UK-Africa: Investment in the private sector can be good, but usually not of this type

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Shadrach   in Life style & General

Last updated: 20 January 2020, 07:37 GMT

Investment can help reduce poverty, promote womens empowerment, and support childrens rights. It can also do the opposite.

Just ten days before the declaration of Brexit, the United Kingdom hosts a major investment summit attended by Prime Minister Boris Johnson and an array of royals. There's a lot of hype about the case with a flood of optimistic win - win-win messaging related to forging new post-Brexit alliances.

Ghana, it seems, is being given top treatment as a favoured destination, while Zimbabwe appears to have been snubbed despite being open for business.

Promoted Recommendations

These days, British assistance strategy is geared towards fostering UK trade interests overseas. It will only be clear whether its Department for International Development (DfID) continues as a separate entity or becomes absorbed into the Office of the Foreign and Commonwealth.

But whatever happens, the government has taken a multinational approach to business development for British businesses.

I have no objection to investment and trade in the private sector, but it is another matter whether all of these initiatives meet the criteria that we assumed were central to the UK aid policy. Questions were raised regarding allocation of funds to dubious outfits.

Support and trading ties obviously have a tradition in Britain. It was the Pergau dam fiasco of 1994in which assistance was used as a sweetener for an arms dealthat contributed to the pledge to untie aid as well as the setting up of a separate development agency and a Parliament Act outlining how aid should be invested. Nevertheless, this agreement on assistance since the mid-1990s is now under pressure.

Trade and investment can of course help to reduce poverty, encourage empowerment of women and be good for the rights of children. But maybe the opposite is true, too.

Promoted Recommendations

There are many different business structures with very different outcomesand so labour, economic and rights systems. Over the past few years, we have looked at some of these problems across a number of projects (all with DfID funding, in fact).

The Land, Agriculture and Commercial Agriculture project in Africa compared three broad types of agricultural commercial investment: estates and plantations; medium-sized commercial farms; and outgrower schemes. The team looked at each business model in Ghana, Kenya, and Zambia and examined the results for land, labour, livelihoods, etc. The cases included investments with UK-linked companies such as Ghana's much-hyped Blue Skies company which packages and exports fruit produced by outgrowers from smallholder companies. Another was the very strange sugar outgrower scheme in Zambia run by Illovo, now mostly owned by British Foods, whereby the land of smallholders is transformed into a property and they are paid rent for land use.

Promoted Recommendations

The findings showed that what really mattered was the "rules of integration" into business arrangements. Too often, estates / plants served as independent "enclaves" from the local community; others offered employment opportunities but often with poor conditions. Smallholder-led outgrower arrangements had substantial linkage effects with the local community, where leverage over terms was effective. In the meantime, consolidated medium-scale farms had potentially positive spillover effects on neighbouring communities through connexions between labour, technology and skill sharing.

A decade ago, many acquisitions were deemed "property grabbing" at the height of Africa's land rush, but our research called for a more complex assessment. Not all the investments are bad, but neither are all good. It is important to align investment with the "Voluntary Guidelines" of the UN Food and Agriculture Organization, as this allows creditors, governments and recipient populations to make balanced decisions, avoiding investments riding roughshod over local land rights and livelihoods.