Weighing the risks of a “land rush” in 2021 in Africa
* All opinions expressed in this opinion piece are those of the author and not of the Thomson Reuters Foundation.
A rush for African land in 2021 seems unlikely, but problems persist
Joseph Feyertag is a researcher at the Overseas Development Institute (ODI), Roger Calow is a principal researcher at the ODI and Ben Bowie is a director at TMP Systems.
The end of the 2000s saw a sharp increase in land investments in the South. In Africa alone, land deals are estimated to have affected up to 63 million hectares, similar to the total availability of arable land in Brazil. Dubbed “land grabbing” in international media, many of these agreements resulted in serious and protracted conflicts between investors and local communities, especially when the rights to natural resources of these communities were ignored or unclear. These disputes can lead to delays or abandonment of investments, also known as “land risk”.
As 2021 dawns, there are the first signs of a similar trend. A UN Food Price Index has increased for 10 consecutive months and is now at its highest level since 2014. The value of land is intimately linked to the price of the raw materials that can be produced from it. Soaring commodity prices may therefore be followed by a greater interest in land to secure food supplies, an early warning sign of a new land rush.
The underlying price dynamics are also similar to 2008. The increase in demand from Asia has persisted despite a global recession. As the only major economy to record economic growth in 2020, China is import of recorded amounts of grains and cereals. Another similarity is that the 2021 harvest is influenced by an episode of La Niña, a global ocean-atmosphere interaction that can trigger droughts and floods in different parts of the world and disrupt food production.
A combination of these adverse conditions could continue to put pressure on food prices, but will it necessarily lead to another land rush? For investor behavior to change dramatically, systematic changes are needed beyond those caused by weather events or the pandemic. In the 2000s, this shift occurred due to the rapid introduction of biofuel mandates, coupled with high crude oil prices. This has added a layer of industrial demand for food crops, leading to large-scale biofuel projects in sub-Saharan Africa, such as Addax Bioenergy in Sierra Leone or Agro EcoEnergy in Tanzania. A similar increase in industrial demand for food crops is unlikely to occur in 2021, as depleted mandates, waste usage, and low oil prices discourage any further mixing of vegetable oil or sugar with sugar. diesel or gasoline.
Instead, attention has focused on a different renewable energy source that could trigger other types of land acquisitions – investor interest in solar, hydroelectric and wind projects in Africa soared. With the exception of large-scale hydropower, this new wave of projects occupy less valuable land than that used for food production. However, there are exceptions: solar thermal systems can effectively divert and capture large amounts of water with competing past use. This is the case of the Noor solar thermal complex in Morocco, which is based on the scarcity of water from the El Mansour Edahbi dam. These renewable energy projects are therefore not trivial from an environmental and social point of view. They can introduce friction and entrench existing inequalities, especially for politically and socio-economically marginalized actors living in urban slums or on pastoral lands.
Also, part of the problem with the 2008-2010 land rush was that it involved a build-up of investors with no real understanding of emerging markets. A similar risk exists among investors seeking post-pandemic opportunities. The inability of investors to undertake participatory community needs assessments can cause tenure risk to become the Achilles heel of the energy transition, causing protracted conflicts and losing results for investors and local populations. This would delay the much needed deployment of renewable energy projects, particularly in sub-Saharan Africa.
Nevertheless, corporate governance has certainly improved since 2010. Due diligence processes have been strengthened, as has the recognition of social and environmental risks. Quantifying these risks helps weigh the benefits of due diligence processes, such as community consultations. Upcoming research by ODI shows that the implementation of measures to successfully mitigate the risk of tenure represents only 2-3% of the net present value (NPV) of an investment. This compares to the costs of operational risks associated with land disputes which can reach 300% of NPV.
Due to the ongoing energy transition and the improvement in the quality of corporate governance, a land rush in 2021 therefore seems unlikely, even if food prices continue to rise or interest continues to rise. for land for renewable energy increases. Still, problems persist. A OECD-FAO Report on Responsible Agricultural Supply Chains observed a significant and persistent gap between the political commitments of companies and their effective implementation. This gap has affected the need to guarantee local communities the right to free and prior informed consent, a crucial step to avoid land disputes and ensure that the transition to renewable energy can be fair, respecting the rights and aspirations of communities. local.