Food security in Southern Africa
An interdisciplinary analysis of the effects of foreign direct
investment in the agricultural sector
Romee Prijden, 10761314 Boris Kreecke, 10784039 Mark Kapel, 10776931
Version: 3st
Date: 23th of December Tutor: Koen van der Gaast Supervisor: Marc Davidson Word count: 6141
0. Abstract
This paper contains an analysis of the effects of foreign direct investment in the agricultural sector on the food security in Southern Africa. Southern Africa is a highly vulnerable region, exposed to risk such as environmental hazards, land degradation, diseases and food insecurity. Theories and concepts of three disciplines, earth science, business and economy, are used to create a theoretical framework. Within this theoretical framework, multiple criteria are created. Three different cases will be studied and the criteria will be assessed. The first case of Zambia and the second case of Mozambique show the negative effects of foreign direct investment on food security. The third case of South Africa shows the possible effects on food security. In conclusion, foreign direct investment could be beneficial for both the investor and the host country if strict regulations and laws are implemented and controlled by the government.
Table of content
0. Abstract... 2 1. Introduction... 4
1.1 Introduction... 4
1.2 Study area... 4
2. Methods and interdisciplinarity... 5
2.1 Methods... 5
2.2 Creating common ground... 5
2.2.1 An interdisciplinary approach... 5
2.2.2 Integration techniques: Organization and theory expansion...5
3. Theoretical framework... 5
3.1 Definition of main concepts... 6
3.2 Relations between concepts... 6
3.3 Criteria... 8
4. Case studies... 9
4.1 Chinese FDI in Zambia... 11
4.2 Favourable regulations in Mozambique... 12
4.3 Transnational cooperation in South Africa... 13
5. Discussion... 14
6. Conclusion... 14
1. Introduction
1.1 Introduction
In 2000, the UN established a list of millennium goals for the year 2015. One of the aims was to reduce the people living in food insecurity with 50 percent. In Southern Africa, this goal has not been achieved (Amelia, et al., 2014). Southern Africa, not to be confused with the country South Africa, is the
most southern region of the African continent. It includes multiple countries, some of them listed as development countries. Only few of these countries are able to produce enough food to fulfil their own needs. To meet their needs, countries also rely on import and food aid (ibid.). The region is highly exposed to poverty and HIV/AIDS infections. Besides that, the region is highly sensitive to environmental hazards such as droughts and floods (Food and Agricultural Organization, 2009). In addition, arable soils are experiencing degradation as a result of old-fashioned conventional farming practices. This results in yield loss and an increased runoff of important nutrients (Baudron et al., 2007; Thierfelder et al., 2013).
However, this highly vulnerable area is attractive for foreign companies. This is mainly due because of available unoccupied arable land and low cost labour. This resulted in an increase of Foreign Direct Investment (FDI) (Grant, 2013) . FDI is considered to be a major channel for developing countries to adapt to and implement new technologies (Borensztein et al., 1998). However, until now there has not been much research on the potential effects of foreign direct investment on food security. However, FDI is still being promoted by intergovernmental organizations e.g. the World Bank, as a tool to effectuate development.
In this research the effects of foreign direct investment on the food security of countries in southern Africa will be investigated. To conduct an interdisciplinary research study, the following research question has been formulated: ‘To what extent is food security affected by foreign direct investment in the agricultural sector in Southern Africa?’ The research that is going to be conducted will limit its scope to FDI in the agricultural sector of Southern Africa Development Community members.
1.2 Study area
Southern Africa is consist of the most southern countries of the continent Africa. The region comprise 11 countries as can been seen in figure 1. The vegetation of Southern Africa ranges from desert, to grassland to forest (Cowling, 2004). The main resources of the Southern African countries consist of raw resources like platinum, diamonds, gold and uranium. However, the economic growth is pressed by poverty, diseases and declining arable land. The most countries in Southern Africa are food depended on foreign countries, they do not produce enough food themselves. Key factors such as political instability, droughts, population growth and low
economic growth affect the food security of these countries (Misselhorn, 2005). In terms of GDP the most developed country is the region is by far South Africa.
