Taking the time needed to achieve inclusiveness in outgrower schemes | Land Portal

How do we make land-based agricultural investments more inclusive, particularly regarding land rights? This was the focus of the agenda as LEGEND held the 6th UK Land Policy Forum on July 11 2018, with lively discussions from all involved – including government, DFIs, academics and land-related CSOs. Our expert panel talked through the incentives and barriers to greater inclusiveness, as well as the role of outgrower schemes, and this blog shares the key points from the Forum.

While this is a well-trodden debate, the Forum highlighted some particularly important issues, and six key recommendations for increasing inclusiveness emerged:

  1. The groundwork for mitigating the risks of bullish commodity prices on land-based agricultural investments starts now

As commodity prices recover, so too will land values, which may well lead to growing interest and investment in outgrower schemes (although companies will probably always need to maintain some reliance on nucleus estates, particularly for infrastructure-reliant crops such as sugar cane). When anticipating this, we shouldn’t forget the knock-on effects that the peak of the 2008 commodity price super cycle had on indirect land use change, food insecurity and inequitable access to land. The preparation to ensure that renewed interest in outgrower schemes is accompanied by inclusive business practices needs to start now, not at the height of the next price hike. The following five recommendations are particularly central to building these practices.

  1. Companies must build sufficient time and resources into their investment processes to ensure that they are carried out inclusively and sustainably

While outgrower schemes are often taken to be beneficial to smallholders and companies alike, they can also create risks for all parties. It can take a tremendous amount of time and effort to properly set them up, particularly with the process of ensuring that smallholders can articulate their own vision of what they want from an agricultural investment. Companies often underestimate the resources required to complete this process and many investment projects have not taken off or run into trouble because of this, as evidenced by a $20 million arbitration case in the DRC just this month.

  1. In investment processes, community engagement is crucial

We say it all the time but let’s say it again: without the buy-in of those affected by an investment, it will struggle to work effectively and have results that benefit a wide range of stakeholders. And that doesn’t mean engaging solely at the design stage – local communities need effective and sustained arrangements for voice and representation throughout the project. Companies should ensure that local stakeholders are truly involved and consulted throughout implementation so that everyone, particularly farmers in outgrower schemes, has the opportunity to make a free and informed choice about whether – and how – to participate in an investment. While many companies already recognise this, there needs to be a wider understanding of the time and resources required for agricultural investments.

  1. Look beyond companies and change the nature of financing for investment in agriculture

Most financial instruments are simply not designed to support inclusive commercial agricultural investment as they expect quick returns, making it harder to follow inclusive processes. This becomes a particular problem for outgrower schemes, especially when perennial cash crops and large-scale infrastructure investment is required. It can take many years until smallholders see the returns of their investments, causing insecurity if financial instruments are not designed to help bridge the gap between planting and production.

  1. Focus on processes rather than models as the cornerstone of achieving greater inclusiveness

First, we need to recognise that business models are not fixed and need to be adjusted to fit particular contexts. This requires companies to abandon formulaic desk-based due diligence approaches and adopt on-the-ground community engagement processes instead. Second, if we want to promote inclusiveness, we should concentrate on how companies implement and operate models rather than purely which models they choose. The real opportunities for scaling lie not so much in rolling out ‘successful’ models, but in sharing lessons on what processes and empowerment approaches can enable smallholders to shape the model so that it makes most sense to them. An example of this is the RIPL project’s country-specific guidebooks grounded by practical experiences and informational needs.

  1. Strengthening data collection and disseminating stories of good practice is crucial for improving investment practices, processes and models

To understand which processes have worked and which ones have worked less well for commercial agriculture, we need to improve the availability of data. Information is required on key cases at country level to provide a solid understanding of the real-life challenges and realities on the ground rather than relying on conceptual models. Project monitoring systems can provide a good starting point for gathering such information and can accelerate progress towards greater inclusiveness. The ongoing collection of data and information on the social impact of the Phata sugar growers’ cooperative in Malawi is an excellent example of this.

Interest in innovative outgrower schemes will continue to flourish as they represent an opportunity to align the interests of commercial agriculture and the development community. However, the forum reminded us of the dangers of using successful blueprints in the wrong environment and of the need to focus on processes rather than the nature of the models. We should turn our efforts to collecting data and information on those successful approaches, including sustained community engagement and financial instruments designed to encourage inclusive, on-the-ground due diligence.

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