Obama v Kofi Annan: Who has the best model for agriculture in Mozambique?
July 31, 2012
Mozambique is a development paradox. Rural poverty is increasing despite high growth rates and billions of dollars in aid. Now the country has been targeted by two contrasting models of agricultural development: the ‘Obama model’ and the ‘Annan model’. Which works better for the poor?
Mozambican farmers are very poor – the average rural cash income is $31 per person per year. That is less than the price of a bag of fertiliser. Very few peasant farmers are willing to risk their whole year’s income on fertiliser, or better seed, or a different crop.
Nearly all Mozambican farmers still use only a hoe, and do not have a tractor or oxen to plough, so they can only farm 1.5 hectares. Now, international investors are noticing that this leaves vast tracts of underused land. The difference between the Annan and Obama models is how that land is to be used.
Will the Annan or Obama model lead to the biggest reduction of poverty and the best use of Mozambique’s land?
Mozambique is a development paradox. Rural poverty is increasing despite high growth rates and billions of dollars in aid. Now the country has been targeted by two contrasting models of agricultural development. The Obama model was backed by the G8 in Washington in May, while the Annan model was proposed by the Africa Progress Panel (APP). Which works better for the poor?
The APP is heavyweight and conservative, chaired by Kofi Annan and with members including a former IMF head and a former US Treasury Secretary. It says one of the biggest dangers in Africa is the growing inequality between rich and poor, which is creating a threat of social instability. In sub-Saharan Africa “the current pattern of trickle-down growth is leaving too many people in poverty.” And the panel warns that Mozambique is one of the more unequal countries in Africa. The APP points out that Mozambique is a net importer of staple foods, despite having huge agricultural potential.
The APP report calls for “fundamental change” in both donor and African government policies. “Raising the productivity of smallholder farmers is critical. Smallholder agriculture must be placed at the centre of a green revolution in Africa.” This will require more government action and more support for small farmers.
Let’s call this the Annan model.
The second agricultural model for Mozambique was agreed in Washington in May, when G8 leaders adopted a New Alliance for Food Security and Nutrition proposed by President Barack Obama and USAID. The idea is to use giant agribusiness to end hunger in Mozambique and five other countries. The first project in Mozambique will be to support Cargill, the giant grain trader and largest private company in the world, to take 40,000 hectares of farmland. US officials say this will include some small-holder contract farming, which means Cargill will not make enough profit from the investment, so the giant transnational grain trader must be subsidised from G8 aid.
Let’s call this the Obama model.
‘Annan model’ ’Obama model’
The two models are incompatible. The Africa Progress Panel report points specifically to the very large land concessions in Mozambique, and warns that “for Africans, the benefits of large-scale land acquisitions are questionable.”
The United Nations Development Programme (UNDP) recently issued its Africa Human Development Report 2012 which points to “the recent international scramble for land in sub-Saharan Africa” and urges caution on big foreign investors.” Much agricultural technology for producing crops is scale-invariant (it is as efficient on small farms as on large), so large farms should not be expected to be inherently more efficient.” The report warns that “private investors naturally prioritize their own objectives, not the well-being of the poor and vulnerable.”
To be fair, Mozambique’s experience with large investors has not been all bad. Indeed, a single US multinational has probably done more to reduce poverty in Mozambique than any donor action – and without subsidy and without grabbing any land. Universal Leaf Tobacco has agreements with 150,000 peasant families, and their earnings from tobacco have lifted thousands of families out of poverty. How ironic that the antidote to poverty should be a poison, tobacco.
But Universal’s success is due to a different model to that of Obama – out-grower or contract farming. The company provides seeds, fertiliser and other inputs as well as extension services, and guarantees to buy the crop. In return, the farmer must sell her tobacco to Universal.
This package works because of two factors: first, risk is shared, so if a drought or cyclone destroys the crop then farmers do not have to pay Universal for the seeds and fertilisers they received. Second, the market is guaranteed; if a farmer grows tobacco, she can be sure to sell it.
Elsewhere, Mozambique has the lowest agricultural technology levels in southern Africa, because under the present free market policies, peasants are expected to carry all the risk – of weather, pests and a lack of market. Mozambican farmers are very poor – the average rural cash income is $31 per person per year. That is less than the price of a bag of fertiliser. Very few peasant farmers are willing to risk their whole year’s income on fertiliser, or better seed, or a different crop.