According to Drimie, et al (2011), Southern Africa will face some environmental challenges in the future. Over the next decades, the climate will be drier and warmer; an increase of 2- 5 degrees Celsius is likely. Besides that, there will be a shift of the wet season, resulting in more rainfall in shorter periods of time with shorter time between wet periods. Although rainfall is expected to increase, water availability will continue to be a problem. At this moment, there are plenty of underground water reservoirs, but they are not suitable as a source for drinking water. Land degradation will be a great challenge in the future because of disturbances such as wrong land use management and also because of increasing risk of wildfires. Although there is
appropriate natural resource management implemented, the rate of land degradation is going faster than the technology adoption. Therefore, land degradation will be a challenge for rising food demand and food security (Drimie, 2011).
2. Methods and interdisciplinarity
2.1 Methods
The purpose of this research is to explain the effects of FDI on the food security in Southern Africa. The research problem and hypothesis will mainly be based on explanatory qualitative research. All data used by each discipline will be secondary research of scientific literature. A theoretical framework was made and within this framework, common ground between the disciplines has been created. With the given concepts and theories in the theoretical framework, an analysis will be made with multiple examples and cases based on the criteria.
2.2 Creating common ground
2.2.1 An interdisciplinary approach
An interdisciplinary approach was conducted because of the different perspectives of the researchers: Earth science, business and economy. The discipline of earth science is focused on the factors that influence the sustainable production of food. How are the environment of the countries in Africa influenced by FDI and what are the effects on current and future food production. The economy discipline gives explanation of why and where FDI occurs. The economic theories provide elaboration what the drivers are to investment in FDI. The concept of business zooms in at the firms that operate in FDI. What are the relations between firm and community and do these contribute to food security or do they have negative effects? These three disciplines are equally important in order to investigate the effects of FDI on the food security. An interdisciplinary approach is used for complex problems with more than two disciplines are involved.
2.2.2 Integration techniques: Organization and theory expansion
To integrate the different insights of all the disciplines, a model was made using the organization technique. This technique clarifies the relations between the concept and provides a broader perspective to the subject. Organization identifies commonality in concepts or assumptions, then redefines them, and then organizes, arranges or maps the causal links between them. These causal links were then used to expand the theory.
The figure 2 above shows the relations between the different theories and concepts. The main question of this research is based upon the relation between
food security and FDI. The relations in the model will be explained in the theoretical framework.
3. Theoretical framework
This part of the research aims to explain the concepts and clarify the relations between these concepts. Important theories and their related concepts will be discussed. Next to that, the relevance of these concepts for this research is explained. On the basis of these concepts some criteria are made which contribute to answering the main question.
Figure 2: A model created using integration techniques such as organization and theory expansion.
3.1 Definition of main concepts
The two main concepts of this research are FDI and food security. Therefore these concepts will be explained firstly. FDI is defined as building or acquiring productive assets in another country (Grant, 2013). More specifically, FDI occurs when a business in one country establishes a business operation in another country. This could either be realised through setting up a new wholly owned affiliate, or acquiring a local company, or forming a joint venture in the host economy (Moran, 2012). Firms can use FDI to enter new markets, acquire access to resources and capabilities in foreign countries or take advantage of foreign legislation (Grant, 2013). FDI also plays a common role in the agricultural sector. This occurs when foreign companies buy or lend land in a host country (De Schutter, 2011).
