Initiative casts doubt on benefits of land rush

In 2007/08, agricultural commodity prices spiked. Following a similar pattern of rising food prices last year, independent global monitor the Land Matrix Initiative reviewed the global land rush in developing countries.

Drawing on evidence from its database as well as a literature review, the initiative's third analytical report examines the socio-economic and environmental impacts of this surge in large-scale land acquisitions (LSLAs). The findings are alarming.

Despite gradually declining in number since 2014, a total of 1,865 deals have been registered in the Land Matrix database since 2000. Figure 1 illustrates this trend for all concluded, failed, and intended deals where data was available. This represents a staggering total targeted size under contract of 33m ha – comparable in area to Italy or the Philippines. 

Now, as global demand rebounds with the world slowly starting to recover from the COVID pandemic, but simultaneously facing supply bottlenecks because of armed conflict between countries that are important for exporting agricultural commodities, is there another land rush on the horizon?

With the rate of global LSLAs potentially accelerating and projects on land acquired over the past 20 years beginning to be implemented, it is as important as ever to ensure we protect rural livelihoods and natural habitats – especially given the record of such investments to date. Figure 2 shows estimates that reveal vast areas of the contract area of all concluded deals are not yet under production.

According to current Land Matrix data, in at least 18% of concluded deals the land – or part of it – was or is used for smallholder agriculture, pastoralism, or shifting cultivation. Combined with poor tenure security, this often leads to local communities being displaced.

Such conflict could be avoided through consultation. However, the Land Matrix report shows that most consultation on LSLAs is inadequate. There was no consultation on almost 45% of the more than 250 global deals for which Land Matrix has information.

For example, overall, less than 0.5% of the national workforce will be employed on acquired land in most countries. This is because labour intensity is often low already, thanks to mechanised farming.

These land investments are no remedy for precarious labour markets either, as most jobs are temporary and underpaid. Likewise, LSLAs seldom benefit national food security, since most investors focus on international commodity markets. For instance, oil palm-related deals in the Land Matrix database account for more than 20% of the area currently cultivated with this crop worldwide.

Other cash crops such as rubber, sugar beet and sugar cane are also significant commodities. The focus on such crops casts doubt on the expectation that LSLAs will substantially improve local food security and help forestall the global increase in undernutrition. If anything, local food supply might actually see a downturn as smallholder production shifts to cash crop growth, or is replaced by export-oriented large-scale farms.

Moreover, while it is true that higher incomes from LSLAs might improve food security and reduce poverty – as evidence from various studies from South East Asia implies – the report suggests the effects on income will be limited for most other countries.

In the past 15 years, global land investments have also encouraged new deforestation worldwide. The greatest loss of forest cover is in South East Asia. According to Land Matrix estimates, about 1.3m ha were lost between 2000 and 2019 in the area under LSLA contract registered in its database.

That loss of forest is likely far from over, given that after acquiring the land the actual establishment of plantations and farms is still relatively slow. As rates increase more deforestation can be expected in Southeast Asia, the Amazon and Africa's Congo Basin.

But more than just forests are under threat. Of the land deals recorded in the Land Matrix database, 54% are intended to produce crops with high water use, and 34% out of all deals take place in dryland zones.

It is even more worrying that 10% of all deals produce crops that require large amounts of water and are located in dryland zones at the same time. These deals increase pressure on local water resources and are an important environmental consequence of uncontrolled land acquisitions.

The data also reveals that, on average, larger projects, biofuel deals and targeted acquisitions of land formerly used by smallholders or pastoralists are more likely to fail. For example, almost 80% of deal failures occurred in sub-Saharan Africa, of which almost 75% were on former smallholder land. The hasty acquisition of land for poorly planned projects following price spikes led to many failures.

One crop stands out in this regard: 50% of deals – mostly in sub-Saharan Africa – involving the flowering plant jatropha – have failed to date. Jatropha also illustrates how expectations about global policy triggered a glut of LSLAs for biofuel production, which was not as profitable an initially thought. The biofuel sector was driven largely by government policies in several regions, such as the EU, US and Brazil, where blending targets with conventional gasoline and biofuel tax exemptions created an incentive for private investment.

This is particularly disconcerting because transparency is fundamental to responsible investments and one of the principal guidelines of the related global frameworks. These include chapter 12 of the Voluntary Guidelines on the Responsible Governance of Tenure (VGGTs) dealing with investments, and principle 3 of Responsible Investment in Agriculture and Food Systems. In Africa, for instance, only two of the 23 countries assessed by the Land Matrix have 30% of the data required to monitor VGGT implementation.

Analyses on the transparency of land deals in other regions show similar trends. Data is particularly scarce on investment processes – including consultations, free, prior and informed consent, compensations, and displacements – as well as on socio-economic and environmental impacts such as job creation, quality of employment, contribution to local production, and biodiversity loss.

Governments and the private sector seem equally reluctant to share and publish information. The report emphasises that regulation is imperative, including transparency as a central principle for more comprehensive due diligence on sustainability.

Even though some progress has been made in recent years, a number of countries have responded to the weaknesses of land governance with appropriate policies; however, these have been mostly paper exercises. For example, international soft law instruments, most notably the VGGTs, have been used more often as a basis for land policy scrutiny and reform, but often lack impact on the ground.

Land governance needs further reforms – particularly to resolve key risks associated with LSLAs. Policies need more mechanisms to impose sanctions or raise grievances, so as to protect the land rights of those affected by LSLAs, especially smallholders, pastoralists, and indigenous groups.

Not only are new policies needed, but those already on the table need to be implemented, as is apparent from the assessment of the inconsistent application of the VGGTs.

Overall, the report clearly shows the urgent need to transform current LSLA practices into responsible and sustainable contributions to economic and social development.