NEW ANALYTICAL FRAMEWORK ENABLES AGRIBUSINESSES TO ASSESS AND MANAGE THE RISKS OF LAND-BASED INVESTMENTS
NEW ANALYTICAL FRAMEWORK ENABLES AGRIBUSINESSES TO ASSESS AND MANAGE THE RISKS AND OPPORTUNITIES OF LAND-BASED INVESTMENTS
At some point in every agricultural value chain, security of land tenure is a pre-requisite for investment and growth – whether for smallholders, larger farms, or actors upstream and downstream. Yet in many African countries, land rights and land governance are ambiguous, complex and poorly managed. Companies that understand the risks posed by insecure land rights and that engage host communities can secure a competitive advantage.
Grow Africa is promoting a new tool to help companies assess and manage risks relating to land tenure: the Analytical Framework for Land-based Investments. Additionally, we seek companies willing to pilot use of the framework over the next year, and participate in a review of its usefulness.
Trial the Analytical Framework
On behalf of the New Alliance, Grow Africa seeks 10 companies willing to pilot the use of the Framework. One of our team will go through the tool with you. If risks are identified from this analysis, then we will help connect you with international land experts who can work with you to develop risk management strategies (although this is likely to be on a commercial basis). All companies piloting the tool in 2015/16 will secure an invitation to Grow Africa’s prestigious Annual Investment Forum in May 2016, in order that they can join a review of the Analytical Framework’s effectiveness.
Please get in touch with your Grow Africa point of contact, or email firstname.lastname@example.org to communicate your interest in participating in this pilot.
Benefits of Using the Framework
The Framework is designed to assist investors and companies in aligning their policies and actions with global and continental guidelines on responsible land-based investments, most notably the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security (VGGT) and the Guiding Principles on Large Scale Land Based Investments in Africa (LSLBI) . Farmers and agribusinesses in Africa face growing pressure to demonstrate compliance with these guidelines, whether because they seek finance from institutional investors, or because they are commodity suppliers for international supply chains. Many such commercial partners now explicitly require due diligence and risk management relating to land issues, all through their value chains.
Many companies, especially smaller domestic ones, do not have the technical capacity to operationalize these international instruments, and this Framework offers them a due diligence and risk management resource to apply to their land-based agricultural investments. It is an effort to provide advice and highlight best practices related to structuring investments in the most responsible way possible. The Framework includes red lines that indicate in which situations investment projects should be cancelled if no benign alternatives can be found. The Framework also clearly rejects the transfer of land rights to investors involving tracts of land that exceed the amount reasonably required for the true purpose of immediately using the land for agricultural activities.
The Framework should be used throughout the life of the project, beginning with the preliminary project assessment, followed by the due diligence phase and continuing through the negotiation, agreement, operation and close-out phases. Hence, while the Framework ideally should be used from the beginning of a project, it can also be used after a project has commenced, as land tenure risks can and should be assessed well beyond the due diligence and start-up periods, especially in areas where communities have insecure land rights.
Beyond the legal and moral imperatives, effective use of the framework also offers compelling long-term commercial benefits:
- Reduced risk of costly community grievances, land disputes, or litigation from regulatory non-compliance
- Eligibility for commercial or development finance
- More sustainable management of natural resources
- Access to markets with defined minimum standards
- Enhanced reputation and license to operate
The Framework derives from a commitment made in 2014 by the Leadership Council of the New Alliance and Grow Africa to develop a harmonized set of operational guidelines for implementing land-based agricultural investments. It was developed by an international group of land experts and vetted through consultation with a broad array of stakeholders. The Leadership Council welcomed and recognized the Analytical Framework as a tool for investors, and agreed to assess experience with the framework in one year.
Banner image courtesy of Phoenix Seeds