Commercial agriculture: cure or curse?

If you visit Equatorial Africa one of the first things you notice is the profusion of oil palm trees growing wild. The locals harvest the highly nutritious fruit for a variety of uses including the distillation of palm wine. Reviewing the history of Nigeria you discover that it was the world’s largest exporter of palm oil at the time of the country’s independence in 1960, generating 82 per cent of national export revenue. Yet today it spends around US$435 million a year importing the same commodity. This reflects an overall trend whereby Nigeria has been obliged to import much of the food it consumes, whether it is fish, rice, wheat or sugar. Currently, this import bill amounts to US$15 billion a year although the country has an abundance of fertile land. Nigeria is only able to afford this shortfall in its food balance of payments because of the export of petroleum. However, government ministers realise that the situation is unsustainable in the long term.

In Commercial Agriculture: Cure or Curse? I focus on why the experience in Equatorial Africa has been in such sharp contrast to the success of plantation agriculture, notably oil palm production, in the Far East, notably in Malaysia. Whereas at the time of independence Malaysia was a relatively modest producer of oil palm it has grown over the last half century to be one of the two largest exporters, along with Indonesia, of this valuable commodity. Together these two countries dominate the global market, accounting for around 90 per cent of sales by value. As a result, commercial agriculture has generated considerable benefits for Malaysian citizens, lifting many of them out of poverty.

Today’s challenge is to replicate this success in Equatorial Africa. Commercial agri-business groups face two major problems in South-East Asia: a lack of land for expansion and the need to reinvest in existing plantations. While campaigning NGOs such as Greenpeace claim that swathes of primary forest are felled for plantation crops such as oil palm, these claims are often exaggerated. Yet it is certainly the case that environmental safeguards have obliged major companies such as Sime Darby, Olam and Wilmar to invest in Africa to meet global demand for agricultural commodities, the most lucrative crop being oil palm. It is estimated that more than US$6 billion has now been pledged in terms of foreign direct investment in the oil palm sector in West Africa alone.

The new wave of investment in African commercial scale agriculture offers the opportunity to meet the surge in demand for food. There are now many more mouths to feed and the increase in the continent’s population will account for much of the estimated rise in the world’s population from 7 billion today to a forecast 9.6 billion by the middle of this century.

African nations can seize the opportunity to tackle food poverty and provide a range of employment opportunities for their growing populations by ensuring that any government intervention is supportive of privately funded investment rather than directing it. Specifically, it is essential that business can work in a stable legal environment with well-established property rights. There is also tremendous scope, as evidenced in Malaysia, for local farmers to co-operate with major agricultural investors in the processing and distribution of a range of final products to the end consumer. The onus should be on complementary activity, making efficient use of major assets such as milling plants, and the development of a well-trained, educated workforce. When adopting such a strategy, everyone prospers.