Food security is defined by the Food and Agriculture Organization (FAO) as access to enough food to live a healthy and productive life for all people. On the World Food Summit in 1996 is that ‘food security exists when all people, at all times, have physical and economic access to sufficient safe and nutritious food to meet their dietary needs and food preferences for a healthy and active life’. In scientific research the term is often used to describe the access a country has to enough food to meet dietary energy requirements (Andersen, 2009)
3.2 Relations between concepts
The relation between FDI and food security is very complex, because there are a lot of factors involved. Therefore the relation can be approached from many different perspectives. Businesses can either apply market seeking or non-market seeking FDI. Market seeking FDI is when products that are produced in the host country are also sold in the host country. Non-market seeking FDI is when these products are sold in the home country (Aseidu, 2002). Market seeking FDI could improve the food security in a country, when foreign companies are more efficient and able to produce higher yields than local companies. However, this relation only holds when the foreign companies sell their products for prices comparable to local market prices. However, when FDI is non-market seeking, the host country can actually lose agreeable land to businesses that produce for their home country. This type of FDI is described as land grabbing, which can be very harmful to the host country. The reason is that the host country might lose control over the way food is produced and distributed, which can make it hard to decrease poverty (De Schutter, 2011). This can result in a decrease in food security. This either positive or negative impact on food security is the most direct relation between FDI and food security.
However, businesses often have many other reasons to invest in foreign countries then only to make profits from local markets. Other reasons are available freshwater resources, arable soils, favourable weather conditions or low-cost labour (Rulli, et al., 2013). Businesses can search for the cheapest option when investing abroad and try to take advantage of (the lack of) local labour and environmental legislation (Harrison, 1994). The pollution haven hypothesis is the theory that describes how businesses internationalize with the goal to avoid environmental legislation in their home countries, which results in more pollution in the host countries (Harrison, 1994). However some nuances must be made. Some argue that the pollution haven hypothesis is outdated. This is because the theory assumes that the transaction costs to internationalize are lower than the costs of adjusting to environmental legislation in the home country (Harrison, 1994). This assumption seems in many cases not to hold, because transaction costs of internationalization are often much higher. Next to that, it is shown that businesses in many cases apply cleaner technologies than domestic firms in host countries (Harrison, 1994). Nevertheless environmental effects and pollution have a negative impact on food security (Gregory, et al., 2005). This is because the available arable land can decrease through land degradation (Holden & Shiferaw, 2004). Because of the conventional farming practices such as intensive tillage and residue burning, many arable soils have a lack of soil cover. Because of deep tillage methods, the soil has no time to create a layer of organic matter, which results in runoff of precious nutrients and a weak soil structure (Baudron, 2007; Thierfelder, 2013). These factors are important for crop growth, strength and therefore the crop yield. Besides that, pollution
of water is a threat for food security. This is because, water availability limits the maximum amount of crops produced (Hanjra & Qureshi, 2010). The environmental effects of an investment are dependent on the origin of the investment. Taking into account that an investment is aimed at producing food, several environmental effects are possible. For example, food production in the host country often leads to overexploitation of important freshwater resources. This has a negative impact on the local community, who rely on those resources as drinking source and for agriculture (ibid.). Besides that, intensification of agriculture by using chemical pesticides and/or fertilizers and mono-cultures will contribute to the decrease of the quality of the soil (Sangwan, 2013).
Furthermore, businesses are often blamed for disrupting local markets, because they look for low-cost labour. However, they often pay higher wages than local firms, which result in an increase in average wages (Harrison 1994). Employment has a positive impact on food security, because it can give locals access to the market (Gregory, et al., 2005). Besides that, FDI employment contributes to economic growth, through the diffusion of technology and knowledge (Borensztein et al., 1998). These new technologies and knowledge could spill over to the local market when local employees stop working for the foreign business or when the foreign business collaborates with local enterprises, which is defined as backward linkages (Alfaro et al., 2004). Borensztein has shown that a one dollar increase in FDI in general results in an increase in total investments of more than one dollar. However, the relation between FDI and economic development is more complicated. FDI will only lead to economic development if the local population is able to understand new technologies and knowledge and apply this outside of the foreign business activities. This requires a certain level of education of the local community (Borensztein, 1998). Besides that it is claimed that a well-developed financial system is necessary to let FDI cause economic development. This is because it is generally shown that economic development is barely possible without decent financial management (Alfaro, et al.,, 2004). However, FDI can also crowd out local business activities. The reason for this is that domestic firms might not be able to compete with foreign businesses, because foreign businesses have competitive advantages (Borensztein et al, 1998). So, FDI can lead to economic decline or development. This is relevant because economic development has a positive impact on food security. The reason for this is among other things, less poverty and increased access to markets (Gregory, et al., 2005).
