The G8’s goal to increase private sector investment in Africa could offer new solutions to global hunger or it could be the new face of a failed solution.

G8 leaders expanded the New Alliance for Food Security and Nutrition last week in the lead up to the G8 Summit in Northern Ireland. The New Alliance, started by the G8 last year, has an ambitious goal of lifting 50 million people out of chronic poverty over 10 years. In 2012, $4 billion was committed in support of private sector investment in African agriculture. British Prime Minister David Cameron wordily explained last week: “For business, it’s about harnessing the power of enterprise to educate people on the importance of nutrition in order to sell healthier food and make a commercial return while also transforming lives.”

African countries that sign on to the Alliance can expect big money from corporations: over $3.8 billion is expected to flow to the three newest members of the Alliance–Nigeria, Benin and Malawi.

More than 70 companies, including 53 from Africa, are part of this new set of investments, but they come with a few strings. Governments in the recipient countries must first make reforms, including increased sourcing from smallholder farmers, improving farmers’ access to seeds and fertilisers and investment in processing, storage, and transport. Sponsors of the initiative hail it as a way of mobilizing large amounts of money and knowledge to strengthen weak value chains.

But advocates for smallholder farmers think the poor will be left behind.

“Investments in the New Alliance are predominantly intended to include smallholder farmers in sourcing and production. The onus is on the initiative itself and other key stakeholders to transform intentions into results,” stated ONE, a poverty advocacy group, in an evaluation the program.

Critics of the New Alliance, including a group of African advocacy groups, believe private sector partners will not live up to the initiative’s intentions. Critics expressed concern in The Guardian’s “Poverty Matters” blog that the New Alliance allows profit-seeking multinational corporations to benefit at the expense of smallholder farmers.

As the G8 meets this week, the arguments for and against this type of investment have heated up.

The pro: Focusing on private investment will help smallholder farmers access new markets

According to the UK Department of International Development, partner countries in Africa will gain access to private sector investment in agriculture through the New Alliance. In return, countries must modify their agricultural policies to strengthen seed quality, change land use laws, and raise farming standards. They argue that corporate investments will strengthen weak value chains through:

• Homegrown investment: The number of projects in the six original partner countries is heavily weighted toward African firms.
• Mobilization of resources: A few major corporations can make a large financial impact quickly. Together, Syngenta and Yara, two European agriculture firms, have committed $2 billion to New Alliance projects.
• Strengthening markets: Corporate investment in processing raw goods can be a vital tool to support farmers. Cargill is investing in processing starch and sweeteners from the locally grown cassava root in order to support Nigerian farmers as part of a New Alliance initiative.

“We are allowing our products to rot away because we are not processing them. Agriculture is not a development activity. It is a business, so we must add value to every single thing we produce.” – Akinwumi Adesina, Nigeria’s Minister for Agriculture and rural development, in the Financial Times.

The con: Focusing on private investment will exclude poor farmers

“This is a skewed free trade, one that favours the ‘formal sector’ of goods and services that have gone through approval and registration processes. Farmers and other producers of goods and services who cannot afford to enter the official approval system are marginalised and trading of their products is rendered illegal.” —African Civil Society, a group of African advocacy groups.

According to the advocacy group African Civil Society, the New Alliance’s aim to engage the private sector benefits corporations at the expense of smallholder farmers. Critics have described the Alliance’s efforts as an opportunity for multinational corporations to secure markets in Africa. The policy reforms made by partner country governments in Africa would leave out small farmers who cannot afford to enter the formalized agricultural structure. Farmers with small plots of land will be affected by:

• Expensive seeds: The Alliance’s insistence on a certain quality of seed will force poor farmers to buy expensive seed from multinational corporations.
• Losing land: The land use law changes may sanction land grabs from smallholders and the poor.
• Intense competition: Poor farmers will not have the resources to produce competitively priced items or to go through approval and registration processes. Wealthy and educated farmers would outcompete many smallholder farmers.

Global leaders have recognized the important role big business and private investment can play in improving agriculture and alleviating hunger. Now they must work to set up a framework that both includes the interests of the world’s 450 million smallholder farmers and ensures they can actually participate competitively in world markets.

Will the kind of private investment the New Alliance aims for be a boon for African agriculture, or a bust for poor farmers? Which side of the fence do you fall on?

Including smallholder farmers in value chains can help feed the developing world. Photo: CIMMYT (flickr).