER FIVE: FINDINGS AND RECOMMENDATIONS ON THE CONSEQUENCES OF FIRST GENERATION LAND DEALS IN SSA 5.1 Overview of Findings 5.1.1 General Findings 5.1.2 Overall Recommendations 5.2 Food Security and Sustainable Human Development 5.2.1 Findings on Food Security 5.2.2 Recommendations on Food Security 5.3 Land Administration and Information Services 5.3.1 Findings on Land Administration in SSA 5.3.2 Recommendations on Land Administration in SSA 3 5.3.3 Findings and Recommendations on Land Administration in Tanzania 5.4 Equitable Access to Water Rights in the Face of Climate Change 5.4.1 Findings on Climate Change and Access to Water Rights and Right of Passage 5.4.2 Recommendations on Access to Water Rights and Right of Passage 5.5 Business Environment for Agricultural Transformation 5.5.1 Findings on Business Environment 5.5.2 Recommendations on Business and Investment Environment 5.6 Investment Climate: Transportation and Other Infrastructural Services Sectors 5.6.1 Findings on Infrastructure Development and Power Supply 5.6.2 Recommendations on Infrastructure Development and Power Supply 5.7 Paradigm Shift in Choice of Developmental Intervention Instruments 5.7.1 Findings and Recommendations on Choice of Policy Instruments 5.8 Best Practice Business Models and Financing Instruments 5.8.1 Findings on Business Models and Financial Instruments 5.8.2 Recommendations on Business Models and Financial Instruments 5.9 Strategic Vision of African Agriculture in Global Economic Relations 5.9.1 Findings on Strategic Visioning on the Role of Agriculture in SSA 5.9.2 Recommendations on Strategic Visioning on the Role of Agriculture in SSAs 5.10 From Strategic Visioning to Good Planning and Effective Implementation 5.10.1 Findings on Effective Implementation 5.10.2 Recommendations on Effective Planning 5.11 Good Governance and Investment in Institutions and Civil Systems CHAPTER SIX: CONCLUSION 6.1 Conclusion 6.2 Way Forward 6.3 Epilogue on Truth and Reconciliation REFERENCES AND BIBLIOGRAPHY August, 2011 4 ABBREVIATIONS AAAF ACTIS Africa Agribusiness Fund ASIF Africa Seed Investment Fund ASDS Agricultural Sector Development Strategy ASDP Agricultural Sector Development Program BDS Business Development Services CCROs Customary Certificates of Rights of Occupancy CDC Commonwealth Development Corporation CDTF Cotton Development Trust Fund CROs Certificates of Rights of Occupancy CVLs Certificates of Village Land CMSACapital Markets and Securities Authority DRC Democratic Republic of Congo EAC East African Community EU European Union FBGs Farmer-Business Groups FDI Foreign Direct Investment FAO Food and Agriculture Organization GDP Gross Domestic Product GPS Geographical Positioning System GVC Global Value Chains GIS Geographic Information Systems GOs Governmental Organizations GVC Global Value Chains 5 ICT Information and Communication Technology IFAD International Fund for Agricultural development IFC International Finance Corporation JV Joint Venture. KRC Korea Rural Company LGAs Local Government Authorities LDCs Least Developed Countries MAFSC Ministry of Agriculture Food Security and Cooperatives MLHHSD Ministry of Lands Housing and Human Settlements Development MTS Multilateral Trading System MOFEA Ministry of Finance and Economic Affairs NGOs Non Governmental Organizations OBC Ortelo Business Corporation PMO-RALG Prime Minister’s Office, Regional Administration and Local Government PPP Public Private Partnership REDD Reduced Emissions from Deforestation and Forest Degradation RSA Republic of South Africa RUBADA Rufiji Basin Development Authority SADC Southern African Development Community SAGCOT Southern Agricultural Growth Corridor of Tanzania SAGF Rabo Sustainable Agriculture Guarantee Fund SEKAB Swedish Elhanol Chemistry AB 6 SSA Sub Sahara Africa SOE State Owned Enterprise SPILL Strategic Plan for Implementation of Land laws SME Small and Medium sized Enterprises TANESCO Tanzania National Electricity Supply Company TAZARA Tanzania Zambia Railway Autority TATEPA Tanzania Tea Packers Ltd TECHNOSERVE Technology in the Service of Mankind TIC Tanzania Investment Centre TNC Transnational corporations UHT Utra High Temperature UNCTAD United Nations Conference on Trade and Development. USD United States Dollars USAID United States Agency for International Development WEF World Economic Forum WCGA Western Cotton Growing Area WMA Wildlife Management Areas 7 EXECUTIVE SUMMARY 8 SUB SAHARA AFRICA’S UNFOLDING TRAGEDY IN MEGA LAND DEALS FOR AGRICULTURAL INVESTMENTS WITH LESSONS FROM TANZANIA CHAPTER ONE INTRODUCTION “Changing agricultural commodity prices are shifting the distribution of risks and returns along the agricultural value chain, by increasing the downstream risks to processors and distributors …..and boosting returns from production. This increases the attractiveness of agricultural production as an investment option, including the acquisition of land..… of shares in companies holding land ……, or otherwise involved in upstream agricultural activities. (Vermuelen S. and Cotula L.)1 “Prices for grains and other farm products began rising last fall after poor harvests in Canada, Russia and Ukraine tightened food supplies. More recently, hot, dry weather in South America has cut production in Argentina, a major soybean exporter. This month’s flooding in Australia wiped out much of that country’s wheat crop. As supplies tighten, prices surge …. FAO said its food price index jumped 32 per cent in the second half of 2010, soaring past the previous record set in 2008.” (The Citizen)2 Over the past five years, a substantial number of deals for acquisition of large tracts of land have been concluded between transnational firms from industrialized countries and firms operating in unison with governments in emerging economies on one hand, and governments of lower income developing countries and the Least Developed Countries (LDCs) in Africa and Asia, on the other hand. All of the deals involve large areas of land, exceeding 20,000 hectares. Some are extremely large, ranging between 100,000 and 1.0 million hectares, to the extent that they cannot be developed commercially in the medium term, and reflect the long-haul strategic visioning. Today, many African governments that perceive their countries as possessing abundant unutilized arable land, have received a large number of requests for land 1 Vermuelen, Sonja & Cotula Lorenzo, 2010, Making the Most of Agricultural Investment: A Survey of Business Models that Provide Opportunities for Smallholders; IIED/FAO/IFAD/SDC, London/Rome/Bern. 2010. 2 Abbassian A., FAO, GLOBAL FOOD CHAIN STRETCHED TO THE LIMIT, in THE CITIZEN (Tanzania) Thursday, 20 January, 2011. 9 allocation,