TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

threshold for remaining in the CDC portfolio was
to be raised.
Following the change in strategy within
CDC, a number of assets in the agricultural
business were sold off between 2000 to 2003
(Tyler, undated), including Nanga Farms and York
Farm in Zambia, but the MDC was unaffected,
implying that it was not immediately considered
for disposal though plans to do so were still
in the offing. The changes within CDC had a
ripple effect on the MDC and there was much
discontent among employees, some of who
thought the company was no longer being wellmanaged.
In 2006, the MDC went into voluntary
liquidation and its assets were sold off. Two new
companies, ETC BioEnergy and Somawhe Estates
Ltd, were now the new owners of the farms.
Even though ETC BioEnergy pledged to inject
capital in the company, employment levels were
significantly reduced.
With regard to the impact of privatization
on firm performance, it is admittedly difficult to
separate the impact of privatization from that
of market liberalization. To say that privatization
had an impact on company performance
is equivalent to attributing performance to
the form of ownership and control. While
a causal relationship might exist, no study
of the Zambian experience has successfully
measured that relationship. That said, a World
Bank Post-Privatization Study on observed
that “performance by companies purchased
through pre-emptive rights sales (usually to
foreign investors holding minority shares and
a management contract) was unaffected by
privatization” (Serlemitsos & Fusco, 2003, p.
6). This, apparently, was the case for both the
Mpongwe Development Company and the
Kaleya Smallholder Company.
There is a significant possibility that
liberalization in general had a greater impact
on company performance than privatization on
the Mpongwe Development Company, at least
in the short term. For instance, an orientation
towards the export market had a positive
effect on company performance (Serlemitsos &
Fusco, 2003). On the other hand, liberalization,
by opening up the economy to increased
competition, negatively affected the performance
Part 4: Business models for agricultural
investment: Impacts on local development
of many of the privatized companies that were
totally dependent on the local market.
3.3 The economic inclusion of
local, low-income people in the
investment projects
This section discusses the economic inclusion of
low-income people in the investment projects.
The discussion is centred on the concept of
inclusive business models.
According to the UNDP (2010), an inclusive
business model includes “people with low
incomes on the demand side as clients and
customers, and/or on the supply side as
employees, producers and business owners
at various points in the value chain” (UNDP,
2010). The goal of an inclusive business is
neither philanthropic nor pure Corporate
Social Responsibility (CSR), but pursuance of a
business opportunity in a low-income market in
such a way as to meaningfully provide tangible
benefits to the low-income sections of society,
while making sufficient returns to justify the
investment. It is helpful to assess the degree and
quality of inclusion of low-income groups in a
business by considering four factors: ownership
(that is, ownership of the business and control
over key assets like land or processing facilities),
voice (that is, participation in the management
of the enterprise), risk (the sharing of production,
marketing and other risks), and reward (the
distribution of the costs and benefits generated
by the project (Vermeulen and Cotula, 2010).
Ownership
The ownership structures of both Kascol and
the MDC present similarities and differences.
Both companies started with similar owners.
Kascol was originally owned by the Government
of Zambia (through Zambia Sugar Company,
a then state-owned enterprise which owned
25 percent shares in Kascol; and through the
Development Bank of Zambia, a development
finance institution established in the early
1970s by an Act of Parliament), CDC and
Barclays Bank. The MDC was owned by the
Government of Zambia and CDC, each having a
50 percent share in the early stages of company’s
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