Agriculture Global Practice Discussion Paper 12 The Impact of Larger-Scale Agricultural Investments on Local Communities: Updated Voices from the Field WORLD BANK GROUP REPORT NUMBER 114431-GLB FOOD AND AGRICULTURE GLOBAL PRACTICE DISCUSSION PAPER 12 The Impact of Larger- Scale Agricultural Investments on Local Communities: Updated Voices from the Field April 2017 © 2016 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Picture on page 16: Duncan Pringle Contents Acknowledgments  v List of Abbreviations vii Chapter One: Introduction and Key Findings 1 1.1 Background and Objectives 1 Data Collection and Methodology 1.2  3 Key Findings and Recommendations 1.3  5 Chapter Two: Financial and Operational Success of Investments 17 The Host Country Operating Environment 2.1  18 2.2 Access to Finance 18 The Link between Success and Impact 2.3  19 Chapter Three: Employment 21 3.1 Employment Generation 21 Pay and Employment Conditions 3.2  24 Work Environment  3.3  26 3.4 Female Employment 26 3.5 Employment of Locals  28 Chapter Four: Rural Development 31 4.1 Saving and Investment of Wages 31 Impact on Local Businesses 4.2  33 Chapter Five: Technology Transfer 37 Chapter Six: Relocation and Resettlement 41 6.1 The Impact of Resettlement 41 Chapter Seven: Environmental Impact 47 7.1 Perceptions of Environmental Impact 47 Education, Consultation and Raising Awareness  7.2  49 7.3 Changes in Access to  Water 50 Chapter Eight: The Roles of Investors and Governments in Social and Infrastructure Service Provision 53 References57 tables Table 1.1:  Updated Key Lessons for Investors, Host Governments and Other Stakeholders 7 Table 1.2:  Updated Recommendation: Example Policies and Practices to Maximize Positive Impacts and Reduce Negative Risks and Impacts 11 Table 2.1:  Summary of Good and Poor Practices Related to Financial and Operational Success in Operations Surveyed 20 Table 3.1:  Variation in Number of Employees from 1st and 2nd Visit: Selected Companies 24 The Impact of Larger-Scale Agricultural Investments on Local Communities iii Table 3.2:  Summary of Good and Poor Employment Practices in Operations Surveyed 30 Table 4.1:  Summary of Good or Poor Practices or Unintended Outcomes Related to Spillovers in the Vicinity of Operations Surveyed 36 Table 5.1:  Summary of Good and Poor Practices Affecting Technology Transfer in Operations Surveyed 40 Table 6.1:  Summary of Good and Poor Strategies or Actions in Cases of Resettlement at Operations Surveyed 45 Table 7.1:  Summary of Good and Poor Practices for Environmental Impact in Operations Surveyed 51 Figures Figure 1.1:  Descriptive Statistics of Stakeholders Interviewed 4 Figure 3.1:  Share of Positive and Negative Impacts Mentioned in Employee Interviews 22 Figure 3.2:  Perceptions of Employment and Related Conditions, Employee Interviews 23 Figure 4.1:  Share of Positive/Negative Impacts Mentioned in Interviews with Retail Owners 35 Figure 5.1:  Share of Positive/Negative Impacts Mentioned in Outgrowers Interviews 40 Figure 6.1:  Share of Positive/Negative Socioeconomic Impacts Mentioned by Resettled Persons 42 Figure 7.1: Perceptions on Environmental Impact, All Stakeholder Interviews 48 Figure 7.2: Perceptions of Impact on Water, All Stakeholder Interviews 50 Boxes Box 1.1:  Key Publications and Outputs by the IAWG on Responsible Agricultural Investment 2 Box 1.2:  Selected Internationally Recognized Principles and Guidelines for Responsible Agricultural Investment 3 Box 1.3:  Definition of Stakeholders in This Report  5 Box 3.1: An Example of an Internal Promotion 25 Box 3.2: Impact of Employment on Women 28 Box 3.3:  Examples of Company Initiatives to Increase the Number of Local Workers 29 Box 4.1: An Example of How Employment Impacts on Livelihoods 32 Box 4.2: Infrastructure Development by Investors 34 Box 5.1: A Microfinancing Partnership for Farmers’ Associations 39 Box 6.1: Uses of Resettlement Compensation Money 43 Box 7.1: Impact of Chemical Usage and Water Infrastructure 49 Box 7.2: Common Solutions to Common Problems 49 Box 7.3: Concerns on Water Contamination 50 Box 8.1: Examples of Social Development Programmes 53 Box 8.2:  An Example of a Social Development Programme Cut Due to Financial Constraints in Tanzania 54 iv Updated Voices from the Field Acknowledgments This report was written by William Speller, Hafiz Mirza, Peer review and valuable insights were provided by Karol Axèle Giroud, Jacqueline Salguero Huaman, Gra- Boudreaux, Jonathan Mills Lindsay, Louis Philippe Mous- hame Dixie, and Asuka Okumura. The team was led by seau, Gregory Myers, Loraine Ronchi and Geoff Tyler. Hafiz Mirza and Grahame Dixie and, in addition to the Hafiz Mirza (UNCTAD), and Christopher Ian Brett and authors, consisted of Duncan Pringle, Abye Tasse, and Harideep Singh (World Bank) also provided overall guid- Teoh Cheng Hai (consultants). It was researched and pre- ance and oversight to the preparation of the final report. pared by a joint United Nations Conference on Trade and Development (UNCTAD)–World Bank team under the Many companies, communities, and external stakehold- overall direction of James Zhan (UNCTAD), and Preeti ers provided their invaluable time in order to allow this Ahuja (World Bank). study to happen. Hafiz Mirza, Grahame Dixie, William Speller and Dun- The World Bank and UNCTAD are also indebted to the can Pringle devised and oversaw the research framework government of Japan for funding this work and for their and methodology. The fieldwork was conducted by Dun- support. can Pringle, Teoh Cheng Hai, Abye Tasse and William Speller. Asuka Okumura provided research and logistical Note: the agribusiness investments subject of the research support in arranging the fieldwork. Jacqueline Salguero undertaken in this study were not financed or supported Huaman and William Speller were responsible for input- by the members of the Inter-Agency Working Group ting the fieldwork results into Nvivo; and interrogation (IAWG). of the Nvivo database and data analysis was primarily by Jacqueline Salguero Huaman, William Speller and Axèle Giroud. The Impact of Larger-Scale Agricultural Investments on Local Communities v List of Abbreviations CEO Chief Executive Officer ILO International Labour Organization CFS Committee on World Food Security MoU Memorandum of Understanding FAO Food and Agricultural Organization MZN Mozambican metical IAWG Inter-Agency Working Group NEC National Environmental Council IFAD International Fund for Agricultural NGO Nongovernmental organization Development RAI Responsible Agriculture Investment IFC International Finance Corporation UNCTAD United Nations Conference on Trade IFC PS International Finance Corporation and Development Performance Standards USAID United States Agency for International IISD International Institute for Sustainable Development Development The Impact of Larger-Scale Agricultural Investments on Local Communities vii Chapter One Introduction and key findings 1.1 Background and objectives In the wake of the food price crisis of 2008, rising commodity prices and the collapse of financial markets caused a significant increase in private sector interest in agricul- tural investment. It raised international concern that agricultural investment involving large-scale land acquisition could have negative impacts on local communities. On the other hand, it was recognized that there may be the potential for positive impacts from such investments. The gaps in knowledge on the overall effects of such investments prompted the need to examine this topic. In light of this, endorsed by the UN General Assembly, G8 and G20, the Inter-Agency Working Group (IAWG) was set up by FAO, IFAD, UNCTAD and the World Bank in 2009. The IAWG was tasked to examine this topic in order to improve understanding of the impacts of such investment and to provide broader recommendations on the appropriate conduct of “responsible” agricultural investment. Through this programme, the IAWG has sought to distill and disseminate the les- sons from past and current agricultural investments to understand what works and what does not work for host countries, local communities, investors, and other par- ties impacted by agricultural investments (Box 1.1). The lessons emerging from this body of work have supported and informed a set of responsible investment principles, including but not limited to the Committee on World Food Security (2015).1 Under the umbrella of the IAWG programme, UNCTAD and the World Bank con- ducted a study and reported the findings in “The Practice of Responsible Investment Prin- ciples in Larger-Scale Agricultural Investments: Implications for Corporate Performance and Impact on Local Communities (UNCTAD and World Bank, 2014).” That study was based on a field survey of agricultural investors, local communities and other stakeholders. First- hand information was obtained through on-site 240 interviews with 550 stakeholders 1 Selected internationally recognized principles for responsible agricultural investment, including Environmental and Social Framework—Setting Environmental and Social Standards for Investment Project Financing (World Bank), are listed in Box 1.2. The Impact of Larger-Scale Agricultural Investments on Local Communities 1 Box 1.1. Key publications and outputs by the IAWG on responsible agricultural investment 1. World Investment Report 2009: Transnational Cor- 7. The practice of Responsible Agricultural Investment porations, Agricultural Production and Development Principles in Larger-Scale Agricultural Investments (UNCTAD 2009) (UNCTAD and World Bank, 2014) 2. Principles for Responsible Agricultural Investment 8. Impacts of Foreign Agricultural Investment on Devel- That Respects Livelihoods and Resources—Extended oping Countries: Evidence from Case Studies (FAO, version (FAO, IFAD, UNCTAD and World Bank, 2010) 2014) 3. Making the Most of Agricultural Investment (FAO and 9. Challenges and Opportunities of FDI in Developing IIED, 2010) Country Agriculture for Sustainable Development 4. Outgrower Schemes—Enhancing Profitability (IFAD (FAO, 2014) and Technoserve, 2011) 10. Investment Contracts for Agriculture: Maximizing 5. Investing in Agribusiness: A Retrospective View of a Gains and Minimizing Risks (IISD, UNCTAD and Development Bank’s Investments in Agribusiness in World Bank, 2015) Africa and Southeast Asia and the Pacific (World Bank, 11. Home country measures that promote responsible for- 2013) eign agricultural investment: Evidence from selected 6. Trends and Impacts of Foreign Investment in Develop- OECD countries (FAO, 2016) ing County Agriculture Evidence from Case Studies (FAO, 2013) Note: Full details of these publications are in the references. associated with or impacted by a set of 39 private compa- report presents an updated set of findings based on these nies in Sub-Saharan Africa and South East Asia. follow-up interviews; as this report is not a stand-alone piece, it should be treated as supplemental material to Job creation was the most frequently cited benefit arising the original study, and the findings contained in the two from the investments. The most frequently noted nega- reports should be viewed in unity. Accordingly, the tables tive impact on local communities was the reduced access in Section 1.3 of this report provide an updated version of to land. Investments that had the most positive impacts the tabular summary findings from the first phase report on the host economies and were well-integrated with that have been augmented and revised based on findings the development vision of the host country also tended from the additional fieldwork. to be financially and operationally successful. The above referenced report summarized lessons learned and good The main intention behind the second phase of fieldwork practices identified. It should be noted that the private was to deepen and enrich the data sample and informa- agribusiness investments covered by this study were not tion collected, by conducting further interviews in order financed or supported by the members of the Inter- to augment, challenge and/or verify the findings of the Agency Working Group (IAWG), including UNCTAD or original study. In the second phase, research teams spent the World Bank. more time with local communities and other stakeholders (interviewees are referred to as “external stakeholders”2) This report is an update to the above mentioned which had not been possible in the first phase, due to time UNCTAD/World Bank study (the “first phase”). Follow- and resource limitations. ing that researchers revisited eight operations in four coun- tries (Cambodia, Ethiopia, Mozambique and Tanzania), 2 That is “external to the investor,” especially people in communities connected conducting a total of 113 detailed additional interviews directly or indirectly to the operation. Contract farmers working for the inves- with 349 stakeholders primarily from local communi- tor, as well as employees are included. These types of relationships with the ties in which the agribusiness operations are based. This operation are indicated where appropriate in the report. 2 Updated Voices from the Field Box 1.2.  Selected internationally recognized principles and Guidelines for responsible agricultural investment 1. Committee on World Food Security, Principles for 5. Guidance for Responsible Agricultural Supply Chains Responsible Investment in Agriculture and Food sys- (FAO and OECD, 2016) tems—CFS—RAI, 10 principles (CFS, 2015) 6. Operational Guidelines for Responsible Land-Based 2. Environmental and Social Framework—Setting Envi- Investment (USAID, 2015) ronmental and Social Standards for Investment Project 7. Principles for Responsible Agricultural Investment Financing (World Bank, 2016). (PRAI)—7 Principles (UNCTAD, FAO, IFAD and 3. Environmental and Social Performance Standards World Bank, 2010) and Guidance Notes—8 Performance Standards (IFC, 8. Respecting Land and Forest Rights—a Guide for 2012) Companies (Interlaken Group and RRI, 2015) 4. Food and Agriculture Business Principles—UN FABs, 9. Voluntary Guidelines on the Responsible Governance 6 Principles (UN Global Compact, 2014) of Tenure of Land, Fisheries and Forests in the context of national food security—VGGT (FAO, 2012) Note: Full details of these principles and guidelines can be found in the sources and publications indicated in parentheses. This updated report seeks to describe in a more nuanced manner the perceived impacts arising from associated 1.2 Data collection agribusiness investments, including spillover effects on the and methodology local community and more widely—whether intended The second phase of fieldwork on which this report is or unintended. Given the complexity of impacts,3 these based was conducted in 2014 and 2015. Researchers cannot be regarded simplistically as ‘good to be recom- spent 2 to 3 days interviewing a wide range of external mended’ or ‘bad to be corrected’; nevertheless, they offer stakeholders for each investment. This is in addition to the essential ground-level insights from which to deepen interviews with stakeholders and management conducted understanding of outcomes and draw lessons. during the first phase visit to each site (in 2012–2013). The second phase visits were specifically focused on interview- A secondary objective of this phase was to assess how the ing a wider range and a greater number of external stake- investment impact may have altered between the first and holders. Interviews at each location focused on a selected set this phase. As such, throughout this report reference is of issues which were deemed to be the most important from made to observations and anecdotal evidence on the evo- the first study, or from subsequent information obtained. lution of the impact of the agribusinesses studied. Given This approach facilitated a greater depth and targeting of the limited sample size, this does not constitute a system- pertinent issues at each location; care was taken in select- atic or comprehensive analysis. Nevertheless, information ing issues at each investment in order to ensure sufficient on changes observed between researchers’ first and sec- coverage across the sample as a whole. ond site visits provides important insights into the poli- cies and practices that tend to affect project impacts as the The choice of the eight investments from the original thirty- investment evolves. nine was made based on potential to obtain more detailed information on the issues of focus described above.4 Dis- cussions with management were limited to updates on the 3 In this work, the term impact is used to denote the changes observed and iden- tified by qualitative interviews with the stakeholders themselves and does not refer to outcomes of an ‘impact assessment’ with random samples and controls. 4 Resource limitations did not permit this, but ideally a greater number of The voices from the field are providing stakeholder observation on how the investments would have been revisited. This would have allowed the research investments have affected an array of variables discussed in the previous report team to obtain a larger number of interviews, and wider variance of views on and this one. issues of importance or concern. The Impact of Larger-Scale Agricultural Investments on Local Communities 3 Figure 1.1. Descriptive statistics of stakeholders interviewed Cambodia Number of interviews by gender Ethiopia 48 126 Mozambique 20 Number of people 87 interviewed per country Mixed group 88 Tanzania Characteristics of stakeholders interviewed 63 30 Male Female 102 73 51 16 14 13 12 11 11 8 5 1 Resident near Migrant Employee Supplier/ Previous Resettled Local minority Outgrower/ Cooperative Gov. of cial Community NGO/MFI investment Customer land user person group Contract farmer leader Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. Notes: (a) A previous land user refers to a local stakeholder who utilized the land for cultivation or cattle and grazing purposes. Displaced people are considered under the category resettled people. (b) Supplier/Customer refers to any local stakeholder with regular direct sales such as supplying input to the investor or who is a regular buyer of local produce. Outgrower is separately considered as outgrower/contract farmer. (c) The characteristics above are not necessarily mutually exclusive, but a principal designator is indicted for each interviewee. (d) Less NGOs were interviewed than in the first study because this follow-up study is primarily focused on the collection of voices from local communities. operations to set the context for stakeholder interviews. Stakeholder interviews were conducted on a confidential Figure 1.1 provides a number of descriptive statistics. and anonymous basis, without the presence of representa- tives from the investor. Since confidentiality was assured In line with the methodology from the first phase of field- to interviewees, no specific individuals and organiza- work, the main approach taken in the second phase was to tions are referred to in this report. The interviews were allow communities and other stakeholders to express their obtained independently of the investor. Interviews com- views in areas they deemed of significance (Section 1.2). menced with the same open-ended questions used in Researchers subsequently focused on specific issues on the first phase of field research, to enable comparability. which more data were sought, specifically: employment Researchers subsequently asked follow-up questions based (Chapter 3), rural development and economic linkages on key areas of specific focus chosen for the location (or (Chapter 4), technology transfer (Chapter 5), relocation issues which emerged from the open-ended questions). and resettlement (Chapter 6) and environmental impact (Chapter 7). In addition, recurrent themes throughout the The write-ups of stakeholder interviews were imported discussions were the operational and financial success of into Nvivo, a software package designed for the analysis investors (Chapter 2) and the role of government in infra- of large amounts of qualitative and quantitative data. structure and social services (Chapter 8). This allowed the researcher to classify the data according 4 Updated Voices from the Field Box 1.3.  Definition of stakeholders in this report Many of the terms used in this report have different mean- Governments: In this report, we mostly focused on fed- ings or implications depending on the context. This box eral or national governments. However, other levels of gov- outlines how these terms are used within the context and ernments such as regional and local are equally important limited scope of this report. to enable responsible agricultural investments. Notably, functional cooperation among them is crucial. Agricultural investment: A project which changes the fixed capital stock in the agricultural production process. In Civil society: Nongovernmental organizations and insti- this report, this includes projects of agribusinesses which tutions include national, regional and local entities. are operated by incorporated companies (corporates) or individuals who neither live on the land nor rely on it for Outgrower: A person not employed directly by the inves- survival, i.e., we exclude smallholders’ investment in their tor who supplies the agricultural investment with produce own farms from the definition of investment because this is cultivated on her or his own land. This involves a variety not within the scope of this report. of contractual arrangements as discussed in the body of the report. Investor: The corporation(s) or individual(s) implement- ing the agricultural investments defined above, include External stakeholder: Person interviewed during the both foreign and domestic investors. In some cases, such course of the research who has been affected by the invest- as family businesses, the ultimate owners of the project are ment operation. This includes not only local communities, also those responsible for its implementation. In other cases, but also suppliers, employees, government officials and such as publicly listed companies or investment funds, the other individuals and groups (e.g., local retailers, hospi- ultimate owners are disparate and hence investor refers to tal staff and others directly or indirectly impacted by the the company implementing the projects visited. investment). Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. to particular themes (for example, employment, resettle- have been possible, especially in the context of the first ment, commodity prices paid to outgrowers) and facili- study and other research. This approach is intended to tated the quantification of qualitative information on strengthen the findings presented in this report, but ulti- socioeconomic and environmental impacts obtained dur- mately such findings should be used in a considered way, ing the stakeholder interviews.5 This was in addition to a recognizing the contingencies involved (Box 1.3). pure qualitative assessment of the extensive information received during the fieldwork. Such an approach permit- 1.3 Key findings and ted an assessment of the relative importance of various types of investment impact which would otherwise not recommendations As mentioned above, the main purpose of the fieldwork on which this report draws was to return to a number of 5 In the case of qualitative research, especially in sensitive areas such as agricul- the matured agricultural investments visited previously in ture and food security, there is always the danger that a researcher may let their order to establish whether earlier conclusions and recom- views prejudge analysis and findings, often unknowingly; hence the advantages of mendations were robust and held up to scrutiny. This was using programmes such as NVivo to quantify the balance of positive and negative views. This provides a number to guide researchers’ views and circumnavigate the achieved by revisiting communities and other stakehold- human tendency to place more emphasis on information in line with preformed ers at 8 investments, spending more time with a larger views. This research has not attempted to apply any scoring of the views. In our number and more diverse set of interviewees, and ensur- view this would be a step too far with the data collected and the methodology ing that they had ample opportunity to voice their views used. The reader should be aware that there is no weighting applied to these per- ceptions, although obviously some issues are much more important than others in on both positive and negative perceived outcomes arising the minds of respondents. This could be an aspect taken up by other research and from the investments. A number of specific topics less well analysis, including by UNCTAD and the World Bank. The Impact of Larger-Scale Agricultural Investments on Local Communities 5 covered earlier (namely, employment, technology transfer, As before, the perception of the impacts of these invest- environmental impact, resettlement, economic spillover ments by members of the surrounding communities was and rural development, and the provision of social and on average significantly more positive than negative, but infrastructure services) were also investigated as were how clearly there is a multiplicity of views and perceptions; and conditions and outcomes had evolved since the first visit. large differences prevail between different investments. For each investment, particular issues are discerned dif- The findings of this follow-up research are therefore ferently by communities, which reflects the specificities of supplemental to those of the original World Bank- operations and local conditions, but is also indicative of UNCTAD study: The Practice of Responsible Investment Prin- communities’ ability overall to carefully and judiciously ciples in Larger-Scale Agricultural Investments. The findings, dis- distinguish the pros and cons of each issue, and not paint cussed in more detail in the sections below, are essentially everything “black or white.” Various shades of grey are in line with the first phase of fieldwork, but more nuanced, more likely in complex interactions which encompass eco- detailed and wider in scope. Tables 1.1 and 1.2 below pro- nomic, social and environmental impacts. The diversity vide an update to the key summary tables from the origi- of findings provides lessons, good practices, and actions to nal report, augmented and refined in light of the findings avoid, which can be used for guiding responsible agricul- from the latest fieldwork. Recommendations in the new tural investments. tables are based upon two phases of surveys as well as desk research and other analyses conducted under the IAWG As a next step based on the findings of the combined programme. For instance, although technology transfer study referred to in this report and other IAWG work, the to suppliers (and spillovers to other farmers) may arise as IAWG plans to develop and disseminate more detailed a key outcome from an investment, the second fieldwork and practical guidance which would assist with the imple- underlines that the types of technology being imparted are mentation of responsible agricultural principles on the not always suitable for local farmers because of local condi- ground, and tools for the capacity building of various tions; for instance, they may not have the necessary finance, stakeholders on pertinent topics. skills, equipment or experience/capabilities to utilize it.6 6 The lesson to take from this may be to take action to improve conditions, rather than forgo the investment or discourage technology transfer. 6 Updated Voices from the Field Updateda key lessons for investors, host governments Table 1.1.  and other stakeholders A. SELECTED KEY LESSONS FOR INVESTORS Communication • Consultations were a key step in developing a strong relationship with local communities. and transparency • Initial consultations were time consuming and expensive, particularly for new investments. • Consultations were most effective when investors took primary responsibility; instead of “outsourc- ing” to host governments or land agents. • A lack of transparency could generate fear and uncertainty about investor intentions and also open the door for unfounded criticism. • Formal grievance mechanisms contributed to better relations with local communities. rency about the • Resettlement management process could benefit from robust communication, consultation and transpa­ process. • Management of expectations was crucial, such as with regard to job creation. • Unfulfilled commitments and unmet expectations were particularly damaging for relations with communities. Due diligence and • Business plans provided by a host government instead of an investor were often based on unrealistic business planning assumptions and weak assessments of environmental factors. • Some problems were foreseen if findings from impact assessments and community consultations were properly incorporated into business plans. • Some investors had success in phasing their investment. That is, obtaining a small land area initially and only seeking more land once the first allocation is running successfully. Financial and • Agricultural investments that were financially and operationally successful were more likely to be well-regarded by local operational success communities. • Patient sources of capital and financial backers who were cognizant of the difficulties of running an agribusiness were more reliable. Land rights and • Many investors were expending significant resources dealing with disputes over access to land. resettlement • It was unrealistic for the investor to assume that the land acquired was free from any existing land disputes or land legacy issues. • A fair and transparent process for negotiation and compensation helped to minimize the negative impact of resettlement. • Some investors found that the best solution was to leave communities in situ and work with or around them, rather than undertaking difficult resettlement procedures. • Failure to develop the land in accordance with expectations was a significant source of tension between investors, local communities and host governments. Environmental • Environmental impact assessments led to poor outcomes when they were conducted by host govern- impact ments or land agents on the investor’s behalf. • Impact assessments were too often “box-ticking” exercises, for local legal compliance, and not incor- porated into the business operations. • More assessment and monitoring was needed for the impact of the investment on water resources. • Some investors took on responsibility for raising local awareness of environmental issues. Social development • Social or rural development initiatives produced better outcomes if they were agreed on through an programmes and inclusive, consultative approach to understand local development visions. financially inclusive • Programmes that were fully funded and not dependent on profitability of the investor were most successful. business models • Financially-inclusive business models were successful in forging partnerships with local communities. (a) Updated information is highlighted in italic. (continued) The Impact of Larger-Scale Agricultural Investments on Local Communities 7 Table 1.1. Continued A. SELECTED KEY LESSONS FOR INVESTORS Employment and • There was a pressure to employ local people; doing so contributed to better working relationships, but working condition it could be challenging due to skills gaps. • Training programmes which helped integrate local communities into the workforce were highly valued by employees. • Some investors were paying inadequate wages and offering unacceptable working conditions, leading to tension between staff and the investor. • There was a gender imbalance in most investments, though some investors have taken actions to improve the situation. • Investors often start businesses in areas where formal employment and the contracting process is not known or well-established. • Investments could be a catalyst for social transformations, especially of women’s and youth’s place in society by providing employment opportunities. • Some investors had increased women’s integration into the workforce through preferential hiring, training and internal promotion programmes. • Having been employed and gaining income, some women could increasingly contribute to the family budget and activities such as education. • Some investments attracted educated young professionals from outside of the area as well as retained those originally from the area who otherwise might have migrated to the cities to find a job. Outgrower schemes • Outgrower schemes were most successful when the business model was defined before outgrowers were introduced. • A lack of transparency and inclusivity of outgrowers in the pricing mechanisms for their crops hin- dered the successful operation of outgrower schemes. • Marginalised groups and women, were less likely to participate in outgrower schemes. • Funding and partnerships with various stakeholders such as local governmental agencies or experienced NGOs played an important role. Food Security • The main positive contribution to food security was through direct employment and outgrower schemes. • The main negative aspect was deemed to be through reduced access to land. Technology transfer • Technology transfer occurred primarily through training, particularly of outgrowers. • The impact varied substantially from site to site, depending on the business model, crop and other factors. B. SELECTED KEY LESSONS FOR GOVERNMENTS Prescreening • In many cases, prescreening of foreign investors could be improved to increase the prevalence of and selection of investors likely to make a positive contribution to the host country. investors • More foreign investors were adopting social development programmes or financially-inclusive busi- ness models. Host governments would be advised to seek commitments on such aspects in advance. Conduct of • The conduct of consultations, impact assessments, due diligence and the creation of business plans consultations, were most effective when primarily the responsibility of the investor instead of the government. impact assessments and business plans Phasing of investors • Many investors were not putting their land allocation to full use. It would have been advisable for and approvals governments to consider to phase a project and seek commitments from investors about the pace at which the operation would have developed. • Large land allocations, particularly to investors introducing new crops, could be fairly risky. Investors could have been required to phase their programmes in stages. • Some governments had allowed foreign investment in agriculture to proceed at a faster pace than their capacity to realistically assess and monitor the investors. 8 Updated Voices from the Field B. SELECTED KEY LESSONS FOR GOVERNMENTS Ongoing monitoring • Ongoing monitoring of investments could be strengthened. of investors • The better approaches were not solely productivity-focused, but more intensive and including moni- toring of the socioeconomic impacts of an investment. • Monitoring of investors’ environmental impact, including use of water resources, and adherence to environmental regulations was in most cases inadequate. Operating • A stable host country operating environment is a key determinant of investors’ success. Sudden, drastic changes in the host environment country operating environment, especially trade legislation could be particularly damaging. Land rights and • A clear regulatory framework for land acquisition approvals and a formalization of local communi- resettlement ties’ tenure rights under a registry system contributed to reducing the risks of land disputes. • Unclear land laws create situations of conflict over land rights especially where customary land was concerned. • Business models with low land needs, such as processing operations, could provide important employ- ment and development benefits. • Resettlement processes should be handled adequately, with communication, consultation and transparency about the process for resettlement. • Clear, transparent procedures to follow and standard valuations for compensation in the case of resettlement could be developed. Adherence needed to be monitored effectively. Employment and • Governments should have considered more thoroughly which investors and business models were contribution to likely to maximize direct and indirect employment. rural livelihoods • Large land allocations did not necessarily create the most jobs per hectare. • Outgrower schemes could be effective in supporting livelihoods while allowing people to retain their most valuable asset—their land. • Governments should have considered the whole value chain and promoted the downstream value addi- tion of the raw materials produced from land made available, thereby maximizing employment and other benefits. • With the arrival of an investment, many communities underwent a period of rapid transition with potential for both positive and negative consequences. • There could be redistributive effects and a creation of insider-outsider status as some people would benefit from the investment but others may not, and may indeed create difficulties due to impacts such as rising prices. • The extent of positive economic spillovers from large-scale investments varied widely and depended on the investor’s busi- ness model and procurement plans. • Governments should recognize the risk that the employment benefits may diminish over time as production becomes more mechanized. Transparency • In general, there was an insufficient amount of publicly available information to ensure the fully transparent and accountable conduct of agricultural investment. Technology transfer • Technology transfer was by no means an assured benefit. • Appropriate, proven and customized use of innovation in new crops, business models, and techniques should have been encouraged to reduce risks. • The types of technology transferred should be contextualized to fit with available levels of finance, skills, equipment or experience/capabilities. Social and • Even though investors may provide and support social services to the communities, governments need to maintain the infrastructure service primary responsibility in social and infrastructure services provision. (continued) The Impact of Larger-Scale Agricultural Investments on Local Communities 9 C. SELECTED KEY LESSONS FOR LOCAL COMMUNITIES AND CIVIL SOCIETY Consultations • Representatives of civil society played a useful role in monitoring consultations and could work with between investors investors to ensure that all relevant communities and stakeholders were included within the consulta- and communities tion process. • There were instances where agreements were not documented, leading to confusion and disputes. While recognizing a capacity gap, local communities should have ensured that all agreements and commitments made through consultations wee documented. • Investors said it was easier to include local communities which were well-organized. NGOs could assist local communities in this regard. Monitoring • Civil society could play a role in monitoring conflicts between investors and stakeholders or instances investors where an investment was degrading natural resources, e.g., in making those issues public or known to relevant authorities. • Monitoring led to positive outcomes when conducted in a constructive, rather than antagonistic, fashion. Engagement with • Civil society could forge partnerships with the private sector to stimulate responsible inclusive invest- investors ments that gave due consideration to reduction of rural poverty and more equitable benefit sharing with farmers and the local communities. • The most successful social development programmes were those that were done in collaboration with NGOs or other organizations (e.g., workers unions) who were able to directly connect these programmes with local needs. Marginalised • NGOs could play a key role in helping investors to forge partnerships with marginalized groups including women and communities and youth, for example: groups ƒƒhelp them link with outgrower schemes ƒƒstrengthen their technical and production capacity ƒƒadvocate that their needs were considered when deciding social development programmes. Land rights and • Some NGOs were effective in raising community awareness regarding their rights and how to exer- resettlement cise them, as well as ensuring that people had a realistic assessment of the value of their land in the case of resettlement. Rural livelihoods • Civil society could partner with investors to provide trainings such as financial literacy or vocational training, to enable communities to benefit from new opportunities. Technology transfer • Civil society could facilitate partnerships with investors to provide vocational training to assist communities, especially outgrowers, with the adoption of new technology and inputs. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. Note: This table extends the key lessons presented in Table 7.1 of the first report (UNCTAD and World Bank 2014), building on the additional information, insights and lessons gleaned from the second, follow-up fieldwork. 10 Updated Voices from the Field Table 1.2.  