The problem for Mozambican peasants is that foreign companies will only share the risk with tobacco and cotton, and are not interested in other crops. And under the present free market system pushed so hard by the international community, the state is not allowed to share the risk for maize and other domestic food crops.
Nearly all Mozambican farmers still use only a hoe, and do not have a tractor or oxen to plough, so they can only farm 1.5 hectares. Now, international investors are noticing that this leaves vast tracts of underused land.
The difference between the Annan and Obama models is how that land is to be used. The Obama model is that giant northern agribusinesses like Cargill with G8 help should take that land and end poverty through what the APP calls “the current pattern of trickle-down growth”. The Annan model would upgrade million of peasant farms to up to 5 hectares each, using most of the available land, but providing initial support with mechanical ploughing, inputs and assured markets.
Will the Annan or Obama model lead to the biggest reduction of poverty and the best use of Mozambique’s land?
This article has appeared in the Oxfam blog ‘From Poverty to Power’.
The article is bias… it favours the “Obama model”. It is well known in Mozambique that the outgrower schem for the production of cotton in northern Mozambique has been there for more than 20 years but it does not contribute to poverty reduction, it is the oposite. Peasant remain poor there. Multinational are there for profit, not for human development. However, on the other hand, peasant farmers living in the outskirts of Maputo city and producing vegetables in very small plots have improved their quality of life.
Great piece Joe!
I choose the Annan model every time. Mozambique’s agriculture is trapped in the low productivity trap that is familiar across Africa. We need public investment in seeds, extension and inputs such as fertiliser to break this cycle, as has been demonstrated in Malawi. Much better to spend crucial and declining aid resources on this than on subsidising Cargill and land grabbing.
The Annan Model appears to be ideal and most beautiful but also it appears to more than difficult to execute. Peasants are difficult to rely on if you give them money to produce as they face many problems – lack of technology, whether, pests etc. After receiving funds the likelihood of saying do not have it to return is more than high. By taking into consideration these factors lead me to choose the Obama model! The private sector brings development but unfortunately this goes together with inequality. However there is no way to escape from this!
That is what happens in most African countries. Africa’s way is an endogenous Development Programme. In this case only Mozambicans know what is better for themselves.
Emmanuel Tano Zagbla, African Institute for Strategies Studies
Of course there is a third model. The Annon model appears to be similar to the contract farming model for cotton that Mali has been using for decades and that has largely failed.
In Mali we are promoting an third model which by working through women’s savings groups initially focuses on building the fertility of the soil and raising the water table with cover crops and providing shade with glericidia trees. This will establish the conditons for increasing production oriented largely to the first market “the stomach” and selling any surplus locally.
Jeff Ashe
Director of Community Finance
Oxfam America
Donor agencies seem anxious to keep small farmers small — improving soil fertility and planting trees, but not making the key technological leaps that allow expanded area. Mozambican farmers will not be able to feed themselves and earn enough cash from the average 1.5 hectares they farm now.
The essential transformation is to increase the land to 5 ha and raise productivity from less than 1 tonne of maize per hectare to 3 tonnes or more. Zimbabwean land reform farmers have shown that this can be done.
But it requires substantial changes — it requires serious credit, not simply microcredit and savings clubs, and it needs subsidised inputs, mechanisation (animal traction or small tractors) and guaranteed markets.
It is interesting that two of the world’s greatest men, Annan and Obama, have their own respective model on how to develop agriculture in Mozambique – a country where large donors are abandoning their support to the public agriculture sector for it being too “difficult”, where several more or less failed national agriculture programmes in recent years tell their own sad story, where the government has promised that at least 10 per cent of public spending should be invested in agriculture – which is very far from present reality) and where the peasants themselves claim that most of the past and present programmes do not pay enough attention to their wants, rights, knowledge and interests.