So the drivers of the businesses have great impact on the relation between FDI and food security. The attitude of a business towards society could be based on the principles of the ‘Corporate Social Responsibility’ (CSR) concept. A broad definition of this concept refers to the business practices involving initiatives that benefits society; in social, economic and environmental contributions (Carrol, 1979). The concept on its own seems to be slightly vague and difficult to connect in specific situations. The following theories will help to give a better illustration of the concept of CSR, the strengths and the threats, and by the evaluation of the situation in Southern Africa. The first concept is aimed at the positive effects CSR could create for the recipient countries, the concept of shared value. The concept of shared value is based on the principle: “creating economic value in a way that also creates value for society by addressing its needs and challenges” (Porter & Kramer, 2011). The concept of shared value is aiming at creating both enhanced competitiveness of a firm and improving the social and economic conditions of society. However, the theory state an important condition that is necessary to be met for a successful implementation: governmental involvement. Governments should set guidelines, through regulations, that business stimulate to contribute to shared value (Porter & Kramer, 2011). According to Dentchev, Balen and Haezondonck (2015), governments can support CSR in two ways: mandatory and voluntary. The mandatory approach is appropriate in cases when objectives are clear, expected outcomes are measurable and when there are different stakeholders with different interest. The voluntary approach is appropriate when: the cases need collaboration of multiple stakeholders to resolve social and environmental challenges. By applying CSR and creating shared value businesses can avoid environmental damage and create economic benefits. Therefore, when these concepts are applied, this will have a positive impact on food security. However, businesses can also communicate that they apply CSR or
create shared value, when in fact they are not. This is described by the greenwashing concept that is based on the communication between businesses and community about the environmental and social benefits of the firm. The concept defines two sins of greenwashes: ‘the sin of no proof’ and ‘the sin of vagueness’. The first one can be described as environmental or social claims that cannot be backed up by easily accessible information or by certification of third parties. The second, claims that are vaguely defined and thereby easily misunderstood (Bazillier & Vauday, 2013). Since CSR is often related to reputation of the firm, there is a high incentive for firms to selectively communicate information of their operations (Bazillier & Vauday, 2013).
A good example of how CSR can be applied in the agricultural sector following the approach of Conservation Agriculture, which is more sustainable than conservative agriculture. It has the following definition: “A concept for resource-saving agricultural crop production that strives to achieve acceptable profits together with high and sustained production levels while concurrently conserving the environment” (Food and Agricultural Organization, 2015). Conservation Agriculture, referred to as CA, wants to achieve this by applying three principles. These are: minimal soil disturbance, a permanent soil cover and crop
rotations or intercropping (FAO, 2015). The first objective is to minimize the soil disturbance and to restore the soil fertility by reducing tillage and/or improving the tillage methods. A form of reduced tillage is ripping, which is performed by a manual device: the Magoye ripper. The device creates narrow grooves in the soil where the seeds are planted. The advantage of ripping is a more efficient use of rainwater reduced tillage does mean less working hours (Mafongoya, 2015; Thierfelder, 2013). The second objective is retention of crop residue, known as mulch. According to Baudron (2007) and Thierfelder (2013), retention of at least 30 percent of the crop residue is necessary for a sufficient soil cover. The crop residue attracts insects that contribute to the decomposition of the crop residue, which is an important step in the nitrogen cycle thus the natural fertilization of the soil (Baudron, 2007). The study of Thierfelder (2013) adds that the soil moisture content after reduced tillage of mulch is higher in comparison to conventional tillage, which is beneficial for crop growth and soil structure. This is important for the strength of the soil and for reducing the vulnerability to runoff after periods of rainfall. The third objective is intercropping. This is most important for storing soil organic carbon. It also serves as a natural pest and disease defence (Baudron, 2007; Thierfelder, 2013). Applying this approach will have a positive impact on food security because of the reduced effects on land degradation and therefore food production.