Updateda recommendation: example policies and practices to maximize positive impacts and reduce negative risks and impacts A. MAIN POSITIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR DIRECT EMPLOYMENT Seek job creation and training • • Ensure adequate living wages are paid. CREATION commitments from potential • Consider gender balance, employment-related • Job creation is a main benefit of investors. gender issues and empowering women. investments. • Consider business models or crops • Provide clear explanation about recruitment process and • Most employees are satisfied with that create most jobs per hectare employment conditions. pay and conditions and felt better off of land allocated. • Staff handbook and induction programmes are useful and due to the job. • Screen investors on type of employment should be adapted to local conditions. • The income from employment or contract (permanent/casual), who is employed • Enforce occupational health and safety regulations. farming provides future opportunities (locals, women) and duration of job • Establish clear and effective grievance mechanisms. such as savings and investments in fixed creation, not just aggregate job numbers. • Provide opportunities to switch casual workers into perma- assets, land improvement and education. • Screen investors on quality of manage- nent contracts. • Training is a key benefit investors can ment and approach to recruitment and • Train local communities, especially women, to provide. employment terms and conditions. assist integration into workforce. • Provision of employment opportunities • Provide training programmes for workers including induc- for unskilled people, especially women, tion courses, occupational health and safety, business under- can have a transformative socioeconomic standing, HIV awareness (where required), retirement impact. savings, chemical application and machine operation. • Partner with civil society such as NGOs and universities to provide training. ACCESS TO MARKETS • Select when feasible, investors with • Consider how schemes can be designed to reach AND OTHER PARTS OF outgrower schemes that have a most marginalized farmers. VALUE CHAINS FOR proven business model. • Resolve the business model before introducing OUTGROWERS • Consider both positive and negative con- outgrowers. • Reliable and suitable market for sequences of encouraging shift through • Ensure transparent and inclusive price farmers’ produce contributed to outgrower scheme from traditional crops determination. improving livelihoods. to cash crops (such as income-sensitivity • Create dedicated outgrowers training develop- • Outgrowers appreciated techni- to commodity prices). ment programmes, including through partnerships with cal support, access to finance, and NGOs and farmers’ associations. higher prices as compared to other • Support may be required for outgrowers’ financial capacity buyers. to participate in outgrower schemes. Funding and partner- ships with various stakeholders such as local governmental agencies or experienced NGOs can play an important role. • The investor should ensure that its operations are not detri- mental to existing sources of food security. SOCIAL DEVELOPMENT • Consider investors’ social and • Consult on and discuss local development visions PROGRAMMES rural development commitments when designing social and rural development • Trend toward social development when prescreening and selecting programmes. programmes, including social investors. • Formally committed arrangements. services (for example, education, • Negotiate with investors on the • Consider training on financial literacy including how to deal health and water), rural infra- benefits to be provided to the host with rising incomes and save for retirement. structure, or improving access to country. • If financially feasible, set up a dedicated Commu- finance. • Retain primary responsibility for social nity Development Fund. and infrastructure services. • Any changes to programmes arising from changes to finan- cial circumstances must be clearly communicated to the affected communities. (a) Updated information is highlighted in italic. The Impact of Larger-Scale Agricultural Investments on Local Communities 11 Table 1.2. Continued A. MAIN POSITIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR FINANCIALLY INCLUSIVE • Promote financially inclusive busi- • Consider whether financially inclusive business BUSINESS MODELS ness models. model can be employed. • Explicit sharing of financial gains with local communities, (for exam- ple, revenue sharing) effective in forging genuine partnerships. FOOD AND NUTRITION • Consider both positive and nega- • Ensure adequate living wages are paid and out- SECURITY tive food security implications of grower produce is sufficiently remunerated. • Income effect of direct employ- investment. • Ensure sufficient land with suitable potential ment and access to markets for • Ensure investments are not detri- for food crop production is available to local outgrowers. mental to existing sources of food population. security for example, through reduced land access by local population. TECHNOLOGY TRANSFER • Encourage investors with schemes • New business models, crops or techniques should AND INNOVATION or intention to introduce improved be piloted and only employed at large scale once • Foreign investors can be instru- technology or farming practices the model is proved and stable. mental in introducing and in an economical and sustainable • Provide knowledge transfer through formal training, on-the- encouraging the adoption of new manner. job field training, informal meetings and visits to projects technology and farming practices. • Encourage innovation appropriate including demonstrations farm. • In select instances, foreign tech- to the context. • Develop a “model farmers system” in which the company nology transfer had a catalytic provides experts to train selected local farmers as models in effect which generated benefits far ways to increase productivity. beyond the investor. • Establish demonstration plots to show better practices to • Technology transfer most commonly grow crops and organize regular on-site visits for local occurs through training of outgrowers. farmers to promote information exchange. • Identify gaps in knowledge, specific training needs and gaps in capital requirements to adopt the requisite technologies. • Consider to provide linkages to microfinance institutions to support outgrowers pay for technology and inputs. • Partner with other stakeholders such as local training agen- cies, farmers’ associations, NGOs and governments to develop a programme enabling technology transfer. INFRASTRUCTURE • Consider infrastructure provi- • Allow benefits of infrastructure development to PROVISION sion and potential spillovers when reach the broader population. • Development of roads, electricity, selecting investors. and telecommunications opens up new areas and improves market access. 12 Updated Voices from the Field A. MAIN POSITIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR ECONOMIC SPILLOVERS • Spillovers are not automatic. Screen • Consider to share or support services and infrastructure such • Investments can generate both employ- investors based on the business model, as electricity and roads with local businesses. ment and indirect additional business procurement plan and potential to gener- • Train local employees in business management. opportunities for small businesses such as ate positive spillovers to other parts of the • Source inputs locally where possible. Establish local busi- restaurants, transport requirements, and value chain. ness development plans to improve the capacity of local agricultural input suppliers. • Undertake proactive urban and rural suppliers. • Local job opportunities created by invest- planning around investments to manage ments have a potential to reverse the exo- the impact of economic transformation dus of skilled labor and educated youth in the area. from rural areas. • Investments can raise awareness of a new business opportunity and provide a demonstration effect. • The rise in incomes produced by an inves- tor can be beneficially invested in the local economy, towards education and skills development or capital development on local farms. B. MAIN NEGATIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR DISPUTES OVER ACCESS • Clear regulatory and transparent • Early engagement with local communities and all TO LAND framework for land acquisition land users and consultation on existing rights and usage. • Range of disputes from involuntary approvals. • Understand the historical and current use of and displacement to uncertainty about • Consider formalizing local com- rights to land based on own assessments and veri- investor intentions. munities’ tenure rights under fication of government assessments. • Common conflict between formal proper registry system. • Consider to purchase land on a “willing-buyer, willing- rights provided to investor and • Encourage business models with seller” basis. informal rights of previous users low land needs. of the land. • Unclear land laws create situations of conflict over land rights, especially when customary land is concerned. LACK OF CLARITY OVER • Publicize land applications under • Consider what information on operations can be LAND ACQUISTION review and approved, including made publicly available. PROCESS on investment registry website. • Lack of public information dis- empowers local communities and hinders ability to hold investors to account. (continued) The Impact of Larger-Scale Agricultural Investments on Local Communities 13 Table 1.2. Continued B. MAIN NEGATIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR RESETTLEMENT • Develop required procedures to • Consider leaving communities in situ as first • Despite some well-handled cases, follow and standard valuations for option. negative experiences of displace- compensation purposes. • Follow a transparent, formal, inclusive, monitored ment without sufficient consulta- • Have policies, and support mechanisms process for resettlement; tion, negotiation or compensation. to help resettled populations deal with the ƒƒhave a clear strategy for land allocation • Inadequate compensation includes cases socioeconomic consequences of the reset- ƒƒconduct proper consultation that replacement land was not equivalent tlement, including how to productively ƒƒset up clear communication channels and strategies in terms of soil quality, suitability for invest the money received lump-sum as between various stakeholders’ agreement on compensation agriculture and access to social services compensation payment. ƒƒbuild transparent systems to monitor and control the pay- such as clinics. ment of compensation. • Lengthy delays in the resettlement process • Ensure full documentation and audit of existing land plots, were experienced. crops, houses and structures. Compensation according to negotiated and agreed compensation rates. • Proper witnessing and recording of compensation payments. • Set and manage expectations through the consultation process. • Give people the choice, for instance building their own houses with materials provided or building houses for them. • Consider to put in place a system for voluntary relocation. • Ongoing dialogue and follow-up audit after the resettlement has taken place. LACK OF CONSULTATION • Clear regulatory framework on Consult with local communities, including infor- • AND INCLUSION consultation procedures. mal users of the land, from the outset. • Lack of involvement of local com- • Monitor consultations conducted • Develop continuous dialogue with local munities in decision making and by investors and assess/act on; do communities. planning led to a sense of exclusion not conduct them on investors’ • Document all meetings and agreements. and precluded mutually beneficial behalf to avoid misunderstanding and • Manage community expectations through a transparent solutions. miscommunication with stakeholders. community engagement strategy. • Unfulfilled commitment, especially with • Keep communities updated on developments by ongoing regard to jobs or community development communications, including financial developments to the plans, resulted in deteriorated relations. extent that may affect commitments made to them, such as funding of the community development agreement, providing jobs or purchasing from outgrowers. • Free, prior and informed consent (FPIC), is vital not only for the investments associated with large-scale land acquisi- tion but also any other types of investments. • The consultation and communication of information needs to take place before, during and after the process. 14 Updated Voices from the Field B. MAIN NEGATIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR FAILURE TO USE LAND • Prescreen investors to ensure they • Acquire land in accordance with ability to develop it. AS EXPECTED have capacity to develop land as • Set expectations about the pace of development • Some investors used a low portion expected. through consultations. of allocated land, including land from • Seek commitments for pace of which people had been resettled, creating development and retain authority tension with local communities and to repossess land not put to use. host countries. • Consider to request investors to phase their projects. FINANCIAL OR • Prescreen investors’ financial • Consider phasing the investment. OPERATIONAL FAILURE strength (for instance, capital structure • Create own business plan and conduct due OF INVESTOR and who are its backers), technical diligence. • Many investors experienced opera- abilities, approach to Environ- • Incorporate findings from consultations and tional or financial difficulty. mental and Social Impact Assess- impact assessments into planning. • Most obstacles encountered could ments and consultations, and • Ensure patient and long-term sources of capital from end have been identified by adequate commitments for benefits to the investors who are cognizant of risks of agribusiness and pre-investment due diligence. host country. who see the project as integral rather than incidental to the • Failure of investment created lose- • Only approve investments at a portfolio of their portfolio. lose situation for investors, host pace that matches capacity to pre- countries and local communities. screen and monitor. • Consider to prioritizing investors who have long-term practical experience and successful track records in agribusinesses in developing countries. • Governments can receive support on pre- screening from financial institutions with solid experience in financing agricultural investments. • Create an enabling policy environ- ment for successful investments. • Monitor investors and have a well- designed exit strategy. LACK OF GRIEVANCE AND • Facilitate and ensure estab- • Establish formal and effective grievance procedures REDRESS MECHANISMS lishment of formal grievance open to both staff and external stakeholders. • Those negatively affected by an procedures. investment often did not have suffi- • Monitor their operationalization and cient means to raise grievances and hold investors accountable. seek redress. • Where employees feel comfortable raising grievances with management, better rela- tions and a more positive working environ- ment are fostered. (continued) The Impact of Larger-Scale Agricultural Investments on Local Communities 15 Table 1.2. Continued B. MAIN NEGATIVE POLICIES AND PRACTICES TO REDUCE NEGATIVE IMPACTS AND ENHANCE POSITIVE IMPACTS HOST GOVERNMENT INVESTOR ENVIRONMENTAL • Require and monitor the con- • Undertake appropriate Environmental and Social IMPACTS, INCLUDING duct of Environmental and Social Impact Assessments. Translate those into Envi- WATER Impact Assessments and effective ronmental and Social Management Plans which • Assessment, monitoring and miti- implementation of Environmental and are enforced through ongoing reporting and gation of environmental impact, Social Management Plans. monitoring. especially impact on water, was • Monitor and enforce adher- • Adhere to environmental and water regulation. generally inadequate. ence to environmental and water • Implement infrastructure changes to mitigate negative regulation. impact, such as airborne pollution or water contamination. • Training for the proper use of chemicals and information on the consequences of their misuse should be clearly provided or communicated to employees and the local community. • Support community initiatives to conserve the environment, as part of the Environmental and Social Management Plan. • Awareness rising of environmental issues could include combining efforts with other stakeholders, such as civil soci- ety and government institutions, as well as supporting local initiatives. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. Note: This table extends the policies and practices referred to in Appendix B of the first report (UNCTAD and World Bank 2014), based on the key findings of the second fieldwork (Table 1.1). 16 Updated Voices from the Field Chapter Two Financial And Operational Success Of Investments The focus of the IAWG research programme mentioned earlier was to understand those conditions that best ensure that large-scale agricultural investments maximize benefits for all stakeholders, particularly surrounding communities, and for the host economy more broadly. In most cases, a critical prerequisite for a positive contribu- tion to development is the financial and operational success of the investments them- selves (UNCTAD and World Bank 2014). Investments that were operating successfully (from the investor perspective) were more likely to be well perceived by local com- munities through the relatively positive economic and social impact of the business. Failing or failed investments, on the other hand, lead to unmet expectations, broken commitments and underutilized productive resources (including land). In this respect, agriculture related investments—especially greenfield operations—are challenging, because there is a gestation period. Even for successful cases there is an inevitable time delay—stretching into many years—between land preparation, full production7 and (ultimately) profitable operations. The most common obstacles to success that investors faced related to the host coun- try’s operating environment (Section 2.1), access to finance (Section 2.2) and variable international commodity prices. The last was felt most keenly by local communities. Price volatility in crop markets, for example induced by weather conditions, was a con- cern shared by interviewees, especially those working at the investment. The impact of success or failure of operations on socioeconomic impacts arose principally through employment generation, business linkages and social development programmes (Section 2.3). 7 For example, it typically takes 3–4 years for a coffee tree to start production. Investors need to consider a potentially long “no-income” period when they choose perennial crops. The Impact of Larger-Scale Agricultural Investments on Local Communities 17 The host country 2.1  of an operation10 when it may need to draw on additional resources to overcome setbacks. As one local employee operating environment stated, “investors must be financially stable because there A stable host country operating environment is a will always be operational difficulties to overcome.” In critical determinant of investor success. assessing the stability of an operation’s ongoing access to capital, its position in the parent company’s overall busi- A constraint on operations commonly mentioned by ness strategy and portfolio is pivotal. investors in the first phase was the host country’s policy and regulatory environment. A well-defined legal environ- Some investors are willing and able to sustain negative ment and stable regulatory requirements applying to agri- cash flows as an operation develops; others will be more business are of fundamental importance for planning a inclined to pull out, especially if the operation is relatively business over the extended period of time that is required marginal to its overall business (or that of its financiers). for a large-scale agribusiness to get off the ground, and in For instance, in the case of one operation, a principal turn become successful and profitable. Host country gov- investor was a multinational enterprise which owned busi- ernments8 also have a responsibility to create a supportive nesses in a wide range of sectors but had little exposure to, and enabling policy environment which will allow inves- or expertise in, agriculture. It would appear this investor tors to survive and thrive. Some investors visited in this sought to cash in on the perceived boom in biofuel crops second round of fieldwork had seen their business plans in the late 2000s. A change in corporate strategy caused adversely affected by unexpected government interven- the investor to pull out of the investment, leaving a fund- tions and policy swings since the first visit and were grap- ing gap that the operation has since been grappling to fill. pling with the consequences. Such developments have direct knock-on implications for local communities. In contrast, when the parent company perceives an invest- ment as a key part of its portfolio, it can be a crucial line In this phase of fieldwork, unexpected changes in the import of support to deal with financial setbacks as the operation tariff and quota system were noted as especially problem- develops. For example, a company visited in Cambodia is atic. Such changes weakened the competitive position of an affiliate of a foreign conglomerate. This investor has local producers and lowered the price of their output. These an extended business plan to set up processing operations policy changes had an impact not only on large-scale pro- in Cambodia, with the output to ultimately be exported ducers, but also smaller producers, including smallholders back to the home market. In this regard, it is part of a under subcontract, who thereby received lower prices for long-term strategy which implies the investor was pre- their output. Among the countries visited, one government’s pared to accept negative cash flow from the operation as decision to allow imports of sugar threatened domestic pro- it got off the ground. ducers of the sugarcane whose price had dropped. Such considerations underscore the importance of opera- 2.2 Access to finance tions having: 1) a clear understanding of the nature and scale of their financial risk; and 2) access to patient capital Access to patient capital helps an investment to from sources knowledgeable on the difficulties of starting develop in spite of inevitable setbacks. and running a primary production agricultural invest- ment. Investors who perceive agricultural investment A critical determinant of the success of an investment9 is in developing countries as a means to make quick, easy its access to ongoing finance, particularly in the initial years profits are likely to be disappointed. For host country gov- ernments, the capital structure of an organization and its 8 Not only central governments; the role of state and local governments are also financiers are key elements that should be assessed during important. 