TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

ZAMBIA
Trends and impacts of foreign investment in
developing country agriculture
1990s, the MDC had high vehicle maintenance
costs due to the bad road leading to the nearest
town, Luanshya.
Imbalance of power relations in the cane
supply chain
The case of Kascol is that of many suppliers and
a single buyer. There is only one buyer of cane
in Mazabuka. This has created an imbalance of
power relations in the supply chain. The suppliers
of cane are dependent on Zambia Sugar PLC,
which can therefore dictate the price of cane
supplied by cane growers. Outgrowers at Kascol
complained that they are told the price at which
their cane will be sold and have no say in the
setting of that price.
In spite of these constraints, there are many
factors that induce investors to continue investing
in both the Kascol and Mpongwe Farms. The
following are some of the key ones.
Favourable investment climate
The favourable investment environment created
since the early 1990s, when Zambia liberalized
its economy, has made continued investment
in the case study businesses an attractive
option. The section on Recent Trends in Large
Scale Agriculture Investments outlines some
of the factors that have attracted investors
to the Zambian Agriculture sector. Following
liberalization of the economy, the MDC was able
to set its own price for maize and soybeans and
to export its commodities and earn income in
foreign currency at a time when the base lending
rates in Zambian currency were over 50 percent.
Its international customers included Glencore
International plc, and Otterbea; in 1996, the
company sold all of its 3 788 tonnes of soya crop
to Otterbea of South Africa.
Comparatively low transaction costs in the
outgrower scheme
The oft-stated downside of contract farming
systems involving a large number of small
outgrowers are the high transaction costs. Kascol,
however, has managed to keep these costs at
manageable levels because 1) the outgrowers are
geographically concentrated on one farm which
makes it easier to provide them with extension
306
services and to supervise their farming activities;
2) the outgrowers use Kascol land, and this
increases compliance levels in contractual matters
as the cost of eviction from company land is
high on the part of the outgrower should they
abrogate the contract; and 3) outgrowers do not
have alternative buyers of cane and this prevents
from side-selling their cane.
4. Socio-economic outcomes
While the socio-economic outcomes of the two
projects are difficult to determine due to the
problem of attribution and to constrained data
availability, there is evidence that the companies
have had some impact, both positive and
negative, on the poor and their environment. The
following section takes into account the situation
prior to the investments and then contrasts
this with the socio-economic outcomes of the
investments.
4.1 The situation prior to the
investments
It is impossible to produce a proper assessment
of the development context in the project areas
at the time of project inception. Too much time
has passed since then, and data on key socioeconomic
indicators is in scarce supply. However,
it is possible to make some general observations.
In the mid-1970s, when the negotiations
for the acquisitions of land for the agricultural
investments were taking place, Zambia was a
young nation. It had only been an independent
state for ten years. One of the major challenges
faced was human capital. The country had very
few schools: by 1976, it had 2 743 primary
schools (most of these just went up to the fourth
grade) and 121 secondary schools. College
education was scarce. In 1976, Zambia had
13 teacher training colleges, 14 technical and
vocational training colleges and 1 university which
had opened ten years earlier, in 1966. Mpongwe
District (then part of Ndola Rural District) at
that time had about 9 primary schools while
Mazabuka District had about 39 schools (GRZ,
EdAssist Database, 2002). However, compared