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AEC 2012 - Land Acquisition in Africa Threat or Opportunity for Local Populations

16-Oct-2012

Foreign acquisition of farmland has become a contentious political issue in African countries targeted by these deals. This paper studies the welfare e§ects of FDI in farmland on the local population. We build a heuristic microeconomics model of local peopleís occupational choice in the context where the selling or leasing of local farmland to foreign investors is decided by the government. The government invests the proceeds of these deals to subsidize farming inputs used by local farmers, thereby stimulating job-creation in the local sector producing these inputs. These new job opportunities raise the payo§ to local people from shifting to wageemployment, thereby easing the pressure on farmland. The model shows that welfare gains to local people crucially depend on two necessary and su¢ cient conditions: (i) the country is landabundant, and (ii) the government, in addition to being accountable to local people for the deals it negotiates and for its use of the proceeds, also has a su¢ ciently high capacity to negotiate such deals.

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