9 Determinants of successful investments in general include a well-developed and realistic business plan and a robust feasibility study; these are equally if not Especially in cases where investors choose crops which require many years to 10 more important for agricultural investments. have the first stable harvest. 18 Updated Voices from the Field the investor screening process. Governments should seek three years behind in its plan due to the withdrawal of a support from agencies/entities with solid experience in key investor during the implementation phase. In contrast, financing agricultural investments to undertake such another investor in Ethiopia has doubled its permanent analysis. employees from 272 to 512 in the two years between visits by the research team due to conducive local conditions, At the same time, it is important for investors to be trans- including a good relationship with the worker’s union. parent with local communities, and share financial (and other) concerns with them, both to avoid unnecessary With regard to linkages, the same investor in Mozambique misunderstanding and to gather support for a solution. had planned to establish a smallholder scheme, but has As one local villager interviewed stated “the future rests had to put this on hold due to its inability to finance the on the promises made by the company. We want the scheme. On the other hand, with the successful develop- promises to be fulfilled. They cannot just say ‘we do not ment of its outgrower scheme in Cambodia, one investor have money’. They must share their problems with us.” was able to move from semi-processing in the host country Although certain financial information is private to the to the establishment of full scale processing and export investor, effective community engagement requires being operations, generating further employment, value added, transparent with local communities when financial dif- and export revenue for the host country. ficulties are encountered, to the extent that they hinder the investor’s ability to uphold commitments made, such Finally, financial difficulties can also impact on the as funding of the community development agreement, continuation of social development programmes that providing jobs or purchasing from outgrowers. Misunder- are funded by the investor. One investor in Tanzania standing and poor communication can exacerbate finan- reported having to suspend its community development cial problems by leading to community dissatisfaction. programme as a result of ongoing losses. Under this pro- gramme, an annual contribution was made to a Com- The link between 2.3  munity Development Fund which the community could spend at its own discretion. The community had previ- success and impact ously chosen to spend this on the construction of schools Successful operations both influence and are and a medical centre, and on improving access to clean in turn influenced by inclusive project design, drinking water. Communities interviewed felt let down by employment generation, business linkages and the suspension of the programme and this created ten- community development programmes. sions due to unfulfilled expectations. This was particularly problematic because the reasons for the suspension were The successes or difficulties faced by an agricultural invest- not clearly communicated to the concerned communities ment have an impact on local communities, and develop- (see Box 8.2). This illustrates the critical importance of a ment overall, through three main ways: first, the effect on proactively implemented Stakeholder Engagement Plan. the extent and type of employment generation; second, through the development of linkages to other parts of the In a similar vein, two investments in Ethiopia provided a value chain, such as outgrower programmes, warehouses, notable contrast. One was a company run by an endow- or processing (value-add) operations; and third, via imple- ment fund which could be associated with greater social mentation of community development programmes. impact. The other was a purely private sector operation. Conversely, close connections with local stakeholders— The latter has run its social development programmes for example, through effective outgrower involvement or much more successfully by virtue of the fact that it was community participation—support operational success or profitable and hence able to fund activities fully. The at least ensure closer cooperation in difficult times. first was struggling operationally and financially and hence was having less positive impact on socioeconomic With regard to employment, one investor in Mozambique development. had to reduce permanent employee numbers and was The Impact of Larger-Scale Agricultural Investments on Local Communities 19 For host country governments, these examples under- agriculture operations, of managing expectations and score the importance of prescreening investments, either maintaining strong and transparent ongoing dialogue with directly or more likely by including a review by a quali- local communities and anybody affected by the investor’s fied institution, with a view to establishing the likelihood decisions and operations. Stakeholders at one investor that the operation will be a success (UNCTAD and World explained a concern that they had no formalized mecha- Bank 2014). Key screening criteria include: financial nism to determine whether the company was or was not capacity of the investor; technical feasibility of the busi- succeeding. While some financial information cannot be ness plan; approach of the investor to social and environ- shared broadly, the failure to meet commitments made to, mental issues; expected socioeconomic benefits of the or to live up to the expectations of, people surrounding an investment; the alignment of the business model with host investment can quickly lead to a deterioration of relation- country national or agricultural development plans and ships, and therefore stakeholders should be kept informed. the investor’s track record. As a summary to this section, Table 2.1 lists some exam- For investors, these examples emphasize the importance ples of good and poor practices related to financial and of defining a Stakeholder Engagement Plan and Commu- operational success. nity Grievance Mechanism at the onset of any large-scale Table 2.1.  Summary of good and poor practices related to financial and operational success in operations surveyed Examples of good • Providing or ensuring patient capital and long-term sources of capital. practices • Investments which are integral rather than incidental to the long-term strategic investment plan of the parent company. • Rigorous prescreening of investors’ technical, financial, environmental and social capabilities (by gov- ernments, drawing on external advice as needed). • Prioritizing investors who have long-term practical experience and a successful track record in agri- businesses in developing countries (by governments). Examples of poor • Failure to adhere to commitments or expectations for job creation, community development pro- practices grammes or outgrower schemes. • Lack of communication with communities by the company when it faces financial and other difficul- ties that are likely to impact commitments made to communities, such as the funding of a Community Development Plan. • Sudden, drastic changes in the host country operating environment, especially trade legislation. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 20 Updated Voices from the Field Chapter Three Employment 3.1 Employment generation Employment is the principal benefit perceived by communities. In line with the earlier study, employment creation remained a principal benefit that communities perceived from the presence of an investor, especially in terms of income and food security aspects when compared with subsistence agriculture. Employees’ perception from investments was overall positive (Figure 3.1) and was also more positive than the full sample average, but only slightly so, indicating that the overall positive community perceptions of these investments were not driven by employees’ views alone. Many investors in the survey generated formal job opportunities in rural communities for the first time. 60 percent of 54 employees interviewed across all investments for this supplementary report had no previous formal work experience. For over 80 per- cent of female employees, the job with the investor was their first experience with formal employment. Job security and regularity of income were particularly appre- ciated. Although there were concerns expressed about pay and working conditions, 86 percent of all employees—and all female employees who responded—perceived themselves to be better off as a result of having a job with the investor (Figure 3.2). The arrival of an investor creates an expectation of jobs but can under- mine relations with the local community if these remain unfulfilled. When jobs generated were lower than expected, community disappointment impacted negatively on the relationship with the investor. This underscores the importance of clear and open communication during the consultation process and management of community expectations, especially when companies face financial difficulties. A sug- arcane company in the survey promised a local community that the establishment of a sugar mill would create job opportunities, but after 5 years struggling with access to finance and low international commodity prices, the jobs had not materialized. Indeed, employee numbers had fallen between researchers’ first and second visits (Table 3.1). The Impact of Larger-Scale Agricultural Investments on Local Communities 21 Figure 3.1.  Share of positive and negative impacts mentioned in employee interviewsa,b 100% Postive impact Positive responses (multiple responses permitted): 379. 75% Average: 76% Examples: social development programmes (infrastructure, health programmes, schools), "better off," eld work suitable for women, payment on time, equal treatment & 50% nondiscrimination, job security, access to roughage, food supplies at lower prices, opportunity to save and purchase equipment and assets, training in new planting and 25% cultivation techniques, youth and local employment, water access, economic activity increased. 0 0 Negative responses (multiple responses permitted): 130. 25% Average: 24% Examples: deforestation (reduction in biodiversity and wildlife numbers), increased prices in the area, pay conditions, overtime payment, promotion system, compensation 50% Negative impact process for resettled people, degree of land utilization by investor, no local people in higher positions, unful lled promises, respect of grave sites, protective equipment not 75% supplied, inappropriate chemical usage. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) 54 employees were interviewed (including employees interviewed along with other stakeholders). (b) All examples of impact mentioned by employees interviewed are classified as either positive or negative. The figure shows the balance of positive and negative mentions for each employee interviewed. A level of 100 percent means that the stakeholders interviewed for that investor mentioned only positive impacts. The local community was dissatisfied by this turnout: one tion to the increase in number of total employees, many interviewee stated he did not understand how a company casual workers had been switched to permanent contracts can make money if it never produced anything. (Table 3.1). Most investors were employing more workers But in some cases, employment benefits dimin- with permanent contracts over the review period. ished over time as production became more mechanized. Some investors visited had dramatically increased the number of employees over the review period. For example, In the early stages of investments the employment of at a maize company and a flower company the number unskilled workers tended to be proportionally higher of permanent jobs had almost doubled. This was because owing to basic land preparation and planting material. To both investors have been expanding operations, clearing shift into larger-scale production and increase the level of and using more of their land allocation,11 a process which mechanization, some companies reduced the share—and was well understood by the communities. “The number sometimes absolute number—of unskilled employees, of employees is increasing gradually as the area planted who were often local people. This is reflected in part in the increases in size,” stated a worker interviewed. In addi- number of temporary workers employed (Table 3.1). In a similar vein, a company in the sample initially planned to 11 Land acquired by both investors has not caused resettlement in the commu- have a total workforce of 3,000. However due to a subse- nity. Expanding operations means that the investor is clearing more land out of quent strategy to plant and process large-scale production the total area initially leased. 22 Updated Voices from the Field Figure 3.2.  Perceptions of employment and related conditions, employee interviews All employees (%) 81% Think women now have 84% 86% more job opportunities 80% 100% 100% Women think that they 100% 100% are equally treated 100% 19% 59% Have previous experience 44% 39% 60% 81% 61% Able to save money 66% 73% 50% 27% Think migrants are 26% 28% prioritised for employment 25% 33% 71% Think they have 57% 62% adequate training 63% 60% 100% Feel better off as a 86% 91% result of employment 94% 83% 63% Feel satis ed 57% 54% with payment 64% 33% 81% 74% Feel secure in their job 72% 82% 50% Gender Total interviewed: 39 Contract status Total interviewed: 39 16 23 Female Male Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. Permanent 33 06 Temporary (a) The total number or employees who responded on these questions was 39. Of 39, women represented 16 and men represented 23. From a contract point of view, 39 total answers consisted of 33 permanent workers and 6 temporary workers. Four mixed groups interviewed during the field work which responded to these questions are not included in the figure. (b) Some employees did not provide an answer to some questions. (c) Think women now have more job opportunities, 35 total answers: 19 males and 16 females. (d) Think they are equal treated (women only), 16 women interviewed; however only 14 responded to this questions. Of these, 12 were under permanent contract and 2 under temporary contract. (e) Think migrants are prioritised for employment, 38 total answers: 23 males and 15 females (f) Think they have adequate training, 37 total answers: 23 males and 14 females (g) Feel better off as result of the employment, 38 total answers: 22 males and 16 females. The Impact of Larger-Scale Agricultural Investments on Local Communities 23 Variation in number of Employees from 1st and 2nd Visit: Table 3.1.  selected companies Companies Permanent 2012 Permanent 2014 Temporary 2012 Temporary 2014 Maize Company 272 512 2,027 1,432 Flower Company 334 915 500 45 Sugarcane Company 1 113 100 198 na Sugarcane Company 2 900 900 10,000 6,000 Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) Companies were selected according to data available from the 1st and 2nd visits. (b) Sugar Company 1 and 2 refers to companies from different countries. for export using a more mechanized process, the num- feeling that there was “better job security as work is avail- ber of unskilled workers dropped from 2,000 to 800 even able every day.” In consequence there were few disputes or though more land was being cultivated and more skilled complaints by workers over payment. In addition the com- workers employed. pany provided flexible arrangements for working which included permanent contracts and a system that allowed 3.2 Pay and Employment employees to earn a “double income” by working on their conditions own farms during the peak season (for local produce) and then returning to the company for the rest of the year. Wages have risen since the first phase and gener- ally compare well to those available elsewhere. There were significant differences in wages and benefits between daily workers, field workers and Not unexpectedly, many interviewees would like to be permanent employees. paid better; yet they were generally happy with the overall terms and conditions of employment (Figure 3.2).12 Local Seasonal employees tended to express greater concern people recognized the need for more investors to come about their terms and conditions; typical concerns were so that there would be competition for labor, and hence financial insecurity and paying for medical expenses when upward pressures on wages. One interviewee mentioned sick. They were paid less, reflecting lower skill levels, but sal- that when he had previously worked at an operation in ary increases also appeared to be at a slower pace. In Ethio- another country, “there were many other investors locally; pia for instance, in some cases salaries for unskilled workers thus workers had the choice to change if they were not had not kept pace with inflation. Permanent employees happy with their job.” could be offered free accommodation and provision of basic amenities, including water and electricity. Some were In general most investors visited paid higher wages in com- provided with medical insurance, bank loans and educa- parison to the legal minimum wage and other agriculture tion allowances. In Ethiopia a supervisor stated that he felt workers. For instance in an operation in Cambodia, field- that the company offered him the possibility to learn from workers receive more than the legal minimum wage, and his experiences, including learning without intimidation much more than the average wage/income in the agri- from any mistakes. In contrast, seasonal employees rarely culture sector. Worker’s wages had increased from US$4 received these benefits. The lack of employment stability to US$5 per day between the two visits, with employees was also a frequent concern for seasonal workers. 12 In the case of some commodities, salary scale is defined jointly by the regional The recruitment process and employment conditions government, the unions and the companies. As such, this is not a sole decision were not always explained to workers before signing their from private investors. 