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Foreign Direct Investments in Africa's Farmlands: Threat or Opportunity for Local Populations?

Author

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  • Sylvain Dessy
  • Gaston Gohou
  • Désiré Vencatachellum

Abstract

We study the welfare effects of government-backed FDIs in Africa’s farmlands. We build an occupational choice model featuring four mechanisms driving these effects. First, local farming is subject to social arrangements prescribing that farmers share their crop surplus with kin. Second, proceeds from land investment deals are invested to make modern inputs affordable to local farmers. Third, these deals cause some farmers to shift to wage employment. Fourth, they also entrench export-oriented agriculture, at the expense of local markets. We show that three conditions are sufficient for such deals to make local people better off: (i) the state has a high capacity and willingness to negotiate deals that benefit local people; (ii) these deals create enough jobs; (iii) wage employment make displaced farmers better off. Fulfilling these three conditions, however, may conflict with the interests of profit-maximizing foreign investors.

Suggested Citation

  • Sylvain Dessy & Gaston Gohou & Désiré Vencatachellum, 2012. "Foreign Direct Investments in Africa's Farmlands: Threat or Opportunity for Local Populations?," Cahiers de recherche 1203, CIRPEE.
    • Handle: RePEc:lvl:lacicr:1203
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2012/CIRPEE12-03.pdf
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    References listed on IDEAS

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    1. Platteau, Jean-Philippe, 2006. "Solidarity Norms and Institutions in Village Societies: Static and Dynamic Considerations," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 12, pages 819-886, Elsevier.
    2. Kazianga, H., 2006. "Motives for household private transfers in Burkina Faso," Journal of Development Economics, Elsevier, vol. 79(1), pages 73-117, February.
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    Cited by:

    1. Khadjavi, Menusch & Sipangule, Kacana & Thiele, Rainer, 2016. "Social capital and large-scale agricultural investments: An experimental investigation in Zambia," Kiel Working Papers 2056, Kiel Institute for the World Economy (IfW).
    2. Kleemann, Linda & Thiele, Rainer, 2015. "Rural welfare implications of large-scale land acquisitions in Africa: A theoretical framework," Economic Modelling, Elsevier, vol. 51(C), pages 269-279.

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    More about this item

    Keywords

    FDIs in farmland; local populations; welfare;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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