Study: Public-private partnerships threaten smallholders

In Zambia 85% percent of population lives from agriculture. [Florence Devouard (CC BY-SA 2.0)]

In Zambia, 85% percent of the population works in agriculture. [Florence Devouard/CC BY-SA 2.]

Collaboration between public and private agriculture investment was thought to be beneficial for development. But a recent study focusing on Zambia argues the opposite: most companies simply seek a quick profit, while local smallholders sink further into poverty. EURACTIV Germany reports.

Agriculture-driven growth is roaring in Zambia: Between 2000 and 2011, the volume of agricultural investments skyrocketed from $8 million to $482 million. 

“In recent years, Zambia has made huge progress in development; particularly in mining and agriculture,” EU Development Commissioner Andris Piebalgs said at the signing of a new agreement to boost agriculture in the country last year.

But the agricultural boom also comes with a dark side, a new study released by the human rights organisation FIAN indicates. According to the research results, Zambia has some of the largest disparities in distribution of wealth in the world – and these imbalances continue to grow.

The expansion of agribusiness in Zambia is driven by so-called public-private partnerships (PPPs). The logic behind this model is that its cooperative nature creates a leverage effect: both private and public sectors profit from the know-how of each other.

At the same time, the security of the public’s involvement emboldens private partners to invest greater sums. Meanwhile, the projects’ profit orientation ensures an implementation that is as cost-effective as possible.

Many of these private and public funds come from Europe. At an institutional level, donors include the European Investment Fund (EIF), the European Investment Bank (EIB) or the German Federal Ministry for Economic Cooperation and Development (BMZ) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

The private side includes companies like the investment firm Amatheon Agri, located in Berlin, and the industrial services provider Ferrostaal, in Essen.

Economic imbalances accompany growth

The agricultural sector is “undergoing great transformations that are of vital national interest, but are often against the interests of smallholders”, the authors of the FIAN study write, quoting a recent report released by the “Committee on World Food Security” (CFS). 

Here, FIAN writes, the blame can be traced back to a small but influential group of agribusiness companies and financial investors, many of which come from Europe. They expose smallholders to rising competition over land and in production.

The result of this “land-grabbing”, FIAN indicates, is land scarcity and hunger, two of the central problems in Zambia.

According to the Food and Agriculture Organization of the UN (FAO), over 6 million of 13.5 million Zambians suffer from hunger, compared to 4.4 million in 2000.

In the FIAN study, the authors quote the World Bank: “Zambia’s economic growth has not contributed to any significant reduction in poverty.”

Poverty and agriculture are closely interrelated in Zambia, the FIAN study says, because agriculture forms the basis of existence for 85% of the population. As a result, access to land and water are crucial factors in food security. The poorest 25% of Zambian households only own around 0.6 hectares of land on average, and that is hardly enough to feed a family or to cover their living costs, the study contests.

Most investors only seek profit

“Yield for the investor is the central motive for action”, the FIAN authors write. Financial investors increasingly seek direct control over agriculture, for example, through majority shareholding. As a result they, and not the farmers, have the final word over cultivation.

Although the private investors always predict “long-term positive development aspects”, after consolidation or “successful” expansion, many of them intend to siphon off financial profits and pull out. Projects are often attached to conditions and commitments like creating jobs, but not much remains to be fulfilled after the original contract partners withdraw.

In its study, FIAN offers an example: “Although 1,639 jobs were promised, Chayton [an investment firm located in Mauritius] currently only employs 390 workers, with more than half of these being temp jobs. As existing farms were reclaimed, the jobs which already existed there can hardly count as newly created jobs through the capital injection. On the contrary, the acquisition of existing large farms was accompanied by job losses.”

FIAN also quotes a smallholder who expressed his frustration: “I believe the government only cares about people who come from other countries, leaving the local Zambians to suffer at the cost of investors. […] Acquiring land is more difficult for a Zambian than for a foreigner.”

In conclusion, the authors fundamentally question the meaningfulness of financial investments in supporting smallholders. Such investments run the risk of hindering or undermining enforcement of the human right to food. For investors, the urban middle class is the target consumer group in which the most profits can be achieved, FIAN writes, not the poor in remote regions who are not a relevant target group.

As a result, the EU and its member states must explicitly “prioritise the poor, endangered and marginalised groups” and introduce corresponding regulatory mechanisms, FIAN says. The local embassies of EU members, as well as EU delegations, should play a key role here: They could oversee and publicise the effects of these investments, for example by creating a formal surveillance mechanism.

Zambia's economy boasted impressive growth over the last decade with an annual average of more than 5.7%. The annual rate of growth in the agricultural sector - from which 85% of people in Zambia support their livelihood - was between 6.6 and 8% in the last 4 years.

Climate change is a big unknown when it comes to improving agricultural output – especially the developing regions with rapidly growing populations and prone to natural disaster. While efforts have been made through the EU’s 2008 Food Facility and the United Nations’ Millennium Development Goals to reduce malnutrition and poverty in Africa, perverse weather events such as periods of severe drought and extreme flooding create uncertainty for the future of farming.

Lies Craeynest, Oxfam International's EU climate change policy advisor, told EURACTIV in November 2012 that EU aid and poverty-fighting efforts have led to gains in needy nations.

But, she said, climate change is likely to have major consequences for agriculture and food production. “What this will mean for many of the people living in rural areas, a large majority of them still being small-scale food producers, may actually mean a reversal of some of these achievements, particularly if you look at the longer time frame.”

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