24 Updated Voices from the Field contract. Investors should be aware that they are start- from a mask. In Mozambique a male employee stated that ing businesses in areas where formal employment—and workers applying agrochemicals did not wear protective the contracting process—is not known or well established. clothing as they should, removing them because they were Good recruitment strategies and clear employment con- uncomfortable under hot weather conditions. ditions are essential. Investors can adopt practices such as a Staff Human Resource Handbook and induction Training is a key benefit to attract skilled workers to inves- programmes according to local conditions. Contracts tors’ operations. About 60 percent of employees think and conditions should be adhered to. In Mozambique they have been receiving adequate training (Figure 3.2). employees interviewed stated that a company did not pay Topics include induction courses, occupational health overtime as agreed in contractual hours and obligations. and safety, business understanding programmes, training for safe agrochemical spraying, machinery operation and Local circumstances also need to be understood and HIV awareness. In Tanzania, one company offered train- respected. At one investment visited, employees expressed ing on how to save for retirement and provided education concern that companies did not respect local holidays and subsidies for employees to undertake higher education expected them to work, even for instance when they had programmes. Some unskilled workers were also receiv- a death in the family. Investors need to take heed of these ing extensive training, for example in driving tractors and issues, especially through close consultation with local operating machinery. In Ethiopia a former worker stated communities. that the company “is a place where you can learn from others who have more work experience.” He left the com- Although occupational health and safety regulations were pany to start a new job thanks to what he learned. common, practical application was often lacking, with supervisors not always following all the safety precau- Some investors were developing vocational training pro- tions carefully or employees deliberately flaunting opera- grammes to integrate local people into the workforce. The tional procedures due to discomfort in wearing Personal first study noted the skills gap in rural areas where investors Protective Equipment. Investors had not always created operated and the need for dedicated training programmes simple protocols, working instructions, or trained safety to integrate local staff. Some investors visited were indeed officers. In Ethiopia some female fieldworkers were con- developing internal promotion programmes (see Box 3.1). cerned that their supervisors did not follow safety precau- In Ethiopia a government official mentioned that local tions, thereby exposing them to agrochemicals and public minority group of people were also benefiting by learning health hazards. Similarly, in one Tanzanian operation new skills and knowledge. pesticides sprayers did not use protective clothing, apart Box 3.1. An example of an internal promotion On a maize plantation, the current incumbent responsible housing and other supplies (running water, electricity and for supervising the administration of agrochemicals noted he health care benefits). “The pay is relatively good,” he says. had been promoted three times in 14 years. He was born and Even though he received three days training on agrochemi- grew up on the farm. He started as a daily worker. He was cals six years earlier he mentions that, “I have experienced provided training on Integrated Pest Management, includ- many difficulties with new pests. Hence continuous train- ing agrochemicals storage, handling and safe use. Then he ing is needed.” The company offers to cover 50 percent of was promoted to a supervisor before reaching his current tuition fees for distance education programmes when the position. As a result, his living standard has improved sig- field of study is related to the current position. However, he nificantly, with him saving around 50 percent of his wage. was not yet been able to be benefit from this opportunity. Currently he earns 2,738 birr or US $132.78 monthly plus Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. The Impact of Larger-Scale Agricultural Investments on Local Communities 25 3.3 Work Environment The level of organization and strength of workers’ unions is a key determinant of job satisfaction. High quality, responsible management staff were crucial to developing trust and good relations At investments where a strong workers’ union was in place, with employees and, in turn, local communities. employees felt more satisfied that their concerns could be heard and collective bargaining agreements made. In Trust and open communication are important in order some cases, not only permanent but also seasonal workers to achieve operational success because they contribute to were able to join the union. On a maize plantation the building a positive work environment. Developing them managers supported the workers’ union and it was rep- depends heavily on the quality of management and the resented in the decision committee of the company. As ability of the investor to interact transparently and fruitfully a result employees have been able to engage in dialogue with local people, both employees and nonemployees. A with the investor and reach agreements through collective good system for worker grievances was particularly appreci- bargaining. One employee interviewed mentioned that, ated by many employees. In a maize plantation, fieldwork- “the collective agreement is a major instrument for deal- ers interviewed mentioned “we are happy with the way our ing with issues in a transparent manner that builds a good immediate supervisor treats us. She is like family to us. She level of trust among parties.” For example, the manage- always listens and tries to solve our problems with an open ment and union have agreed a policy of profit sharing heart.” In a spice company most of the managers were where 10 percent of annual profits are distributed to all drawn from the community, facilitating interaction with the employees.13 local community. The CEO was also closely involved with the local community. Where employees feel comfortable raising grievances with management, better relations and a 3.4 Female Employment more positive working environment were fostered. In many cases, the arrival of agricultural invest- ments has boosted women’s share of the local In contrast, poor management or supervision can have labour force; yet there was evidence of women a detrimental impact, especially where power relations being confined to lower paid and unskilled jobs; are involved. In the case of one company, the relationship and gender-defined roles remained. with one supervisor was so poor that if employees com- plained about aspects of the investment when govern- Women represent up to 50 percent or more of the work- ment officials asked for their views, they were afraid they force in the investments surveyed, with their employment would be fired. Another supervisor was accused by work- particularly concentrated in the role of fieldworkers. More ers of selling jobs for US$18 to US$52 or for the price than 70 percent of employees who responded to a ques- of a goat (US$13), having a tendency to employ friends, tion on opportunities (19 males and 16 females) thought and for asking for sexual favors in exchange for employ- that women now had more job opportunities than before ment. The senior management appeared to be unaware (Figure 3.2). A woman worker mentioned that, “the pos- of these accusations because employees had no means sibility of women getting employment, especially for those to raise them. There were cases in the visited companies who are from the local community given their limited edu- where action was taken when malpractice was discovered. cation and technical expertise, was very unlikely before In one company some local employees felt mistreated by the investment arrived.” In one case, a maize plantation, managers: as a result the company changed the manage- ment team and the situation was reportedly improving. 13 Also in collaboration with the company, employees have been organized into 5 associations to secure land from the government to construct houses reducing the total cost up to 50 percent. 26 Updated Voices from the Field 70 percent of daily workers were women, most of them easily could get information and prepare for entrance without previous work experience. In another case, at a examinations (for instance, by frequently working collec- spice company, around 60 percent of workers were women tively), women were often isolated and did not have the who were paid the same wage as men. Women were per- experience of working together. It was also sometimes the ceived as responsible and hard workers by investors; a case that some well-meaning initiatives reinforced gender view shared by some fellow male employees, as exempli- stereotypes practices. For example, at one company in fied by a man interviewed in Mozambique who argued Cambodia the number of female employees was very high. that women had more job opportunities because they This was because, as some female workers mentioned, “it worked harder than men. During the paprika harvesting is easy for a woman to work in the company because it in Mozambique, one company employed 20 women out provides accommodation and cooking areas which make of 30 seasonal workers because from previous experience it easier to do our domestic chores after work.”15 women picked the equivalent of 3 bags of the crop daily compared to 1.5 by men. Women’s aspirations, traditional lifestyles and cultural behavior were changing. Overall, however, female employment was concentrated in less educated manual tasks in the operations visited, Most of the 16 women employees interviewed (see Fig- such as seeding, watering, weeding, farming and harvest- ure  3.2) were pleased with the job opportunity because ing. At the highest level of management women were it was generating a positive impact on their lives and for almost absent. The reason claimed by investors for this their families and children. The second visits to the 8 gender gap was the lack of qualified women.14 Among investments were able to observe further cases that many the companies visited in one country, there was only one women were contributing to household budgets and seek- woman as head of a department. Nevertheless, women ing opportunities for further education and entrepreneur- workers visited in another country believed that with the ship initiatives. This boded well for personal development right qualification in terms of education, experience and and children’s health, nutrition and education, not least commitment it was possible for a woman to get promoted. because women’s saving propensity tended to be higher (81 per cent of female employees are saving money) in In order to overcome the gender gap in higher paid and comparison to men (Figure 3.2). managerial positions, some investors were establishing preferential training and internal promotion programmes. In Cambodia while many male employees interviewed did For example, in order to increase the number of female not feel financially secure, women in contrast mentioned employees, one company in Ethiopia provided incen- that were able to save up to 300,000 riels or US$75 per tives, for example, accepting a lower Grade Point Average month. Investment in agriculture, especially in rural areas, (GPA) of 2.75 for women in comparison to the 3 required could contribute to reducing the social obstacle to women for men employees. As a result some women were occu- working, and enhance women’s empowerment (Box 3.2). pying managerial positions. However a women employee One woman worker mentioned that her life has improved mentioned, “This benefit does not seem to compensate because of this employment opportunity, “I am receiving for the disadvantage because the information we need in a better salary and supporting my child, with savings of preparation for evaluations is not always equally available up to 2,500 birr per month ($120 dollars).” One operation to both men and women.” She explained that while men visited in Mozambique, the biggest maize field opposite 14 That is, a person who has finished primary school and undertook advanced Moreover work was distributed where high level intensive work went for 15 studies. women in the field and heavy work for men. The Impact of Larger-Scale Agricultural Investments on Local Communities 27 Box 3.2. Impact of employment on women In one area visited, historical and cultural reasons have other women to join them. There were now opportuni- limited women working outside the home. These reasons ties for widows who would otherwise struggle for income. included perceptions that they will neglect housework Women were switching from temporary to permanent and/or start a relationship with a male worker. Before get- positions and had increasing opportunities for promotion. ting married many women had to quit their job, if they had one, due to family pressure. As a consequence, cultural barriers have been reducing as investment in agriculture was contributing to reducing the Employment opportunities created by investors have begun social obstacle of women in the area and enhancing wom- to change these attitudes. Companies often preferred to hire en’s empowerment. For some women, the job represented women as they were perceived as more responsible and reli- a way of getting financial independence for instance to get able. “It is also easier to get both long-term and short-term out of a troubled marriage. This has been reflected in life- work for a woman,” some female workers stated. Their style changes of young women; one noted “we have a break families were starting to value their economic contribution; once a week and often go to the city center to buy things one female worker noted that because of this employment like clothes and hair oil from the market, and for entertain- opportunity “I can buy what I need and make savings. ment such as having tea or coffee.” Traditionally women Occasionally I also partly support my parents.” Another did not have long hair in the area, yet they were now adopt- interviewee mentioned “my husband’s job is harder and ing long hair, going to hairdressers, and changing their style more tiring than mine and so it is me that supports him. of dressing. These small shifts noted by researchers could I initially had a hard time convincing him to get employed be reflective of an increasing “transformation” of attitudes in the company.” Some female workers were encouraging and the shifting position of women in society. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. to one factory gate belonged to a woman employee. She junior positions; and training was essential to ensure this invested her money in some land and employed local peo- (Section 3.2). At one company in Ethiopia, 26 unskilled ple. She grew sesame seed which was sold to traders for women daily workers were trained to become machine 45 MZN or US$1.14 per kg. operators. They were considered as exemplary and role models in the community especially for young people. 3.5 Employment of locals Beyond this, companies had a variety of initiatives to increase the number of local workers (Box 3.3). Investments vary to the extent to which local communities were integrated into the workforce; A common concern among local communities was per- vocational training programmes to integrate local ceived favoritism by companies in hiring skilled workers people have worked and should be encouraged as from capital cities or neighboring regions where better part of project design and implementation. educated staff were available. In Tanzania one village council mentioned that most employees were migrants, Our cases studies found that employment of large num- even those in low-skilled jobs such as drivers which could bers of the local population sometimes occurred in the be easily sourced locally. The few employees from the vil- early stages in an investment, i.e., when more unskilled lages surrounding the investment were deemed to be in labour was needed. In many cases, few of the local pop- the worst paid and lowest quality jobs. ulation may have attended school and may be illiterate; restricting local employment to jobs such as daily laborers In some localities, villagers perceived that the recruitment or other junior positions (such as security guards around strategy of the company did not take into account the farms in many cases). recruitment preferences of local skilled people for mana- gerial positions; for instance advertisements may not have Some companies have had success in integrating local even been published in the community, nor were locals people into higher roles after initially employing them in 28 Updated Voices from the Field Box 3.3. Examples of company initiatives to increase the number of local workers • In Ethiopia, some companies were opting for developing employable. The regional university signed a MoU with roads. As a result, operations were better connected to the company that accepted students (mainly from the the local town and villages, reducing the long walking University’s Management and Economic Department) distance not only for employees, but also for children as paid interns for a short-term period (up to 9 months). and farmers in the area. Other companies were provid- Students assisted company staff members in supervision ing fieldworkers who lived in town with subsidized bus of field and other workers. They also kept daily records transportation from their home to the plantation in order of work done (e.g., number of trees pruned and crop to avoid the 1 to 2 hour travel by foot. In one case, a com- harvested). Results were presented daily in management pany had contracted 4 busses. However due to lack of staff meetings. Since 2012 the company has provided effective planning, transportation services were delayed traineeships to 20 students and 10 of them were offered up to one hour and were not available to everyone. permanent positions. Two students interviewed by the • On a maize plantation, a company’s recruitment policies research team expected to become permanent staff at the gave priority to locals where job applicants were other- company and agricultural specialists. wise equivalent in terms of education. Local farmers • In Mozambique, some local people (especially women) believed that this situation provided long-term benefits do not have ID cards, but this document is required since people thereby gain good work experience. How- in order to apply for a permanent job. Therefore, one ever, employees mentioned that local people were mainly company was helping local people to obtain ID cards so employed for short-term positions, with no definite pros- that they could get a job. “Before the investor came many pect of continuity. people did not have a vision for the future. But now they • Another investor had established partnerships with have applied for IDs to get employment. In fact, people NGOs and Universities to fund the training of local are more proactive about wanting work,” remarked a people in agribusiness and other skills so they were more supervisor interviewed. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. informed in another way. A standing example was a com- with positive results. “The interaction between the local pany among those visited which changed the manage- community and university graduates is contributing to ris- ment team to address many complaints on the preference ing aspirations among local people. Most especially they given to non-locals. In this case, this action has also led to create role models for young women,” a male supervisor more local minority people occupying managerial posi- mentioned. tions (i.e., there was also an issue between local majority and minority groups). The arrival of an investor in a region can also offer an opportunity for people of local origin to return to the Across all investments and regions visited, in general local area they had previously migrated from. For example, in villagers believed they had good relations with nonlocals Mozambique many skilled people left the locality or the and perceived that they were contributing to local growth country due to the war, but some were now returning as (for instance, through construction projects). In addition they have heard about employment prospects. companies were attracting young professionals from out- side the area. This was often the first time that university As a summary to this section, Table 3.2 lists some exam- graduates came to live and work in such places, sometimes ples of good and poor employment practices. The Impact of Larger-Scale Agricultural Investments on Local Communities 29 Table 3.2.  Summary of good and poor employment practices in operations surveyed Examples of good • Provision of employment opportunities for unskilled people, especially women. practices • Stability of income supporting a transformative effect through savings and investments. • Higher wages in comparison to legal minimum wage and other agriculture workers. • Expansion of operations, creating more job opportunities. • Provision of opportunities to switch casual and seasonal workers into permanent contracts. • Flexible working arrangements: e.g., provision for individuals to work on their farms during the peak season and then return to the company for the rest of the year. • Internal training and promotion programmes to integrate local people into the workforce. • Partnerships with civil society such as NGOs and universities to provide vocational training. • Clear and effective worker and community grievance mechanisms. • Workers’ union presence to establish collective bargaining agreements and engage in an ongoing dialogue with investor. • Job opportunities for women, improving women’s lifestyle and socioeconomic conditions. • Ancillary benefits to employees: transportation, subsidized food, and housing. Examples of poor • Lack of communication when company faces financial or other difficulties that will lead to a shortfall practices in job creation promises, or reduction in existing employment. • Unfulfilled job promises. • Unduly low compensation for casual or seasonal employees. • Absence of explanation about recruitment process and employment conditions. • Occupational health and safety regulations not being enforced and/or being monitored. • Poor management and abuse of power by direct supervisors. • Insufficient consideration towards training locals for skilled jobs. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 30 Updated Voices from the Field Chapter Four Rural development Investments can have a transformative impact on the communities where they are located.16 Much of this impact can be long term, and go beyond the immediate activi- ties of the investors. Employment provides the local community with salaries, which can be saved and invested to create further opportunities (Section 4.1). Over time, the local economy also thrives, initially from an expansion in small businesses— restaurants and other services—to, ultimately, bank branches, agricultural input sup- pliers, building suppliers and supermarkets (Section 4.2). Additional spillovers occur when investors, sometimes in addition to government efforts, develop infrastructure around the investment (Box 4.2). Spillovers can be negative. For instance, when the presence of an investment leads to a rise in local prices, including the price of land or the price of products in local shops; or where investments create a divide and tensions in the local community between employees who have money to spend and those who find life less affordable. It is important to recognize that positive spillovers are not automatic: the policies and practices of the investor and the government influence outcomes (for example, the capital intensity of production methods, the choice of crops, the use of outgrower schemes, or investment in education and skills). At the same time, much depends on local factors; for instance, the potential for knowledge transfer to local smallholder farmers depends on the latter’s existing capabilities and their ability to learn, absorb and utilize new knowledge. 