A report published by the International Institute for Environment and Development (IIED) and commissioned by the Food and Agriculture Organization of the UN (FAO), the International Fund for Agricultural Development (IFAD) and the Swiss Agency for Development and Cooperation (SDC), explores the range of business models that can be used to structure agricultural investments in lower- and middle-income countries, and that provide an alternative to large-scale land acquisitions.
Making the most of agricultural investment: A survey of business models that provide opportunities for smallholders documents a range of more inclusive business models that can bring benefits to small-scale farmers and protect their land rights, while also ensuring returns to companies.
The report finds that any international guidance on agricultural investments should go beyond minimizing the possible negative impacts of large-scale land acquisitions, to also promote investment models that maximize opportunities for local smallholders. It further identifies a range of ways for big investors and local smallholders to collaborate that can be mutually beneficial. These options are discussed under six broad headings: contract farming, management contracts, tenant farming and sharecropping, joint ventures, farmer-owned business and upstream/downstream business links.
The report suggests that no single model emerges as the best possible option for smallholder farmers in all circumstances. In order to benefit smallholders, while still remaining attractive for investors, each specific context must take into account the local land tenure, policy, culture, history, and biophysical and demographic considerations.
There are many ways for companies to do business in more inclusive ways whilst minimizing risk and still turning a profit, the report concludes. This can mean closer working relationships with local partners, landholders and farmers, and more sharing of the value generated by the investments.
The report focuses on the way alternative business models can share value – in terms of risk, reward, ownership, and voice in influencing business decisions – between the investor and local partners. It analyses the advantages and disadvantages, opportunities and constraints, and options for scaling up each of these alternative business models.
According to the report, for more inclusive land agreements to work, companies need to embrace them as a genuine economic component of their business, and not just as part of a corporate responsibility programme. The report also states that action to strengthen the negotiating power of local farmers is crucial. Governments and development agencies can do much to promote fairer, more inclusive business models, and support smallholders in their relations with government and investors.
The report, co-authored by Lorenzo Cotula and Sonja Vermeulen, can be downloaded from the IIED website, and is also available on the IFAD website.
Source: www.un-ngls.org
Growth Green Agriculture Plc is a UK based agricultural investments company specialising in emerging markets offering unique opportunities to invest in Ghana. GGAgriculture acts as consultant on green and socially responsible investments to the private and institutional investor community in Europe. http://ggagriculture.com/
