Africa for sale

There has been a spate of announcements and news items in recent weeks about the acquisition of African land by foreign governments and investors for the purpose of food production. While not quite on the scale of the colonial era, this trend raises numerous questions over the role of government, over food security, over land ownership and over the rights of African smallholders and pastoralists (who, one fears, will be displaced from customary land to make way for large-scale agriculture).

Many economists seem to think that this is a good thing. They point to employment creation, infrastructure investment and increased agricultural efficiency. To be sure, in an environment where population growth remains rapid, where inadequate infrastructure hampers communication and distribution and where agriculture is, in general, extremely inefficient, the potential benefits are substantial.

And that's the key word - potential. Historically, I am sorry to say, Africa is littered with investment failures in large scale agricultural projects. Most famous among these is the Tanganyika groundnut scheme. This plan, to cultivate a large area of modern-day Tanzania with groundnuts, was a catastrophe in every way (see Wikipedia http://en.wikipedia.org/wiki/Tanganyika_groundnut_scheme for the full story - which is almost comical in its catalogue of disaster). It is, however, by no means unique.

The latest investment fad has centred around the production of biofuels and, in particular, a plant called jatropha curcas. This plant, it is claimed, will yield four times as much fuel as soya, and will thrive in semi-arid conditions unsuitable for almost any other commercial crop. To go back to a theme running through this blog, just remember, if it sounds too good to be true, it probably is.

What can the new investors learn from past and present mistakes? Three things stand out: the importance of research; experimentation and pilot programmes; and the need to invest in management and training. Simple, really.

Leaving aside these long term issues, let's hope that the details of these transactions are made public and that the proceeds are used first to compensate smallholders and pastoralists who have been or will be affect by the proposed developments, and second to invest in long term improvements to infrastructure. Sometimes it's good to be an optimist: in the words of David Landes "...pessimism offers little more than the hollow satisfaction of being proved right"

Hybrid Maize and the legacy of George Shull

White maize is by far the most important crop in East & Southern Africa. The grain is palatable; crop yields are high in comparison to alternative grain crops; labour demand is low. Well over 200 million people in sub-Saharan Africa rely on maize as their principal staple crop.

Remarkably, for a crop so critical to food security across half the African continent, maize is a relatively recent introduction. The Portuguese brought it to Africa early in the 16th century, since when it has spread throughout the continent. Its popularity owes much to its productivity : under the right conditions, commercial farmers in Southern Africa have achieved yields in excess of 10 MT/hectare for hybrid maize. Indeed, I remember during one visit to the Mpongwe farms in the Zambian copperbelt, the General Manager, Patrick Tobin, proclaiming his delight that he would soon be eligible to join the “ten tonne” club of Zimbabwean commercial farmers (though I never knew if such a club really existed).

But yields like this are only possible where farmers are using hybrid maize seed. Exactly 100 years ago, an American plant scientist, George Shull, published research into the phenomenon of hybrid vigour in maize (enhanced yields through hybridization). Within 20 years, hybrid seed maize offering significant yield improvements was on sale in the USA, and the technology quickly spread across the world. Everywhere, that is, except Africa, where hybrid maize still makes up only about 25% of the total area planted to maize – despite its manifest yield benefits. To put this statement in context, smallholder farmers using traditional open-pollinated varieties of maize, probably average yields of about 1 MT per hectare in comparison to Mpongwe’s 10 MT target – a factor of ten. This colossal inefficiency is a major contributor to the continuing food insecurity on the continent and, in light of the ever increasing population, a major risk to the future.

This is a simple example of why it is so important to invest in Africa’s seed industry, from breeder to multiplier through production, distribution and retail. Access to and utilization of improved maize seed has the potential to transform African agriculture. African Agricultural Capital (AAC) has already invested in four seed companies in the region and it is both my hope and my intention that AAC will continue to look actively for opportunities to invest in the seed sector in the future.

For more information on this and other important crops in sub-Saharan Africa, it is well worth reading Securing the Harvest, by Joe de Vries and Gary Toennissen. Both work for the Rockefeller Foundation and both were instrumental in the foundation and initial capitalisation of AAC. I owe them a debt of gratitude.

Visiting Rwanda

Or, more accurately, Kigali for the Commonwealth Business Council Investment Forum for East Africa.

My first encounter with Rwanda was in 1994, when I was working for the International Red Cross Federation's regional delegation in Nairobi. As an accountant, my job for a short period was to deliver huge sums of cash to the relief effort in Goma and Bukavu, just across the Congo border. The weekly consignments averaged about $500,000 in cash - mixed denominations, 1999 series or later. By keeping the process low-profile, I managed to avoid becoming a target myself, but it was an uncomfortable, but very necessary task. At the time the banking system in Eastern Congo (Zaire) had broken down completely, so cash was the only means of financing the massive relief operation.

Since then, I have been back on a number of occasions, always with delight at the visible and tangible progress since the dark days of 1994. Most memorably, I made a trip in 2002 to Ruhengeri to visit mountain gorillas. I had tagged a day visit on the end of a business trip to Kigali and as a result was extremely badly equipped for the short hike up the mountain to the forest. It had rained the night before, as we left early in the morning, the valleys were cloud-filled but the hills clear. The image of the deep green "mille collines" floating in a sea of white clouds in the early morning sunlight is unforgettable, yet it pales by comparison with the sight of a family group of 15-20 mountain gorillas.

Kigali is clean, orderly and functional but, in comparison with the hustle and bustle of other East African commercial centres, strangely devoid of apparent colour and energy. There is a reserve and a sense of watchfulness which leaves the visitor with a sense of remoteness....

As for the conference, well, I was very interested in about 20% of the agenda. Protocols observed, there were some very interesting discussions on the future of agriculture and forestry in Africa (both of which are close to my heart) and, as is always the case, a good opportunity to meet a range of useful contacts. Sadly, the session on financial inclusion - the delivery of appropriate financial services to the unbanked majority - was disappointingly bland. The simple fact is that banks in East Africa are extremely profitable and simply do not need to invest in delivering banking services into rural areas. Furthermore, they are far too costly - tending, as everywhere else in the world - to grow fat on the huge and indefensible spreads between customer deposit interest rates and borrowing rates.... Am I alone in thinking that there is something fundamentally wrong when bankers are the highest paid segment of the workforce?

I hope I will be back in Rwanda soon. And I hope, next time, that I will be able to see something more than a hotel, a taxi, a conference centre and an airport. On the flight back this morning, I realised that I had in all honesty had no contact with Rwanda... again. East Africans, international delegates, foreign-owned and managed organisations, but nothing that brought me any closer to a relationship or an understanding of Rwanda. The remoteness remains.

AAC enters the blogosphere

My name is Tom Adlam and I am lucky enough to be managing African Agricultural Capital: an Investment Fund for - as the name suggests - agriculture-related businesses in East Africa. My team and I are based in Kampala, Uganda, and you can find more information at http://www.aac.co.ke/.

I want to use this blog to share personal experiences and information about business, working and living in East Africa with all of you out there who are interested. It is important for me, at this point, to stress that the views and opinions expressed in this blog are my own and in no way represent the views and opinions of African Agricultural Capital as an organisation. I will probably try to post a weekly update.

The inspiration for this blog comes from one of our investee companies, Sandstorm Africa (see http://www.sandstormkenya.com/) whose CEO Mark Stephenson has recently started his own blog. It's a fascinating read which you can find at http://www.sandbagman.blogspot.com/.

And, at least for today, that's about it. More news to follow soon.