4.1 Saving and investment of wages Salaries create opportunities for people to invest in fixed assets, land improvements or education. In the case of a number of agricultural investments visited, they have created oppor- tunities for the first time in remote areas where few opportunities existed before, 16 For an analytical framework of potential impacts of investments on an economy, including less common concepts such as “value chain multipliers” referred to in this section, see Mirza, et al. 2003. The Impact of Larger-Scale Agricultural Investments on Local Communities 31 especially for youth and women. In one area visited, local can support the means to invest in capital development farmers interviewed mentioned that many of their fam- (fixed capital, land improvements and human capital), a ily members—some without land—were working for the critical determinant of economic development. operation, and were making money. Before, the choices available for these family members were few: work on the In many cases, employees of investors also worked on farm, domestic labour or emigration from the area to find their own farms, and saving part of their wages enabled work. In some areas in the past, poverty had been accepted them to invest. In some cases household savings were up as the normal state of affairs. An employee interviewed to 70 percent. There were several cases of employees noted, “I have money now because I am working at the interviewed using savings to pay for vocational training; investment. Before it came, I did not have money. Now I employees also used savings to construct houses both to can buy what I need.” live in and to lease out as a further income stream. A num- ber of interviewees, e.g., in Mozambique, further com- This influx of incomes when multiplied across many mented on changes in attitudes and perceptions due to workers or contracted outgrowers, as well as other inputs wages earned; for example, people initially bought bicy- purchased locally by investors, has resulted in a transform- cles but nowadays, one could see more motorbikes and ative effect on the future aspirations and expectations of even motorcars, significant improvements in houses as most rural communities visited in the fieldwork. This was evidenced by zinc roofs and brick and cement structures,17 particularly the case for rural women (see Box 3.2). The as well as an increase in the number of shops. transformational impact was intensified as the income provided by employment opened up new opportuni- The transformational impact was also demonstrated by ties for people to save and invest in their own farms, in the fact that, with a stable income, a number of employees shops and businesses (Section 4.2), in health services, in on farms changed their risk assessment and invested part their own education and training or that of close relatives of their income to increase production on their own land (especially children). Such simple things, multiplied, could (including purchasing new land, expanding field size, and have a large local effect (Box 4.1). hiring tractors from the company or other sources). This generated income from the production and sale of sur- Employment can generate economic empowerment pluses, sold either locally to other employees, or benefit- and development in local communities. But it is not just ing from improved road access, to nearby villages/towns employment and the influx of cash which can drive this change. Other “transformative elements” include greater 17 For instance, a local villager in one locality visited described the type and size confidence and empowerment among local people, stable of the houses being built by the local community as in a very “modern” style, incomes, and higher levels of education. Investors thus and bigger than those in the majority of rural areas. Box 4.1. An example of how employment impacts on livelihoods Investment can generate positive outcomes by increasing Her husband was still working in the company. Her salary the possibility to save after covering household and personal was used for household and personal expenses while her expenses. A female interviewee started without a contract of husband’s salary was used for savings. The family could save employment as a daily paid worker, but after one year was around $75 per month (or 300,000 riels). After three years, promoted to a monthly paid post. She decided to work in they were able to save enough money to buy their own land the company for a further three years until she got pregnant. for $500 and build a house-come-shop to sell vegetables, She also received one month’s allowance for support during fish, meat and other foodstuff for $250. Currently when her pregnancy. As a daily paid worker, she was paid 16,000 interviewed, the family felt better off as now they had their riels or $4, but once she became staff in the second year she own house and business. They could provide better educa- was paid $110 monthly and in the third year $150 monthly. tion to their son. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 32 Updated Voices from the Field and to traders. Multiplier effects can be generated by such hands of a large number of local individuals (including practices extending further. For example, an owner of a employees of outgrowers, suppliers, contractors), with a retail shop who has done well from new business after the potential of a more inclusive growth effect. investment began mentioned that, as well as continuing with his present business, he intended to expand his farm Impact on local 4.2  by buying more land and planting mangoes and other high value crops. businesses Investors create spillovers in the form of linkages But rising incomes can create an insider-outsider with local businesses. status in that some people not employed by the investor can suffer due to rising prices. A major part of the spillovers arising from large-scale investors is because of the additional income in the local Overall, a rise in employment was generating higher economy, particularly when the income is widely dispersed incomes and local savings in most of the investment areas and the preponderance is spent locally. Investments cre- visited. When incomes and savings were reinvested into ate employment and attract people to an area, generating the local economy, this had positive multiplier effects, but indirect additional business opportunities for small busi- it could also create inequalities and rising prices can have nesses and suppliers. These businesses benefit from salaries a detrimental impact. A negative impact arises if people and wages of employees spent within the local economy. with lower incomes in the community face economic dif- In one locality visited, a government official interviewed ficulties as a result of a rise in prices. For instance, in the mentioned that the town had transformed dramatically, area surrounding one investment in Mozambique, local “everything started to change after the arrival of the inves- shops raised prices to reflect the rising income of employ- tor. Shops, hotels, and coffee shops opened quickly, one ees working for the investor. Over time, such consequences after another.” Local businesses can also benefit by access- created a divide in local communities, since those who did ing services or infrastructure (Box 4.2). In one instance, an not work for the investor could find life less affordable. investor has provided free electricity to support the opera- In Ethiopia, interviewees mentioned that once employees tion of local businesses where public electricity could be retired, they were no longer able to afford or rent houses, unreliable. and some resorted to begging in the streets. Economic spillovers can also occur through demonstra- A multiplier impact is by no means automatic. When tion effects or impacts along the value chain. Demon- wages earned by employees are kept as precautionary sav- stration effects occur when successful new ventures are ings they have little positive impact on the local economy. recognized and imitated by other companies. Investing in One way to manage unnecessarily high rates of precau- farmland operations to grow flowers was not perceived as tionary savings could be to develop a programme to train an opportunity in one of the countries before a company employees and others on how to manage savings and established an operation in this business, but its success channel this back into productive use. One initiative was has changed this situation and attracted the attention of reported in Tanzania, with an investor providing train- new potential investors. In another location, rice was not ing to employees on how to save for retirement (along cultivated before the investment took place, but has also with other courses delivered to raise language proficiency, resulted in additional investments. reading and entrepreneurship skills). Value-chain multipliers18 can also yield significant local Overall, the multiplier effect of the investment on the impacts. For instance an investor in Tanzania invested local economy observed was minimal when there were in a new processing facility, adding further value to the only a few highly paid workers (especially if those come primary product. The resulting product was sold to other from further afield), but the effect could be boosted by a higher share of cash flow being channeled through the 18 Op. cit. Mirza, et al. 2003. The Impact of Larger-Scale Agricultural Investments on Local Communities 33 Box 4.2. Infrastructure development by investors Notable improvements for the local community can arise development. Infrastructure has an enabling effect on from infrastructure development in and around the invest- local farmers and businesses, facilitating access to new ment, particularly in remote areas. Infrastructure develop- markets for their products, either for products grown to ment associated with the investment, such as building of sell or for farmers selling their surplus (Chapter 8). One roads, expansion of telecommunications, access to electric- investor provided financial contributions to support the ity, building of a police station, or improving access to water maintenance cost of the irrigation system constructed by supply generally has a positive impact on local communi- the government. In Cambodia, an investor has improved ties. The benefits derived are most visible when the investor the main road from the village to the city. According to operates in remote, rural areas. local people interviewed this was a major contribution of the investment to the community. “The improved road Infrastructure is generally developed by central or local access has stimulated more commercial activity in the vil- governments, but in a number of sites visited, it was lage,” mentioned a local villager. the investor who engaged directly in infrastructure Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. local beverage industries, creating some 60 additional In Cambodia, Tanzania and Mozambique, many entre- jobs. The new facility also acted as an incentive for local preneurs and business owners interviewed were former people from within and outside the area to establish logis- or current employees of the investors. These employees tics companies to support the investor’s operations. The acquired valuable knowledge working for the investment, extent of multiplier effects (value-chain or consumption) which they subsequently applied in the local business in such cases depended significantly on the level of work- community, either when leaving the investor or on a part- ers’ wages, which have been found, in some locations, to time basis while still employed (Section 3.5). rise at a faster rate than the cost of living in the area. In addition, the activities of the investors can provide Investors may not always represent a large market for local opportunities for remote areas or regions or zones to businesses.19 Companies may not generally buy significant retain their educated youth. In the past it would be com- materials from local shops, and it tends to be limited for mon for educated, diploma and degree graduates, and to local businesses to supply inputs and materials directly to some extent high school graduates, to migrate to the cities the investors, often because they do not usually stock the and in particular to the capital city to find a job. The situ- quantity, quality or type of inputs required by large-scale ation could change with the presence of rural enterprises investors. Investors may also operate in enclaves with lit- requiring skilled staff, thereby creating opportunities for tle or no interaction with the local business community better qualified local people to find gainful employment. rather than utilizing local services. There are exceptions, such as one investor in Cambodia who purchased coconut As a result of rising business opportunities around invest- leaves, food, chemicals, construction materials and petro- ments, satisfaction among retail owners was very high on leum products from local stores, or another in Tanzania average (Figure 4.1). which bought stationary and building materials locally. These spillovers can, however, have negative The spillover to local businesses can arise through effects, for example by impacting the prices at changes in the local job market. which goods are sold. Negative spillovers for retail owners or local producers can arise when investors sell basic commodities cheaply into 19 This does not refer to an outgrower scheme which connects local farmers to the local market (though these may represent ancillary a market. 34 Updated Voices from the Field Figure 4.1.  Share of positive/negative impacts mentioned in interviews with retail ownersa,b,c 100% Postive impact Average: 84% 75% Positive responses 50% (multiple responses permitted): 68. Examples: employment opportunities, good relationship and system to raise grievances, company is "good customer" and supports growth of local 25% economy, perceived as "better off," social development programmes. 0 0 Negative responses Average: 16% (multiple responses permitted): 24. 25% Examples: low purchases by workers, low salaries, negative impact on environment, unfair compensation for resettled people, unful lled promises, investor's sales at lower prices. 50% Negative impact 75% Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. Notes: (a) The sample includes 6 investments and 15 stakeholders interviewed. (b) Impacts of the investment mentioned by retailers interviewed are classified as positive or negative. Figure shows the balance of positive and negative mentions for each investor. A level of 100 percent means that the stakeholder interviewed mentioned only positive impacts. (c) The total number of responses indicating a positive impact was 68, and a negative impact was 24. benefits for their own employees). Unfair low pricing strat- between people whose income has risen compared to oth- egies were reported for two investments, with the percep- ers. This can also lead to a negative impact on food secu- tion that the investor was undercutting local producers. rity for those not employed by the investment, owing to a reduction in purchasing power. Rising land prices can cre- Spillovers impact on local businesses may also be negative ate winners (land owners) and losers (those seeking access when the presence of the investment leads to a rise in local to land) within a community. prices, including the price of land near to the investment (e.g., in the case of one investment in Tanzania, the price As a summary to this section, Table 4.1 lists some exam- of land rose after people from other parts of the country ples of good and poor practices or unintended outcomes moved to the area) or the price of products in local shops related to spillovers. rose, potentially creating a divide in the local community The Impact of Larger-Scale Agricultural Investments on Local Communities 35 Table 4.1.  Summary of good or poor practices or unintended outcomes related to spillovers in the vicinity of operations surveyed Examples of good • Incomes and savings invested in the local economy, towards education and skills development or practices and towards best agricultural practices (e.g., drip irrigation) on own farms. positive outcomes • Initiatives and training provided on how to save, for instance for retirement. • Investor raises awareness of a new business opportunity (e.g., cultivating flowers) where it was not done before (demonstration effect). • Investor shares services and infrastructure with local businesses (e.g., free provision of electricity). • Investor buys local inputs and materials (when available). • Investor invests along the value chain, with a multiplier effect locally. • Investor trains local employees who go on to become entrepreneurs (or work in other businesses). • Investor raises job opportunities locally, reversing the exodus of skilled labor and educated youth. • Investor and/or government build roads, especially beneficial in remote rural areas. • Investor supports local irrigation system. Examples of poor • Limited or no local supplies bought by the investor. practices and • Low pricing of basic commodities by the investor in the locality. unintended negative • Enclave operations by the investor with little or no interaction with the local business community. outcomes • Rise in local prices (of land and goods) following increase in incomes for some people or because of an influx of people to the area that creates a divide in the local community. • A disproportionate percentage of precautionary savings limits the economic spillovers and multiplier effects arising from the investment.a Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) The emphasis is on disproportionate. In general, precautionary savings have positive impacts on people’s lives by making them more financially resilient. However, because of insecure condi- tions, a lack of knowledge on how to best save and invest for the future (see second bullet under good practices), or the mechanisms to do so, individuals and households may save at a rate which is undesirable from the broader perspective of the community and economy. 36 Updated Voices from the Field Chapter Five Technology Transfer The impact of large-scale agricultural investment on rural communities through technology or skills transfer occurred primarily through training. The impact was uneven, varying substantially from site to site, depending on the business model, crop and other factors. Under the best circumstances, the deployment by farmers of new technology introduced by investors could allow them over time to move from subsistence to commercial farm- ing, generating funds that can be reinvested, but this is not always the case and, indeed, there can also be negative repercussions from technology transfer (Box 5.1).The impact of large-scale investment through technology transfer was uneven, and at some sites vis- ited, local farmers felt there has been no transfer of any consequence (including where outgrower schemes were involved). In other investments, positive technology trans- fer from investors to the local farming community was reported, taking place mainly through training of employees and outgrowers, sharing of farming techniques, provi- sions of inputs (such as seeds, agrochemicals or fertilizers that can raise the productivity of local farmers), and in limited cases through sharing of tools and machinery. Investors could open up markets for local farmers by introducing mechanization, improving access to roads or providing finance. Employees who were also farmers could apply skills and capital (wages) gained from their job to their own farm. Knowledge transfer takes place through formal training of local farmers, on-the-job field training, informal meetings, or through visits to plantations. One of the companies visited in Ethiopia has developed a “model farmers system” in which the company pro- vided experts to train local farmers in ways to increase productivity. Training was pro- vided in collaboration with the local agricultural bureau. So far, some 400 farmers have benefited from this training, and further plans to develop an outgrower scheme by the company have already been approved. Visits to the company farm can also be a useful means for learning: one farmer mentioned that the investor’s farm served as a “demon- stration to local farmers on how to better utilize fertilizers and agrochemicals.” Farmers who took part in this training indicated that so far they had learned how to plant maize The Impact of Larger-Scale Agricultural Investments on Local Communities 37 in a modern way, and how to grow vegetables and fruits However, at two sites visited where biofuel crops (for such as mango, papaya and oranges more efficiently. instance, jatropha or sugarcane) were produced, tech- nology transfer was found to be limited, first because the The ability of local farmers to adopt new technology investor was not growing the same (or complementary) depends in part on the crop chosen by investors and crops as local farmers and second because local farmers how this fits with local cultivation. On one site visited, felt the investor was not providing the package of technol- local farmers were encouraged to “interplant” a crop ogy and finance required to support their adoption of the introduced by the investor with their regular crops. The new crop. Some local farmers reported that there was a production of the new crop did not displace short-term lack of certainty of returns if they introduced the new growing of their regular crops (for instance corn, durians, crop, others mentioned that its introduction required cap- mango, soybean, cassava), as those were suited for inter- ital intensive technology (such as irrigation), which was a planting given that the crop required partial shade condi- barrier as they did not have the resources to fund it. tions. Crop choice could further impact on food security when local farmers continue to grow their own staple This means that the types of technology being transferred food, and new techniques provided by investors help raise may not be suitable for local farmers as they may not have yields of their crop, thereby adding an income stream for the necessary finance, skills, equipment or experience/ local farmers. The risks associated with changes in crops, capabilities to utilize it. Indeed, small-scale labor-based such as income sensitivity to commodity prices, should production systems may rely on different technology com- be assessed and managed. In some cases, profitable cash pared with large-scale commercial agriculture. The meth- crops allowed people to buy food which could be a bet- ods transferred need to be appropriate and applicable to ter survival strategy than precarious food crops in some smallholders. Although local smallholders recognized the areas. need for mechanization and irrigation to improve their capacity to work the land and raise yields, they often felt Strengthening local farmers’ knowledge or build- they did not have the financial resources to acquire (or ing on existing knowledge can facilitate adoption rent) the equipment or technology required. of new techniques. Technology transfer was more noticeable in the In one case, local farmers gained experience with a previ- presence of outgrower schemes. ous investor a few years earlier on methods to cultivate a crop; this helped them adopt suggestions from the new One way to incentivize technology transfer could be for investor more quickly. In another case, farmers learned investors to mainstream outgrower schemes into project new techniques and applied practical instructions received design, identifying gaps in knowledge and specific train- from experts on their own land, such as the use of organic ing needs and gaps in capital requirements to adopt the fertilizer, timing of planting and logistical arrangements requisite technologies. One investor has introduced a sys- on collection and dispatch. One farmer stated that she tem for crop improvement, using village farmer groups learned how to use cow dung as fertilizer, including mak- supported by an extension office and demonstration plots ing her own fertilizer using effective microorganisms on applying the Farmer Field School approach. purchased dung. Funding and partnerships are important elements of out- Some former employees—for instance in Ethiopia— growers’ schemes and programmes (Box 5.1). One company reported being able to find jobs in other companies on the visited during the first phase of this research had a develop- basis of skills and experience obtained with the investor ment plan for outgrowers in place, with training provided visited. This is an important example of people not being to about 100 local farmers. In the second visit, however, the dependent on individual investors, but able to apply their programme had stopped due to financial constraints. skills elsewhere. 