If you are a small farmer in a developing country, and there is a big agricultural land investment deal going down in your neighbourhood, you could become part of it and make money in several ways, said a new UN-backed study. A growing number of "land grab" deals, especially in Africa, have hit the headlines of late.
The study - Making the most of agricultural investment: A survey of business models that provide opportunities for smallholders - examined agricultural investment models that have included small farmers and suggested changes to make sure the poor were not short-changed; more than 70 percent of people living in developing countries are small farmers.
To make these models work you need strong policies in place and vigilant governments to "police" the deals, said Sonja Vermeulen, deputy director of research at the Denmark-based Challenge Program on Climate Change, Agriculture and Food Security, one of the study's two authors.
Vermeulen and her co-author, Lorenzo Cotula, a senior researcher at the UK-based International Institute for Environment and Development, started researching the issue after looking at some of the deals for another UN-backed paper in 2009.
"We found that many of the land investment deals were taking place in irrigated and well-serviced areas, for instance in the Office du Niger area on the Niger River in Segou, Southern Mali, which has a high irrigation potential, is well-connected to markets, and is a focus area for large-scale land investment," said Vermeulen.
The researchers found that "as negotiations for large-scale land acquisitions evolve at rapid speed, the impression is that some countries are approving plantation-based projects without strong ideas of alternatives."
The study does not suggest that the only option small farmers have is to partner with big investors, or that large-scale plantations are not the way to go. "In some instances, plantations may be the best option for the investor, host country, and the local community," said the paper.
|Land was often the only asset the small-scale farmer had, and selling it was usually the last resort of a farming family|
"For example, in areas with very low population densities and little local capacity to engage in agricultural production, it may be difficult to establish business models that include local ownership and operation."
A business model "is the way in which a company structures its resources, partnerships and customer relationships ... to create and capture value – in other words, a business model is what enables a company to make money," the authors noted.
"Business models are considered as more inclusive if they involve close working partnerships with local landholders and operators, and if they share value among the partners." The study reviewed models that include contract farming, sharecropping and joint ventures.
The sticking point in any deal including small-scale farmers is usually land ownership - in many African countries the land is owned by the government but is sometimes administered by the community.
Some countries are reluctant to privatize landownership. Tewolde Egziabher, who heads Ethiopia's Environmental Protection Authority and is effectively Minister of the Environment, said there were concerns that if land were privatised, small-scale farmers could sell their holdings and move to urban areas, where they could end up destitute.
Vermeulen said these were "sensible" concerns; land was often the only asset the small-scale farmer had, and selling it was usually the last resort of a farming family. This had happened in India, where land has been privatized; the farmers ended up working as labourers, living in slums in urban areas.
South Africa's land reform programme was using a good model, Vermeulen said, in which the government encouraged joint ventures between local farmers and agribusinesses.
In one such scheme, the farmers became share-holding employees; in another, previously disadvantaged people were helped to enter into competitive commercial agriculture - the government paid for the land, which was held by a community trust owned by the beneficiaries, and management of the farm was outsourced.
Yet Vermeulen and Cotula said even this model was not without flaws, and cited studies showing that some management companies had found ways to conceal profits. "Of 88 shared equity agriculture schemes established in South Africa between 1996 and 2008, only nine have declared dividends."
The study underlined the need for "strong support" to enhance the capacity of small-scale farmers as "decision-makers within business structures, including support from third party independent advisors, on a non-profit basis."