The Mozambican agriculture researcher João Mosca has said that Mozambique’s agriculture policy is suffering from “savage liberalism, disastrous privatisation and the politics of not having politics”. Choosing between Annan and Obama seems far from solving/responding to a development challenge that is about lack of a coherent, nationally and locally owned, long-term policy for development of the rural economy. I doubt that, once again isolating agriculture as something separate, without taking into account all the surrounding questions of political and economic nature, will not be a success story in making the peasants today earning USD 31 a year less poor. Thus, I believe that the two great men will fail (but that others will pay the price…). Neither of their models will, by themselves, make the Mozambican rural economy less extractive. Maybe it would be more fruitful to discuss some of the aspects mentioned briefly in the article, for example the impact of the free market system pushed hard by the international community, which implies that the state is not allowed to share the risk for domestic food crops?
Having said that, some brief comments… I share Diamantino’s comment above regarding the out-grower schemes on (for example) tobacco and cotton – even though they have for sure made significant contributions to local economy, the story is complicated… The cotton market is volatile and Mozambican farmers receive a very low pay for their cotton in comparison to farmers in neighbouring countries. In the tobacco sector, farmers are vulnerable by being dependant on one single trader.
I share the doubts on the benefits of the large private investors and the claim that they prioritize their own objectives and not the needs of poor people. Based on the existing experiences of large-scale agriculture investment in Mozambique (that is deeply criticised by many grass-root organisations, including the peasants’ movement), it is difficult to see how supporting (with development aid) the largest private company in the world to take 40,000 hectares of farmland will be an efficient measure to reduce poverty… In the development debate in Sweden, the Government and some lobbyists have been extremely eager to find the good examples where private sector actors magically cure poverty. However, many times it seems more like an attempt to, in the name of agriculture development for poor people, make aid pay for both our own (in the broader sense of the Swedish public) interest of for example continuing consuming food and energy at an unsustainable level and, at the same time, subsidising Swedish profit-making private companies.
Joseph Hanlon presents two pictures. In my opinion, one represents the current state that both the so called Annan and Obama models seeks to improve. The second (greeny) picture is obviously what both models to attain. I therefore find it strange that the author choose to label the current state Annan model and the other picture the Obama model. This is a mislabelling and I sincerely hope it is not deliberate.
It has to be said that both models have their promise and challenges in both efficiency and distribution terms. The question therefore is can the two schemes operate side by side? I am inclined to answer in the affirmative.
James Dzansi (PhD)
Research Fellow in Economics
Jonkoping International Business School, Sweden
The Brazilians will be promoting their model, which is a self-conscious combination of mega-business and large investments in small scale farmers, the source of much of the food. There is no doubt that mega-agro is an important part of Brazilian growth, but the change in policy under Lula to invest in small farmers as well has led to poverty reduction, increased food production and an increase in demand, further driving economic growth. In other words, it may not need to be an either/or.
Brazil is indeed becoming a big player in Mozambique. Pro-Savana is a three way Brazil (technical assistance)-Japan ($)-Mozambique programme which really only started this year. They want to do a mix of large, medium and small farms. Embrapa (The Brazilian Agricultural Research Corporation) is taking the lead, and it has a lot of experience in making smaller farmers more commercial and thus raising incomes. Their model of state-led agricultural development of smaller producers is really similar to what I called the Annan model. In parallel there is Brazilian interest in very large highly mechanised farms, and I have a sense that there is some tension between the Embrapa approach and the would-be latifundiários
It might come to an interesting mixture of what you call the Obama and Kofi Annan Model, if Cargill´s and other company´s investments were based on the small scale agriculture. The Mozambican Agriculture, not only in the North, will need strong business actors to overcome infrastructure problems, extremely high fertilizer prices and low management skills of the smallholders and to organize and structure the value chain. But these “strong actors” need not necessarily invest in land aquisitions and produce the soy itself but act as a leader of the supply chain management and as a strong buyer. So, there might be a lot of chances for “inclusive business models” in Mozambique in the near future. Of course new and modern and inclusive agricultural and industrial policies of the government would be very helpful…
Why chosse between the two? I think we should apply both models by keeping the Mozambican active in their everyday farming while commercial farming is establish for more growth. If the government of Mozambique cannot implement a new model to farming by aiding the farmers financially then they should open the doors to foreign experts who are willing to improve food production in the country.The world should applaud both men for their desire to assist this poor country.