38 Updated Voices from the Field Box 5.1. A microfinancing partnership for farmers’ associations An investor was able to develop successful programmes costs which were between US$19–23 per acre. The level in partnership with an international organization and of loan recovery achieved was 95 and 98 percent for each local farmers’ associations. The company has also signed year respectively. In addition, farmers could receive loans an agreement with microfinance institutions to provide through their farmer’s association and pay 10 percent for farmers associations with loans. In the first year (2012) 3 or 6 months. However, concerns regarding the interest 148  loans were given, followed by 885 given out in the rates applied were raised by farmers, “the programme is second year. These loans were used, among others, to buy expensive as one bag of fertilizer costs US$14 but we have computers and other equipment, or to cover ploughing to pay back the loan at US$28 after three months.” Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. Programmes implemented by three investors visited were benefit equally from schemes, and well-off farmers with reliant on outside bodies and/or funders to support the more land and experience have been found to benefit development of outgrower schemes. One investor in Tan- more, leading to friction in the local community. Secondly, zania was advocating the Block Farming approach, where outgrowers may be encouraged to replace traditional groups were formed and their lands were farmed as a (staple) crops with high (cash) value added ones. This block. Another investor utilized a “model farming system” can have an adverse impact, for instance, if outgrowers’ conducted in partnership with the regional government, income subsequently becomes more sensitive to fluctua- and as a result of which participating farmers have seen tions in commodity prices. A number of outgrowers also yields as much as double. A local training agency played a expressed concerns that they have become dependent role in providing contracted training to association (group) on the investor buying the bulk of their harvest. Some management, as well as piloting a small-scale furrow irri- outgrowers mentioned that though they initially switched gation project for both farmers to improve yields. from traditional crops (for instance, paddy rice) to sugar- cane, they have since switched back again. Thirdly, when In Tanzania, outgrower schemes were developed through outgrower schemes are linked to a local farmer’s associa- collaboration between farmer associations and one of the tion, their success is associated with the success of the investors visited. Local farmer associations represented association; fragmentation and disagreements amongst farmers, working as an advocacy body to raise issues, small-holders can undermine a scheme. and were registered with the Ministry of Home Affairs. This could be a useful means for smallholders to benefit Such concerns expressed by a number of outgrowers from joint warehousing facilities, marketing knowledge or in areas visited explain why they, on average, reported access to finance. On the one hand, these associations can fewer positive (technology) impacts from the investment ease communication with the investor; but on the other, (Figure 5.1). internal friction among members has been known to occur (with some smallholders leaving the association in As a summary to this section, Table 5.1 lists some exam- some instances). ples of good and poor practices by investors impacting on technology transfer. A number of concerns have been raised by outgrowers. A number of interviewees expressed concerns that could arise from outgrower schemes. Firstly, not all outgrowers The Impact of Larger-Scale Agricultural Investments on Local Communities 39 Figure 5.1.  Share of positive/negative impacts mentioned in outgrowers interviewsa,b,c 100% Postive impact 75% Average: 56% Positive responses 50% (multiple responses permitted): 56 Answers: revived interest for planting high value added crops, better productivity, technical support, work 25% opportunities, social development programmes (infrastructure), use of organic fertilizers, good grievance mechanism, communication. 0 0 0 Negative responses (multiple responses permitted): 42 25% Answers: unful lled promises, prices, degree of land utilization, delays in compensation process, less access to Average: 44% natural resources, respect of sacred areas, expensive outgrower schemes, pollution. 50% Negative impact 75% 100% Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) The sample includes 4 investments and 9 stakeholders interviewed. (b) Includes outgrowers and farmers associations (c) All impacts of the investment mentioned by outgrowers/farmers’ associations interviewed are classified as positive or negative. Figure shows the balance of positive and negative mentions for each investor. A level of 100 percent means that the stakeholders interviewed for that investor mentioned only positive impacts. Table 5.1.  Summary of good and poor practices affecting technology transfer in operations surveyed Examples of good • Create dedicated local farmer/outgrower development programmes. practices • Foster partnerships with relevant group of stakeholders (e.g., farmer associations, local agricultural bureau, NGOs). • Organize regular on-site visits for local farmers/outgrowers to promote information exchange and on-site learning opportunities. • Demonstrate how to grow new crops, use of intercropping. • Incentivize farmers’ learning (e.g., use of organic fertilizer, timing of planting and logistical arrange- ments on collection and dispatch). Examples of poor • Lack of assessment of local outgrowers’ financial resources and ability to learn new techniques. practices • Insufficient action to bridge the gap between technology utilized and the training required by local farmers. • Lack of or no local sourcing. • Promises made but not fulfilled, causing tensions with the local community. • Insufficient attention to the needs of smaller, poorer farmers: better-off farmers with more land and experience benefit more from outgrowers’ schemes. • To replace traditional crops by high value added ones could have a potential to raise food security vulnerability and farmer income sensitivity to fluctuating commodity prices. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 40 Updated Voices from the Field Chapter Six Relocation and Resettlement 6.1 The impact of resettlement Physically resettled people tended to have the worst perceptions of investments. Resettlement and relocation was a significant area of contention in some locations visited. Whereas across the entire sample, stakeholders mentioned 2.5 positive impacts for every one negative impact, for resettled persons the ratio was one positive impact for every negative impact (Figure 6.1). Even those who mentioned positive impacts in other respects, such as employment or infrastructure, tended to perceive the experi- ence of resettlement itself as negative. The impact of resettlement depended on how people perceived their living situation had changed after the resettlement. Typical grievances from resettled persons were that the compensation was inadequate or that replacement land was not equivalent in terms of soil quality and suitability for agriculture. For instance one resettled com- munity20 voiced their disappointments about the outcome; they claimed that they have lost their farmland without adequate compensation for their land, that there was no compensation for their crops, that the replacement land was unsuitable for farming as it contained dangerous animals and was flood-prone, that the houses constructed were too small for their families, that their children now had to travel much further to school, that there is now no interaction with the investor and that they are marginal- ized and reap no benefits from the presence of the investor, and that many of the com- munity had given up on the area and moved further away. Those interviewed noted they were staying because they were getting too old and did not want to move and start a new life again. Another particular area of concern was that not sufficient support mechanisms were provided along with financial compensation. In cases where people received financial compensation for being resettled, the impact depended substantially on how people use 20 The number of resettled people interviewed is 13. Just one investor did not face a resettlement process. The Impact of Larger-Scale Agricultural Investments on Local Communities 41 Figure 6.1.  Share of positive/negative socioeconomic impacts mentioned by resettled persons 100% Postive impact 75% 50% Average: 51% Positive responses (multiple responses permitted): 76 Answers: access to basic infrastructure, social 25% development programmes, employment, consultation process, technical support. 0 0 Negative responses (multiple responses permitted): 77 25% Answers: access to natural resources (e.g., grazing land), communication, degree of land utilization, compensation delays, less space in village, impact on local productivity, 50% Average: 49% unful lled promises. 75% Negative impact 100% Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) The sample includes 7 investments and 13 stakeholders interviewed. (b) All impacts of the investment mentioned by resettled people interviewed are classified as positive or negative. Figure shows the balance of positive and negative mentions for each investor. A level of 100 percent means that the stakeholder interviewed for that investor mentioned only positive impacts. the money. Individuals’ levels of education and social capital There were, however, positive cases of resettled persons could influence the extent to which they were able to manage investing funds received in new land to cultivate other receipt of a lump sum compensation payment. In the worst crops or to pursue new business opportunities, such as cases, resettled persons had reportedly spent the money shops; or by using the funds for further education for on alcohol, weapons, or purely consumptive purposes. In themselves or their children. Some resettled persons were such cases, the financial compensation did not contribute to able to save the compensation money for their retirement restoring the ongoing livelihood of the resettled person as or as an emergency fund (Box 6.1). intended. This indicates the need for policies, resettlement procedures and support mechanisms to help resettled popu- In many cases, the process of resettlement tended lations deal with the consequences of the resettlement.21 to lack transparency, consultation and appeal mechanisms. Most resettled persons interviewed felt that resettlement 21 There are internationally recognized guidelines such as Voluntary Guidelines on was forced upon them and that they did not have suffi- the Responsible Governance of Tenure of Land, Fisheries and Forests in the context of national food security (VGGT), Environmental and Social Performance Standards and cient voice in the decision to resettle, or the terms of the Guidance Notes (IFC Performance Standards), and Environmental and Social Frame- resettlement agreement. There was a perception of inad- work—Setting Environmental and Social Standards for Investment Project Financing (World equate involvement of resettled persons in the discussions Bank, 2016). Tools also have been developed such as Respecting Land and Forest and selection of areas to which they were to be resettled Rights—A Guide for Companies (Interlaken Group, 2015) 42 Updated Voices from the Field Box 6.1. Uses of resettlement compensation money An Ethiopian farmer interviewed was required by the account each year and perceived this as “renting money to regional government to sell his farm so that land could be the bank.” He expected that when he retires he will be able provided to the investor. He was compensated 135,000 birr to live off the interest on his savings without working. for a quarter hectare of land. Since then, he has put all the A nurse at an investor’s medical center had her parent’s money in a savings account in a bank in the nearest town. land expropriated by the regional government. With the Each year he got 6,000 birr in interest. It was seven years compensation, they purchased a house in the nearest town since he has received the compensation and he has been and invested in her education in nursing. When she fin- able to start several business ventures: he had a khat planta- ished her education and passed the national qualification tion on the site of his house; he rented farming land to cul- exam of nursing, she was hired by the investor as the nurse tivate maize, green pepper, tef and other products; and he of the site. was engaged in animal fattening. He was adding to his bank Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. and in negotiation procedures. A group of farmers oper- benefits did not materialize (for example, insufficient job ating near a rice plantation noted they expected to be creation), or the land was not put to active use follow- resettled, but did not know when, or how, or under which ing the resettlement, community relations were quickly terms and conditions. undermined. For example, in one investment surveyed a resettled farmer expressed his disappointment that he was The consultation and communication of information displaced but his former land remains uncultivated. Com- needs to take place before, during and after the process. munication during the Environmental and Social Impact Resettled persons often felt marginalized once the pro- Assessment and/or Resettlement Action Plan with a com- cess was complete and had no means to appeal or have munity would be more effective by establishing how and further interaction with the investor afterwards. The tim- when the land will be used. ing of moves was also important. Resettled persons need adequate time to consider, prepare and make the move Lengthy delays in the resettlement process were also during the most appropriate season. problematic. First of all, this contributed to an extended period of uncertainty for local communities. Second, the Unfulfilled commitments and unmet expecta- level of compensation initially agreed on may no longer tions were particularly damaging for relations be adequate once the resettlement actually took place. In with communities. particular, in case that land markets developed upon the arrival of the investor, resettled people may not be able to Inadequacies in the process for resettlement opened the acquire equivalent land with the compensation amount at door for perceptions among affected communities that a later date. promises or expectations had not been met. In several instances there was a disparity between what the investor As with the first phase of field research, resettlement pro- thought the process and commitments were, and what the cesses led by the government to “pave the way” for inves- local community had expected. Access to reliable infor- tors were problematic, with room for misunderstanding mation could be the most important factor in a relatively and miscommunication. In such cases, there sometimes successful resettlement process. were misinterpretations between local governments and investors on how and to what extent the government Some people were content to move because they felt they conducted the consultation procedures before investors’ had received a commitment that benefits of the invest- arrival. That led to lingering resentment within local ment would materialize in due course. But when those The Impact of Larger-Scale Agricultural Investments on Local Communities 43 communities which investors ended up having to deal area. These owners were not actively using the land due with upon arrival. In some cases, community perceived as to the lack of road infrastructure, making the area difficult the government had made commitments (for instance, for to access. In this case, voluntary resettlements had led to job creation) that the investor was unaware of and unable better relations with the local community than those pre- to meet. vailing elsewhere. The Village Chief assisted in the iden- tification of potential buyers but was not involved in the Unclear land laws created situations of conflict over land negotiations. rights when local governments offered land to investors, especially where customary land was concerned. Situa- In a similar vein, people may opt voluntarily to move so tions arose in our sample where local leadership had “sold” the investor needs to have a proper process in place for the land to local people, but the government recognized that. Although not resettled, people may feel pressured to it as the government’s land so the government directly move as the operation develops around them, so in these sold the land to the investor. Therefore, the person who cases too there must be a compensation and relocation had “bought” the land from the local leadership had to be system in place. Some investors visited have offered finan- resettled. Although technically no compensation should cial compensation, construction of houses and ploughing apply, investors visited have normally followed available of fields in new areas under such circumstances. best practice, such as the IFC Performance Standard on land acquisition and involuntary resettlement. A few investors have chosen to release some of the conces- sion area so that communities can be left in place. This Purchases of land on a willing-buyer, willing- has been done with some success at investments visited seller basis have worked well, as have situations in Mozambique and Tanzania, for instance one company in which investors have left communities in place gave up 300 hectares because the area was too heavily rather than attempting to resettle them. occupied. An alternative to resettlement used by one investor in As a summary to this section, Table 6.1 lists some exam- Cambodia was to purchase land on a willing buyer-willing ples of good and poor strategies or practices of the selling basis. This was land mainly purchased from former resettlement. Khmer Rouge soldiers who had been allocated land in the 44 Updated Voices from the Field Table 6.1.  