3.3 Criteria
In order to determine the effects of FDI on food security in Southern Africa, different criteria will be used. These criteria are based on the relations described in the theoretical framework. An extensive
explanation of the used methods will be provided in the next chapter. In figure 3, a model is shown to explain the different criteria and the supportive criteria of every discipline.
The following criteria were devised for a positive effect on food security. The FDI should implement CSR, the host country should benefit from the investment and the investment should be two-sided. From each perspective, the criteria is substantiated. For every case, the criteria are assessed. The same method was used to determine whether the investment has a negative effect on food security. Based upon the relations, it can be found that market-seeking FDI in the agricultural sector, that are made with CSR regarding social and environmental protection will either directly or indirectly improve the local food security. However there are a lot more factors that influence this relation but for this research, the criteria are abbreviated to the criteria mentioned above.
4. Case studies
The theoretical part of this research has shown that there are multiple concepts influencing the relation between FDI and food security. These abstract concepts will be applied on three case examples in Southern Africa. Through the great diversity in all FDI flows to Southern Africa it is hard to make a generalized analysis. Therefore the aim of this analysis is to show examples of how different factors and actors involved can influence the outcome of FDI for the local food security.
We have chosen the countries that we will analyse based on the inward flows of FDI. As can been seen in figure 4, South Africa, Mozambique and Zambia are the top 3 of inward FDI stock in Southern Africa. Because FDI is such a considerable part of the economy of these countries, it is plausible that there will be observable effects that influence the food security.
4.1 Chinese FDI in Zambia
According to Busse (2012), African countries do in general not optimally benefit from Chinese investment. So far, Chinese investments are often isolated from the local economy. Due to the isolation of the investments, the local economies could not benefit from the effects of technological spill-overs, work potential etc. This contradicts with the concept of the shared value. According to Porter (2011), FDI should create value for both the operating firm as for the local society when CSR is applied. One of the major reasons that causes this isolation comes surprisingly not from the Chinese investors. According to Busse (2012), Africa does not optimally benefits from Chinese FDI, because the African government does not harness these positive effects. The government should direct the FDI to important economic sectors and have
the
Figure 3: A model to visualize the created criteria for this research. Orange=criteria, purple=business, blue=economy, green=earth science
Figure 4: Foreign Direct Investment in Southern Africa. (Source: United Nations Conference on Trade and Development (UNCTAD), 2015)
means to harvest it. So, the government should play a more mandatory role to harvest the full potential of the FDI.
However, the lack of African governmental involvement is not the only reason that the shared value of Chinese FDI is not optimally harvested. The main reason China does invest in African agricultural land is due to their domestic food security problems. However, food security is not the only reasons for these investments. Agricultural investments in Africa are encouraged by the government for the circumventing of certain World Trade Organization (Alden, 2005). Finally, china has contracted a significant amount of Chinese labour that works in the invested agricultural sector. This is significant loss of shared value. If these Chinese labour would be replaced with local people, shared value would be created (Alden, 2005).
