Big companies, small farmers or both?
Yesterday ONE, along with several NGO partners, hosted a congressional briefing on the economic and global stability benefits of fighting hunger. The event, called “Feeding the Future: Agriculture Development, Economic Prosperity and Global Stability,” was designed to bring lawmakers’ attention to some of the lesser-known benefits of aid to African agriculture, namely that it can be good for US businesses and for global stability. The event got me thinking about the role of the private sector in fighting African hunger, especially in light of USAID’s recent focus on the private sector and agricultural development.
At the World Economic Forum in Switzerland two weeks ago, USAID Administrator Raj Shah announced US support for a plan by 17 companies to promote global food security. I know that there are people out there, a few probably reading this blog, who think that partnering with multinationals is problematic because large companies unequivocally wreak environmental destruction, worker exploitation and unsustainable agricultural practices on their host countries.
However, while some agribusiness companies may be less than stellar in their business practices, it sounds like others are waking up to the fact that working with well-organized groups of smallholder farmers might provide them with a triple (financial, environmental and social) bottom line. As one consultant at the event told me, her client (she wouldn’t divulge the name) has chosen several pilot villages in which to heavily invest in building schools, bringing in teachers, building health systems and teaching people sustainable agriculture practices so that they can grow high-quality products that the company can then buy. With robust monitoring and evaluation of such endeavors, companies can earn the corporate social responsibility cachet that some customers demand.
For USAID’s part, one of the things its new Bureau of Food Security is doing is using its many decades of expertise to show companies the models that work to sustainably reduce poverty and build up agriculture sectors. At the briefing today, we heard from the Mozambique’s head veterinarian. She told the story of how US foreign assistance, the Government of Mozambique and private companies like Cargill, who was also on the event panel, managed to transform the poultry industry in Mozambique in just a few short years, bringing income and food security to many of her compatriots. To quote, “We help them get their profits, but they integrate the smallholder into the value chain.”
It is this sort of responsible partnership that I think will help bring the private sector to poor countries and move them from aid to trade on a large scale. Indeed, it is a long-term endeavor, but one that I think is worthwhile.
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February 8, 2011 at 2:51 pm
Sounds good and all, but I’m still suspicious of the for-profit corporation that just goes in and invests in so much of it. I feel like the end result might be that the corporation will claim ownership of the land or the school or whatever. Or maybe it’s not giving the small farmers a good deal with this bargain. Something about this just makes me paranoid. I hope my paranoia is misplaced.
February 9, 2011 at 10:00 am
Like David, I think that big for-profit ventures are not easily compatible with poverty reduction. (For-profit microloan banks have apparently done a lot of harm to the effectiveness of mini loans.) For starters, I would think that huge fields of thousands of acres must be pushing villagers off their old land and upsetting countless rural traditions. Mechanized farming will require local employment, which is good, but will the techniques of village farming, even improved ones, be lost in the process? And I read about the huge African Agriland Fund backed by a hedge fund that is planning on a return of 25%!! Where will the priority be when there is a conflict in the future between the wealthy investors’ return and the well-being of the people on the land?
February 9, 2011 at 12:16 pm
Thanks for your comments.
Land grabs, or leases and sales that don’t acknowledge the informal land rights of occupants, are a huge issue in the developing world, especially in Africa, and partnership models and deals that involve such scenarios are obviously hugely problematic. Loans that transfer risk from private companies to small farmers are not desirable either. Land speculation, in my opinion, is also an issue from a smallholder point of view, since it increases their incentives to sell land, decreasing their productive assets unless the money is reinvested in others – in tough times, this may be unlikely.
Professional institutional investors, such as the hedge fund you mentioned, are increasingly looking to invest in land. I imagine macroeconomic phenomena like biofuel mandates increasing in rich countries, food price volatility, and world population growth are driving the speculative interest in land.
In my post, I was referring to models that involve a company sourcing agricultural products from smallholders organized into cooperatives or other producer groups, while at the same time supporting the community in developing the capacity they need to sustainably produce export-quality goods, thus securing their supply chain for many years, in a socially responsible way. By partnering with USAID, it seems some companies are learning what does actually work to sustainably develop agriculture.
Thanks,
Kelly
February 10, 2011 at 7:25 am
The way foward is for the multinational to provide micro finance to support the small farmers with the aim to increase their supply capacity. This works very well in some of the rich countries. With no limitation to this role, transfering knowledge in new techniques will as well boost production level, hence reducing wastages.