IDS researcher Henry Tugendhat (right) wonders whether UK aid is following in the path of China and Brazil
Two weeks ago at the London Stock Exchange, Justine Greening announced her new policy of supporting UK businesses to invest in developing economies for the mutual benefit of both sides. According to the UK’s Secretary of State for International Development: “This is good for investors, who earn a financial return… [and] good for the poorest, who receive jobs and support”.
New as it may sound in UK development circles, this strategy sounds an awful lot like the “win-win” sound-bites we’re increasingly used to hearing from China among the other BRICS countries, who are meeting in Durban, South Africa this week. China and Brazil have both made efforts to leverage private sector investments as part of their aid/South-South Cooperation agendas, but problems have already arisen which the UK could usefully learn from.
Alignment of aid and investment efforts is a particular challenge. Business seeks profit, while aid is traditionally geared to humanitarian objectives, and they don’t always match up.
One example is the disconnect between the promotion of food security in Africa, and the agricultural interests of investors. The Chinese state has pushed for a serious engagement with food security issues affecting African countries. This is seen in everything from meetings in the Forum on China-Africa Cooperation, to Agricultural Technology Demonstration Centres. Equally Brazil has committed to supporting agricultural mechanisation and technical support in a number of countries.
All such efforts are envisaged to link to private sector activity: to provide tractors, take over farms, or offer technical support. However, Chinese and Brazilian investors in Africa have predominantly invested in cash crops and large-scale farming, and even when smallholders are targeted, in many cases they have been those that are better off and already more commercially oriented.
New evidence from the Future Agricultures Consortium generated by research in Ghana, Ethiopia, Mozambique and Zimbabwe, shows that when Chinese companies do invest in local agriculture, it is predominantly in crops such as cotton and tobacco. Otherwise, additional investment has focused on surrounding infrastructure such as irrigation schemes and roads. Brazilian investments have predominantly focused on sugar-cane and ethanol production. However, when private sector investment has targeted food staples necessary for food security, there has been either little success, as in the Xai-Xai project in Mozambique; or only small-scale investments, as in the small farms in Ethiopia that supply local Chinese restaurants.
not the right model for Africa?
Adding to this disconnect between Chinese and Brazilian government statements and the behaviour of their companies, even Chinese state-owned enterprises at times flex their independence from state interests, as Lucy Corkin describes for Angola. But of course, Chinese companies in particular may be subject to more pressure than UK companies to invest in areas aligned with state interests abroad, as they are often supported by state policy and finance. Which begs the question: when financial returns are less obvious, what makes Justine Greening more able to leverage investment for development interests, where China and Brazil have failed?
The second issue is that many investments in Africa have led to harmful practices over the years, whatever the nationality of the investor. Even if investors are introduced based on the principle of “development assistance”, profits are still paramount. This can lead to unintended consequences. For example, Chinese and Brazilian companies have got mired in controversy in recent years, including accusations of ‘land grabbing’, even when such claims have been refuted.
One of the currently most contentious investments is the vast ProSavana project spearheaded by Brazil in a triangular agreement with Japan and
Mozambique. The aim is to bring about agricultural development in Mozambique’s Nacala corridor, transforming it into a bread-basket on the scale of Brazil’s Cerrado savannah region, the site of a “green revolution” transformation which began in the 1970s. Brazilian private investors are already, as well as Japan, and a ‘Nacala Fund’ expected to mobilise US$2 billion has been set up. Already described as an example of ‘Brazil’s neo-colonialism in Africa’ in the Mozambican press, the project has come under heavy fire from local civil society groups that criticise the secrecy surrounding the project and the risk of evictions of local smallholder farmers.
So will ‘land grabbing’ become an issue that UK businesses face if they follow Justine Greening’s recommendations? In her speech, she recognised this challenge, arguing that there is a need for transparency on investments, so as to expose “those who acquire land unfairly”.
As a final thought, we should also question whether this new policy could be a subtle re-introduction of tied aid practices, despite Justine Greening’s
strong assertions to the contrary. The political reality is that this would no doubt be an appealing means of defending the aid budget against current cuts, so it must be properly scrutinised to avoid to a return to inefficient aid practices.
Ultimately, overseas investment by private sector actors is open to many challenges and problems. As the UK adds this new facet to its aid programme,
lessons from Brazilian and Chinese experiences in Africa should definitely be heeded.
Henry Tugendhat is a Research Officer at the Institute of Development Studies, with responsibility for the China and Brazil in African Agriculture
project, involving roughly 20 researchers from institutes across Africa, Brazil and China. For more information and the project’s first working papers click here.