Taken into account that China is using Zambia’s arable land to produce food, environmental effects are a limiting factor for the local food security. As mentioned before, conventional agriculture and the intensification of these methods contribute to land degradation. To tackle these effects, Zambia adopted a more specific form of Conservation Agriculture, which is known as Conservation Farming, referred to as CF (Arslan, 2014). The overall effect of CF is strongly dependent on environmental factors such as soil-type and weather circumstances, but on long-term perspective, CF is efficiently reducing soil degradation. It is also convenient for increasing labour and water use efficiency because of the implementation of manual ripping devices (Baudron, 2007; Thierfelder, 2013). Besides that, CF in Zambia has contributed to the livelihood, crop yield and therefore food security of the population since it was first implemented (Andersson, 2014).
In Zambia, Chinese companies claim to produce food for local markets rather than for large-scale export. However, only the export of raw materials such as cotton, skins and tobacco has been increased and no clear benefits for Zambia were recorded (Mwanawina, 2008). Al-Aameri et al (2012) claims that Chinese companies do not have any environmental regulation regarding their investment. Although Zambia has already created a legislative framework for environmental protection, the Chinese rapid investments have resulted in water and air pollution in Zambia. In return for the land grabbing, China aims to help African development on political, economic and social level. However, none of those plans include environmental protection (Mwanawina, 2008).
In conclusion, Chinese companies suggest to stimulate African development through CSR. However, there is no indication that any of the proposed development is either socially or environmentally beneficial for Zambia. Linking back to the criteria from the theoretical framework it can be found that in this case there is a negative relation between FDI and food security. Chinese companies mostly apply non-market seeking FDI. They do not create spill-overs and no shared value. This could indicate that the Chinese CSR report is an example of greenwashing and in practice they would be land-grabbing in Zambia. Investments of monetary value and knowledge are required for more research and as a support for the local farmers and the government. FDI (by Chinese companies) could be helpful if the main motive is to support the food security of the Zambian population and sustainability rather than to act solely out of self-interest.
4.2 Favourable regulations in Mozambique
Mozambique is one of the least developed countries in the world due to the aftermath of a civil war. However, since the 1990’s the country has had a stable economic growth (Theting & Brekke, 2010). This is partly due to the changes in the agricultural sector. Agriculture in Mozambique is mostly still traditional and 80% of the population works in the agricultural sector (Theting & Brekke, 2010). However, the Mozambican government have made some favourable conditions regarding law and regulations in the agricultural sector to attract FDI. For example, corporate tax in Mozambique is only 10% compared to 32% on average. On top of this there is an 80% reduction of corporate tax in the agricultural sector. Next to that there are also other fiscal benefits, like tax free import of equipment (Theting & Brekke, 2010).
These conditions were all set to enhance the effects that FDI could have on Mozambique. However, information that is conducted out of interviews with local communities state a mixed attitude
towards the foreign projects. In some cases, the villages expected more beneficial effects, but they accepted the situation because it was better as before. In other cases, villages were not content with the situation and would not accepted other foreign projects. Apparently, there were some factors that pressured the development through FDI. According to Theting & Brekke (2010), there were three main determinants that caused the failure of development.
First, the local villages of Mozambique could not benefit from the FDI, due to the local regulations concerning the FDI. The local regulations do not protect the domestic economy or give opportunities of domestic growth. For example, there are no restrictions, such as taxes on export (Basu & Srinivasan, 2002). This leads to an outflow of products when there is domestic demand. Overall, the regulatory frameworks are too much focused on the foreign investors and less on domestic economies. Second, in many land acquisition deals to local community had to make their decisions based on asymmetric information. Often, the villagers were not fully informed about what they exactly constituted. Contrary to the villagers, the foreign investors were often aided by the government and were informed of all the cons and pros of the land acquisition. Finally, there were little forms of compensation provided by the investors. Health care, school, electricity and infrastructure were the most common form of compensation that the investors should establish, but in many cases these promises were not fulfilled. There were often no written contracts of what exactly the investor should compensate. Also, there was little forms of shared value. Community members were not certain of employment on the projects, and the members that were employed earned low wages and did not have further development potential. This contradicts with the African Policy paper that China provided. In the paper China stated that it would enhance the local employment rate in the African area’s they operate (huaxia, 2015). These economic, legal and communication failures have great effect on the food security in Africa. Besides these factors, that affect the food security in Mozambique, FDI also has an impact on the arable land in Mozambique.
