TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

Fund (PTF) for subsequent public floatation.
This did not happen and by 2005, the CDC had
100 percent ownership of the company. In a
surprising turn of events, the MDC went into
voluntary liquidation in 2006 and its assets were
sold to other companies, the main one being ETC
BioEnergy.
The government’s equity stake in Kascol was
partly through the Development Bank of Zambia,
and partly through the Zambia Sugar Company;
when the latter was sold to Tate and Lyle in 1995,
Kascol was effectively privatized.
The trend of private investments in agriculture
has continued in recent years. In the tenyear
period starting from 2000 to 2009, total
pledged investments in agriculture have been
on an upswing, reaching US$315 027 378 from
US$8 343 207 according to data from the Zambia
Development Agency (see Figure 1). 3
These figures represent both start-up
companies and investments in existing companies,
and indications are that the majority of the
investments are purchases of existing farms. For
instance, the data includes the purchase of MDC
assets by ETC BioEnergy in 2007 by an investor
of Indian origin, with a pledged investment of
US$59 648 687. This was the second largest
pledge in the agricultural sector in ten years. It
also includes the purchase of Munkumpu Farms,
once part of Mpongwe Development Company,
by Somawhe Estates Ltd, with a pledged
investment of US$14 060 000. Somawhe is
owned by a Danish investor.
In 2011, ETC BioEnergy sold its farms and
associated assets to Zambeef Products Plc at
US$47 390 000. Zambeef Products Plc is a
Zambian agribusiness company involved in
the production, processing, distribution and
retailing of beef, chickens, pork, eggs, milk,
dairy products, flour and bread, edible oil and
stockfeed through its own retailing network
throughout Zambia and West Africa. Could
this signify a new trend – where foreignowned
companies are bought by locally-owned
companies? It is perhaps too early to make a case
3 These figures represent the investments pledged when
obtaining investment licences. The amounts actually
invested may be different.
Part 4: Business models for agricultural
investment: Impacts on local development
FIGURE 1
Pledged investments in agriculture,
2000–2009
000 US $
350 000
300 000
250 000
200 000
150 000
100 000
50 000
0
2000
2003
INVESTMENT PLEDGED
Source: Zambia Development Agency
2006
2009
out of this one isolated incidence.
What is worth noting, however, is that there
are exceptions to the apparent trend of new
investments being focused on purchases and
expansions of existing farms. In a few cases,
completely new farms have been started,
although this phenomenon has taken place
mostly in the biofuels subsector. Investments were
started in earnest a few years ago, driven by the
rising prices of fossil fuels. Since 2010, however,
investments in biofuel crops, especially jatropha,
have almost ground to a halt. The fall in fossil fuel
prices that has undoubtedly made investments
in jatropha unattractive, is probably one of the
reasons why ETC BioEnergy sold Mpongwe farms
in 2011. ETC BioEnergy planted 500 hectares of
jatropha on an estate that was originally being
used to grow coffee, and had plans to expand the
area under jatropha to 12 000, which, however,
did not materialize.
The preference for investing in existing farms
may be explained by various factors, among them
the high cost of land clearing for virgin land. It
is estimated that it costs about US$900 to clear
one hectare of land. At this rate, one would need
an investment of close to one million dollars to
clear land which is just slightly over a thousand
hectares. The other possible reason is that
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ZAMBIA