by Rafael Gomes
Rising commodity prices and growing global concerns over food security are driving increased investment in African commercial farming. Agricultural investment within the Southern African Development Community (SADC) is primarily driven by South Africa, which has the most advanced agricultural sector on the continent.
However, a lack of bilateral investment treaties between South Africa and most SADC countries and a lack of requisite land reform raises contract risks, including expropriation and contract revision. Foreign land ownership is impossible in most SADC member-states, requiring the need for free leases ranging from 50 to 99 years. Most leases are negotiated on an ad hoc and individual basis, thereby significantly raising contract risks.
Despite on-going efforts in some member-states to formalise land ownership on the basis of the western private-ownership model, most land deals will likely face risks of expropriation or contract revision in the five year outlook. In countries such as Namibia and South Africa, there are also growing risks of an acceleration of the transfer of agricultural land from white landowners to the indigenous population. South Africa recently proposed the Tenure System Reform Bill, expected to be tabled in March 2012, which aims to limit foreign and white ownership and to nationalise agricultural land.
According to farmers group Agri SA, almost 1,000 South African farmers are already producing crops in Namibia, Botswana, Malawi, Mozambique and Zambia, apart from extensive farming within South Africa itself. In total, some 22 African countries have already offered farming opportunities to South African farmers.
Other notable investors in the SADC include India, the GCC and China. Since 2008, China has begun investing some $800 million in Mozambican agriculture, with other key investments in Angola, Tanzania and Zambia.
Major international banks such as Standard Bank, ABSA and Standard Chartered, as well as some Chinese institutions, have expressed interest to fund such farming deals.
The Food Chain Blog
November 28, 2010
Rising commodity prices, global food security concerns drive increased investment in African farming
Categories agribusiness, commercial farming, investment