Investments In Africa- Is It Only a Land Grab??

Investments in Africa are quite often seen as merely land grab. The World Bank’s study released in September 2010 identified 45 million hectares under negotiation for allocation during 2009 alone, of which 70 percent (about 32 million hectares) was in Africa. A new study by the International Land Coalition suggests that the true figure could be much higher, at around 80 million hectares, 64 percent (about 50 million hectares) of these in Africa. The exponential rise of interest for investing in Africa is chiefly because of 3As- Agri, Area and Affordability. In 2007-08 fluctuation in global prices of commodity forced many food grain importing Nations to change their strategies. They started looking out for meeting their food demand through own production at foreign lands.

Steep rise and high fluctuation in oil prices has laid foundation for alternate source of energy. Few Agriculture produce have identified as potential source of energy. A large area needed to produce them for mitigating the expected demand.

Africa being in under-developed tag offers quite low price for lands, which allured investors to set their eyes for resourceful cheap lands largely for their agricultural operations.

Despite categorized in investors ideology of just land grabbing, Africa still attracts just less than 5% of global FDI projects. This low share of percentage showcases that it isn’t merely a race for land grabbing but of well sound business motives. Investors are choosing Africa because of

1.  733 Million hectare arable land, which can play a great role in world food security
2. Only 57-58% of agricultural productivity compared to their Asian and South American counterparts, sets opportunity for quality input suppliers
3. Big economies are at single digit growth rate, while Africa provides consumer side demand for over 1 Billion people
4. Cheaper labour availability
5. Availability of natural resources necessary for investment
6. Local policy and industrial facilitation

Business requires investments, in form of Land, human resource and many other business activities. Investor moving towards Africa because of cheaper lands, but this isn’t a sole reason for them to invest in Africa. A survey finding suggests that 88% of investors feels Africa is an attractive business destination for investment, compared to likelihood the actual investments are quite low. The root cause for this heavy difference is because of sound business plans. Investors want to invest in Africa with a long term vision. However, to avoid any land-grabbing interest local government can design policies to secure national resources.