As the world begins to awaken to the looming food crisis — how we will feed 2 billion more people by the year 2050 — investors are turning to a place not typically associated with its agricultural bounty, but a region that National Geographic Magazine (NatGeo) is calling “The Next Breadbasket”: sub-Saharan Africa. In its July edition, NatGeo’s Joel K. Bourne Jr. (aided by predictably stunning photos from Robin Hammond) points a wide lens at the issues raised by the creation of giant agricultural developments in sub-Saharan Africa, including some of the potential benefits as well as the likely pitfalls.
First, why sub-Saharan Africa? The short answer is that the region has the most potential upside, or what is referred to as “yield gap,” on Earth. This essentially means that Africa is home to an enormous amount of arable land, yet the continent produces “roughly the same yield Roman farmers achieved … in a good year during the rule of Caesar.” Put another way, less than 5 percent of arable land in the sub-Saharan area is currently irrigated, and farms in the region are not reaching anything near their potential output.
This is likely true for a number of obvious reasons, and NatGeo’s Bourne lists the clear culprits: poor infrastructure, limited markets, weak governance and brutal civil wars. The other key ingredient is the amenability of African governments, some of which are willing to overlook (or inadequately safeguard) the property rights of their citizens in favor of influxes of foreign cash and the attendant benefits.
The “why now” is two-fold. On the one hand is the impending food crisis, which is centered on the African continent and which, for most of Africa, is not really impending but has been plaguing the region for years. Second, there’s the real driving force: the potential monetary upside for investors. As Bourne puts it, “Since 2007 the near-record prices of corn, soybeans, wheat, and rice have set off a global land rush by corporate investors eager to lease or buy land in countries where acreage is cheap, governments are amenable, and property rights often ignored.” Large Chinese and Brazilian companies have eyed the “millions of acres of fallow land and plentiful water available for irrigation” and seen the potential for massive profits. It seems only a matter of time before others join the party as well. In fact, Bourne points out that a recent conference in New York for agricultural investors drew some “800 financial leaders from around the globe who manage nearly three trillion dollars in investments.”Click to continue reading »