Mozambique has around 1.4 million hectares of arable land suitable for producing maize (Eash, et al., 2016). This area will be reduced in size because of the impacts of climate change such as droughts or floods. Besides that, erosion of Mozambique‘s fertile soils will increase as food production continues to intensify to meet the growing demand (ibid.). In Mozambique, Conservation Agriculture is popular under small rural farm families. Especially this group is at risk to be food insecure because they are dependent on their crop yield. The comparative study of N. Eash (2016) found that the net returns of CA in Mozambique were higher than the returns of the conventional practices. Besides that, in several other cases, CA implementation resulted in increased yield on degraded agricultural fields and a better water use efficiency (ibid.).
Although CA is implemented and contributing to the local food production in Mozambique, an ongoing Japanese Project called ProSAVANA, is introducing another perspective. This project, aimed at supporting the food security of Japan, is an intensive large-scale project, mainly focused on mono-culture (Okada, 2015). The production is export-oriented, thus non-market seeking. Although this public-private project claims to support the liberalization and modernization of Mozambique and has therefore a two-sided motivation, the environmental effects of the intensive production might have a negative impact on the development of CA and therefore the food security of the local people in Mozambique (ibid.).
Linking back to the theoretical framework it seems that most FDI in Mozambique is aimed to take advantage of lack of local regulations and low cost labour. There are no spill-overs and also no shared value. However, it could also be possible that CSR is ineffective. The lack of spill-overs can also be explained by an ineffective financial system and lack of efficient human capital. To avoid exploitation the government can therefore better focus on improving these factors, rather than on regulations.
4.3 Transnational cooperation in South Africa
The SADC member states are actively seeking for FDI to enhance their economic growth. To determine the effects of FDI in SADC member states it is import to find out the origin and the objectives of the FDI. A recent trend in the global economy is the increase of FDI from companies of developing
countries in other developing countries. This type of FDI is defined as south-south flows (Mhlanga, 2010). These south-south flows create new hope for SADC member states This is because north-south flows have historically a character of being exploitative of raw materials, which is explicitly non-market seeking. South-south flows tend to be more market seeking and are more risk averse through familiarity with government structures in developing countries (Mhlanga, 2010). In Cooperation with the United Nations Development Program (UNDP) multiple transnational summits between African, Asian and South American countries have been organized. China, India and Brazil need African natural resources from Africa to support their growing economies. In return, they can offer technology and expertise for Africa’s development needs. The goal of organizational structures between these countries is to create cooperation that is mutually beneficial. Even though south-south cooperation in the agricultural sector is often created for outsourcing of production, the goal is a win-win situation. Through enhanced efficiency the surplus of the high productivity is also to be shared with the host country (Arkhangelskaya & Khamatshin, 2013).
An example of such a transnational cooperation is the India-Brazil-South Africa dialogue forum (IBSA). The IBSA cooperates on many common concerns, of which one is agriculture. Each member states is involved in south-south capital flows. The countries work together in food processing and safety measures through common compliance to measurements. Next to that, they work together in research and development, communication and technology, building and exchange of human capital and pollution. These is all-in attempt to create long term FDI flows between the countries and strengthen their position in the world market (Arkhangelskaya & Khamatshin, 2013). Examples of good practises are India providing specialized technology for tropical farming and Brazil training human capital in the agro-energy sector. In addition, the IDSA focuses strict on food security and poverty reduction. With the IBSA trust fund, which was rewarded by the UN development goals, the countries invest in skill development and modern farming. The fund also supports environmental initiatives regarding water management, erosion reduction measures, and soil salinity, and sustainable agricultural growth (Arkhangelskaya & Khamatshin, 2013).
