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

CIRPEE Working Paper No. 12-03

32 Pages Posted: 26 Jan 2012  

Sylvain Dessy

Laval University - Département d'Économique

Gaston Gohou

affiliation not provided to SSRN

Désiré Vencatachellum

African Development Bank

Date Written: January 24, 2012

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.

Keywords: FDIs in farmland, local populations, welfare

JEL Classification: O13, Q15, Q24, Q28

Suggested Citation

Dessy, Sylvain and Gohou, Gaston and Vencatachellum, Désiré, Foreign Direct Investments in Africa's Farmlands: Threat or Opportunity for Local Populations? (January 24, 2012). CIRPEE Working Paper No. 12-03. Available at SSRN: https://ssrn.com/abstract=1991290 or http://dx.doi.org/10.2139/ssrn.1991290

Sylvain Dessy (Contact Author)

Laval University - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

Gaston Logoue Gohou

affiliation not provided to SSRN

Désiré Vencatachellum

African Development Bank ( email )

Rue Joseph Anoma
Abidjan, Ivory Coast 01 BP 1387
Ivory Coast (Cote D'ivoire)

HOME PAGE: http://www.afdb.org

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