Summary of good and poor strategies or actions in cases of resettlement at operations surveyed Examples of good • Purchase of land on a “willing-buyer, willing-seller” basis. strategies or actions • Leaving communities in place; working with and around them, rather than resettling. • Putting in place a system for voluntary relocation. • A clear strategy for land allocation, proper consultation, the setup of clear communication channels and strategies between various stakeholders’ agreement on compensation for houses, and transparent systems to monitor and control the payment of compensation. • Full documentation and audit of existing land plots, crops, houses and structures. • Compensation according to negotiated and agreed compensation rates. • Proper witnessing and recording of compensation payments. • Training on land valuation and negotiation. • Giving people the choice between building their own houses with materials provided or building houses for them. Examples of poor • Absence of grievance or redress mechanisms. strategies or actions • No ongoing consultation or follow-up audit by the investor after the resettlement has taken place. • The land from which people have been resettled left idle. • The government prepares the land for the investor by resettling people in advance without following due process. • Resettled area has reduced access to water, schools, clinics, roads, shops and so on. • Displacement of smallholders to less agriculturally productive areas. • A lack of a proper witnessing and recording of compensation payments made as part of the resettlement. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. The Impact of Larger-Scale Agricultural Investments on Local Communities 45 Chapter Seven Environmental Impact 7.1 Perceptions of environmental impact Local people were often insufficiently conscious of environmental degra- dation. For many this was secondary to improving livelihoods. The topic of environmental impact was often referred to in stakeholder interviews, but with a lower level of priority compared to other issues. In spite of the number of stake- holders who perceived some negative change to the biophysical environment, it was only occasionally that environmental degradation was strongly felt as a negative issue. Economic effects seemed to be much more prominent in the minds of local communi- ties; and environmental conservation (or improvement) tended to be less prioritized. One government official interviewed was concerned that, “the impact will be observed in the long term. Thus, so far nothing has happened.” Where environmental concerns were voiced these were more frequently from community members not directly associ- ated with the investment (Boxes 7.1 and 7.2). Moreover, since some investments were established in remote areas to which people moved only after the investor arrived, concern about environmental degradation has been muted. For example, in Ethiopia a male worker made the point that, “when this farm started here some years ago it was a jungle, no one used to live here.” The most common issues raised were a loss of biodiversity and extensive use of agrochemicals, including pesticides. The intensive use of land and natural resources could contribute to conversion of natural and critical habitats that may lead to a loss of diversity (Figure 7.1). At one operation visited, local people claimed that poor forest management was causing the reduction in biodiversity and a drop in wildlife numbers. The area referred to had been cultivated previously by another investor, but then abandoned and reverted to natural bush; it was again cleared by the new investor. When the operation was visited the area was fully cultivated. The Impact of Larger-Scale Agricultural Investments on Local Communities 47 Figure 7.1. Perceptions on environmental impact, all stakeholder interviews Number of answers Postive impact Negative impact 13 Land and biodiversity 23 3 Soil conservation 4 2 Seed management 0 1 Energy usage 0 9 Chemical usage 17 2 Air pollution 9 Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) Based on the total number of responses from interviewed stakeholders. The impact arising from the usage of agrochemicals, bagasse in the old chimney system at one plant was said to especially on water resources, was considered as the sec- be causing ash pollution. As a result, ash drifted down into ond largest negative impact (Table 7.1). “Agrochemical nearby houses. Also, the same company did not maintain use has caused the soils to deteriorate,” mentioned a local its roads properly, therefore, during rainy seasons dirty teacher. Training for the proper use of chemicals—and water went into the canals and rivers. information on the consequences of their misuse—were often not clearly provided or communicated to employ- All of the above, combined with insufficient consultation ees and the local community. In some cases local farmers processes with local communities, has resulted in concerns were not skilled in applying agrochemicals correctly. As on public health issues and plenty of complaints, some a result of this the potential to create adverse impacts on of which have been dealt with (Box 7.1). It is essential surface and groundwater could be severe. Near a flower that investors move to remedial measures and monitoring company this had fueled speculation about the effects of mechanisms to mitigate the direct and indirect environ- chemical misuse, for example on fertility in women. In mental impact of their operations. 22 response to this, the company has explained to workers and the community that agrochemicals were controlled 22 In such cases, the government authorities can play an active role by moni- by national authorities who sold them to the investor. toring companies and taking measures to ensure compliance with local and international environmental pollution standards, e.g., the IFC PS3 standards. Environmental and Social Standard 1. Assessment and Management of Environmental At an investment in Ethiopia the burning of grass waste and Social Risks and Impacts (World Bank Environmental and Social Framework—Set- products reportedly caused air pollution in the vicinity. At ting Environmental and Social Standards for Investment Project Financing) also provides another investment in Tanzania the inefficient burning of practical guidance. 48 Updated Voices from the Field Box 7.1. Impact of chemical usage and water infrastructure The use of agrochemical sprays applied aerially has report- some nearby farms because of the use of agrochemicals edly caused damage to maize and paddy rice crops (fungus at an incorrect growth stage. As a result of this finding, and germs) at local farms near one operation visited. “The the investor has agreed to pay compensation to those with company must change the way it applies chemicals because legitimate claims. Instead of these positive initiatives, the the wind causes drift and there are many children around issue may not be fully resolved yet. Some farmers inter- this area,” mentioned a female farmer. Because of commu- viewed argued that, “we still face the problem of water nity complaints, the company has ceased aerial application contamination.” In addition, recent complaints have been and now uses tractors rather than planes. received that even with ground application, children were reportedly coughing during times of chemical application. The investor undertook an extensive follow-up investiga- tion that also showed damage may have been possible to Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 7.2 Education, However, an investor in Mozambique has been making efforts by banning hunting on their site.23 In another case consultation and in Tanzania, past illegal use of agrochemicals by a local raising awareness community to kill and catch fish was causing the demise of fishing in the river; after a consultation with the com- There is a role for investors to raise local aware- munity this practice has been stopped. Another company ness of the environment through education and has developed an initiative with the forestry department, consultation. as a result of a consultation carried out with the local community on environmental issues. Action by the com- Investors have a responsibility to raise local awareness of pany in concert with the forestry department has reduced their policies and management procedures, as well as spe- animal poaching and stopped the cutting down of trees. cific environmental and social risks and impacts arising from Environmental outcomes are better when a local commu- their operations. This might include combining efforts with nity and investor have effective, ongoing communication, other stakeholders, such as NGOs and government insti- including in finding joint solutions to common environ- tutions, as well as supporting local initiatives. However it mental problems (Box 7.2). seemed to be not a priority for many investors. A local com- munity has established an environmental committee, which includes monitoring duties. They requested the investor’s assistance, but its support has been minimal; only 14 pairs of gum boots were given for those patrolling in the bushes (to make sure people would not cut trees to make charcoal). 23 This is a requirement of the Rain Forest Alliance. Box 7.2. Common solutions to common problems In Tanzania at one site visited, flooding was resulting in soil smallholder areas on the opposite side. In response to this, erosion. In order to solve the problem, the company built a and in consultation with smallholders and with funds from dyke to prevent flooding on its side of the river. However, the EU Sugar Structural Adjustment Fund, another dyke this solution is reported to have caused more inundation on to protect smallholder land has also been constructed. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. The Impact of Larger-Scale Agricultural Investments on Local Communities 49 7.3 Changes in access by distributing 2,000 liters of water per day by truck; but due to fuel shortages this has stopped. to water As discussed in Section 7.1, stakeholders interviewed also Local villagers near operations visited saw water avail- had concerns about possible chemical contamination of ability as a positive impact arising from the investment. water (Box 7.3). As a result many people in the vicinity of The contribution of investors in improving availabil- some investments did not make use of runoff water from ity of drinking water by constructing irrigation systems operations into rivers or canals (e.g., at the end of the irri- and pumps for domestic water was in general appreci- gated blocks of land). They were particularly aware of the ated (Figure 7.2). In Tanzania a company had a water potential impact on children. treatment plant and villagers collected tap water for free from the company; before this people were using bore- As a summary to this section, Table 7.1 lists some exam- hole water. Such largesse was not always well maintained ples of good and poor practices by investors impacting on however: in Mozambique another company promised to the environment. provide water to local villages. They fulfilled this promise Figure 7.2. Perceptions of impact on water, all stakeholder interviews Number of answers Postive impact Negative impact 9 Improve water access 11 0 Irrigation schemes 5 7 Water comtamination 5 22 Water availabilty 4 Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. (a) Based on the total number of responses from interviewed stakeholders. Box 7.3. Concerns on water contamination A company visited in Tanzania undertook an annual Envi- However local farmers mentioned that they did not receive ronmental Impact Assessment (EIA) conducted by consul- any information from the EIA. They claimed the com- tants accredited to the National Environmental Council pany has not done anything about mitigating the negative (NEC). The audit covered issues such as the waste manage- impact on water quality. There was a lack of communica- ment on the entire farm, worker welfare, soil conservation, tion about assessment and monitoring results. pollution from fertilizers, and water use and quality. In addition, checks were conducted on the implementations of recommendations previously made. During the EIA, around 10–15 water samples were taken. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 50 Updated Voices from the Field Table 7.1.  Summary of good and poor practices for environmental impact in operations surveyed Examples of good • Support community initiatives to conserve the environment, as part of the Environmental and Social practices Management Plan. • Prohibit hunting on site, cutting down of trees, and similar practices in protected areas. • Work with the national authorities’ conservation programmes. • Replace the use of agrochemicals with organic fertilizer, such as treated cow dung. • Create a separate system of domestic waste. • Implement infrastructure changes to mitigate negative impact, such as airborne pollution or water contamination. • Water infrastructure development and improvement of local water access. Examples of poor • Excessive pressure on natural habitats critical for flora and fauna; having a potential to contribute to practices loss of biodiversity. • Absence of communication about the potential deleterious impact of agrochemicals (and how to use them safely). • No ongoing consultations or communication, fueling speculations on the nature and effect of agro- chemicals under use. • Burning of grass and bagasse, leading to air pollution. • Poor government monitoring in water use rights. • Lack of dissemination of/consultation on Environmental and Social Impact Assessment results to community. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. The Impact of Larger-Scale Agricultural Investments on Local Communities 51 Chapter Eight The roles of investors and governments in social and infrastructure service provision Social or community development programmes were typically appreci- ated, especially those which were consultative, in connection with local needs and well funded. Some investors, especially those operating in remote rural areas, have made signifi- cant contributions to local development through social development programmes (Box 8.1).24 In general these were appreciated by both employees and other stakehold- ers; in the latter case, however, there were continuing concerns of unfulfilled promises and the role of governments. Box 8.1. Examples of social development programmes • In Ethiopia, an investor operated in an area with a high to workers. Thus, the incidence of malaria has decreased prevalence of HIV. The company, in partnership with the since people are learning how to take preventive measures. workers’ union and two local NGOs, has set up a charity • Investors in Mozambique and Ethiopia have constructed focused on support of HIV positive individuals, as well schools in the community. On the second visit at one as orphans and single-headed households who have lost site, the school had 500 students of 12 years and above. income providers due to the disease. It provides financial, The new school has allowed high school children to con- medical and material assistance as well as organizing centrate on their education, rather than having to travel HIV/AIDS education workshops. 17 km daily to get to classes, as before. On two other sites, • In Cambodia, an investor has supported the USAID investors have built primary schools, one included three Malaria Control Programme by distributing mosquito nets classrooms for grades 1 to 7. Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. 24 In addition to running community development programmes, investors support other requests and initiatives from local communities, but this is not always recognized. For example, one company’s support to the local community in Tanzania is channeled through committees and therefore may not be always visible as its contribution. The village government does not inform the community about the origin of the grant. Thus, many villagers presumed that the projects are self funded. The Impact of Larger-Scale Agricultural Investments on Local Communities 53 Box 8.2.  An example of a social development programme cut due to financial constraints in Tanzania An investor in Tanzania had established a community a vocational training college, a secondary school, improve- development programme (funded to the tune of 32 million ment to water supply (e.g., pipes in homes), a market dis- shillings or US$15,057 per year). Funds were distributed to pensary, and improvements to the roads and electricity. 3 villages around the investment. Access to clean water has However due to financial constraints, the company was not been improved through the programme (in collaboration able to pay the grant the year it was visited, and expressed with regional agencies and a third-party fund); it now comes the fear that this would be the case in subsequent years. from pumps whereas it used to come directly from the river. As a result, construction at the school and hospital has The fund had also been used to fix roofs and start building stopped. Many local people interviewed were unaware that classrooms in the local primary school. It was also being this was taking place. “The company has not explained used to build a hospital and provided an ambulance. “The why,” noted a local villager. Councilors complained that nearest government hospital is 75 km away and impossible the company “is providing insufficient information about to reach, taking several hours by road.” mentioned a local their operations and hence we are unable to verify if the villager. In addition, some other promises have been made: company is profitable or not.” Source: UNCTAD-World Bank Survey of Responsible Agricultural Investment Database. The most successful programmes were those that Countries may not have the resources—or capabilities— responded directly to local needs as ascertained through to fulfill all the social and infrastructure service needs of a consultation process; those that were fully funded and rural communities. In such cases, the possibility of com- not dependent on project-based profitability of the inves- bined financial and other efforts by governments and the tor; and those that were done in collaboration with NGOs private sector was seen as a possible solution by many or other organizations (e.g., workers unions) who are also stakeholders spoken to, but normally under the overall able to connect with local needs. One of the reasons such authority of the country. With such a combined effort in conditions are important is because otherwise there are mind, villagers interviewed at an investment in Cambodia significant dangers of promises not being fulfilled or com- were optimistic that the road built by a company would be munity development programmes being curtailed when a complemented by the government, improving electricity company runs into difficulties (Box 8.2). supply. Some electric supply lines have already been put up along the main road by the investor. The respective roles of investors and govern- ments: Governments have the primary respon- However, in an area visited in another country local farm- sibility in social and infrastructure services ers were less sanguine. They have expressed their concern provision. to the local government that there was lack of access to water due to an unrepaired borehole. The government At almost all investments visited, investors were acting was however reported as arguing that since the farmers to support and provide social services to the community, were in an area under concession to an investor, they were including by building schools, improving electricity sup- no longer responsible. As a result they feel abandoned. plies, constructing of roads and so forth. Many stakehold- ers interviewed were pleased with this support, but felt With governments sometimes not undertaking fully their that the government should not rely on investor actions. responsibilities, as well as companies being inadequate or “There must be better involvement of government in the consistent in what they take on, there is a risk of an insti- development of the community,” argued a local villager. tutional void developing in many rural areas. In the face 54 Updated Voices from the Field of such dangers, stakeholders in the communities visited proactive rural and urban planning around large invest- were clear that their governments must recognize and ment sites. As mentioned in Chapter 4, investments act as fulfil their primary role in rural economic development, a magnet for people and economic activity. As the popula- including through the provision of social and infrastruc- tion around an investment grows, it needs to be accompa- ture services. nied by improved services, including water and sanitation, access to health and education, and so on. Governments With the arrival of the investment, many of these com- would be well advised to consider these issues in advance, munities have been through a “local growth phase,” with rather than after the event, as advised by the communities both positive and negative consequences. Overall they visited. argued that their respective governments should conduct The Impact of Larger-Scale Agricultural Investments on Local Communities 55 References African Union, UN Economic Commission for Africa IFAD and TechnoServe (2011). Outgrower Schemes— and African Development Bank (2010). Framework and Enhancing Profitability. Technical Brief. Rome: International Guidelines on Land Policy In Africa. 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