In contrast to Zambia and Mozambique, CA is not only successfully implemented by small scale farmers, but also by large scale commercial farms (FAO, 2010). One of the positive effects IBSA could have on the implementation of CA in South Africa is that Brazil for example is already practicing CA on a large scale and is one of the leading CA countries in the world since the 70s (Kassam, 2009). India is also highly acquainted with CA but on a smaller scale due to low maintenance crops such as rice (ibid.). Therefore, a cooperation between companies within IBSA, could be efficient if a legislative framework regarding environmental protection is assessed.
The IBSA is an example of how countries should work together to structure and guide the relation between FDI flows and food security. IBSA focuses on subjects corresponding with the criteria resulting from the theoretical framework. They stimulate market-seeking FDI with spill-overs to the local market resulting in fair profits. They also focus on limiting environmental impacts. Even though the organization is a governmental platform, their practice could be the perfect example of CSR when applied by businesses.
5. Discussion
In order to execute the analysis, multiple criteria were chosen. However, not every criteria is assessed in the same extent. Further research should delve deeper into the criteria and assigning weights to these criteria. The use of a multi-criteria analysis method would be a great contribution to the quality further research.
The relation between FDI and food security is very complex and many other factors influence this relationship. This research has only approached this relationship from three disciplines. However, in order to broaden the research, several other disciplines should be taken into consideration. Adding concepts from social science, politics, biology and social geography would complement this research subject. These
disciplines presumably bring different perspectives to this research. If more scientific disciplines would be involved, than more complex insights to this complex relation would appear.
Besides that, more cases should be investigated in order to create a sufficient analysis for the whole of Southern Africa. There are too many independent FDI flows to the region to draw conclusions that fully cover all FDI flows in the region. More specific data is needed to support relations that are shown in this paper. This includes examples of operating firms in the Southern African region. The paper in limited to the example of one operating firm, but for a more objective perspective of corporation relationships, more examples are required.
For now, the aim of this research was to show some of the factors that influence the relation between FDI and food security and show how these relations appear in practice.
6. Conclusion
Companies invest in Africa, because they see a lot of potential for growth in the agricultural sector. Their FDI has via many factors influence on the food security of African countries. three cases have been investigated: the case of Mozambique, Zambia and South Africa.
In the case of Zambia, there was a low degree of beneficial CSR effects. There were no spill-over effects or creation of shared value. This contradicts with the guidelines that were given in the Chinese CSR report and could indicate the extent of greenwashing. The implementation of CA and therefore the sustainable development of Zambia is limited by the FDI. Besides that, there is no regulation regarding environmental protection by the Chinese investments, thus land degradation will decrease and crop yield will be at risk. Altogether, FDI have a negative effect on food security in Zambia.
In the second case, Mozambique, the FDI had predominantly negative effects on the local community. The main cause of this relates the focus of the local government. The regulatory focus is mostly aimed to attract foreign investors, but they do are not beneficial to local community. Besides that, an example implies that the investments are based on large-scale monocultures that can be seen as a damage to the environment and a risk for food production. Overall, the FDI have a negative effect on food security.
The last case, South Africa, could be illustrated as the optimal use of shared value. IBSA focuses on subjects corresponding with the criteria resulting from the theoretical framework. They stimulate market-seeking FDI with spill-overs to the local market resulting in fair profits. They also focus on limiting environmental impacts and could use their shared knowledge to implement CA as an agenda in their CSR to contribute to a sustainable development.
Based on the cases, the conclusion can be drawn that the effects of FDI on food security are influenced by many factors and that various effects can occur. In general, it seems like FDI does not have a positive effect on food security in Southern Africa. In some specific cases it will even negatively affect the food security of locals. However, regulatory frameworks and governmental involvement could contribute to improve the effects of FDI on food security. In this vulnerable region FDI should be structured through regulations that enforce companies to apply CSR.
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