The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

What if we held a private sector initiative and nobody came?

Posted by

Share this story:

Lessons from Tanzania for the G8 food security initiative

This blog post was written by Porter McConnell, Oxfam America policy and advocacy manager for aid effectiveness.

G8 leaders will meet in Camp David in a month’s time. In 2009 at the L’Aquila summit, they took a bold step forward on food security, committing to resources and a promise to be better partners. Fast forward to 2012, and many of them are cutting their aid to poor countries.

The Obama administration has put food security on the agenda at the Camp David G8. There are proposals circulating for what a Camp David Food Security Initiative should look like. It’s all the rage for donor governments to emphasize the need to entice the private sector to get engaged in promoting growth that fights poverty. One of the models cited often is a public-private partnership in Tanzania called the Southern Agricultural Growth Corridor of Tanzania, or SAGCOT.

The private sector has not invested in any significant way in SAGCOT.
The private sector has not invested in any significant way in SAGCOT.

In some ways, Tanzania is the perfect “donor darling.” The Tanzanian economy has been growing at 6-8% per year over the past 10-15 years, and budget allocations to agriculture, education, health, roads, and water are on the rise. But at the same time, low growth rates in agriculture, which provides 74% of Tanzania’s jobs, and continuing high population growth, have pushed at least one million more people under the poverty line. Research suggests that investments in agriculture and other productive sectors have failed to benefit small scale agriculture producers or to produce jobs in sufficient numbers, especially in rural areas, so poor people still aren’t feeling Tanzania’s growth.

Yesterday, the German Marshall Fund’s Translatlantic Experts Group released a report on partnerships in food security which digs deeper into the story of the SAGCOT in Tanzania. SAGCOT is intended to be a hub of international partnerships to develop the potential of a formerly marginal region through infrastructure projects like dams and roads, export market zoning, and smallholder access to inputs and agriculture extension through “hub and out grower” relationships with commercial agribusinesses.

While the report is optimistic about SAGCOT, the authors point out some problems with the model. First and probably most damning: the global corporate partners that donors and the Tanzanian government are anxious to recruit have not yet invested in any significant way. SAGCOT’s model is based on private sector investment coming through, in addition to the public resources committed. The lack of investors calls into question the effectiveness of the public money that has been contributed to the partnership. The report also outlines more troubling concerns that agribusiness will dominate at the expense of the region’s small scale agriculture producers, the partnership will encourage land grabbing by investors, and SAGCOT’s governing body leaves little room for small scale producers to participate or influence the partnership’s direction.

These findings mirror Oxfam research in Tanzania in 2011, which also investigated the promise of SAGCOT for poverty reduction through agriculture and found similarly that smallholders seemed to be missing out in the focus on large commercial farms, and the partnership posed a significant risk of land grabs and environmental abuse irrigation, drainage, salination of land, and loss of wildlife habitat and poaching. It was unclear whose role it was to conduct oversight over SAGCOT.

While generally supportive of the partnerships with the private sector, the GMF report acknowledges that donor-private sector partnerships are of limited use for meeting the needs of small scale agricultural producers. And since smallholder farmers, especially women, make up the majority of the world’s poor, it’s tough to argue that these partnerships will be the ticket out of poverty for most.

The private sector can play a supportive role on food security if it invests in ways that strengthen sustainable small-scale production. But there needs to be a high bar: using scarce public resources for private finance may be worth the risk only if it has clear poverty reduction purposes and proven benefits to the neediest. Unfortunately, donors have been taking steps to create an “enabling environment” for private sector investment in agriculture for decades, and there are still a billion hungry people in the world. A recent report by the World Bank’s Independent Evaluation Group pointed out that less than half of IFC’s projects successfully reached the poor. If the private sector is to play a productive role, there needs to be better evidence that these kinds of partnerships can actually deliver for the poor.

All of this begs the question: is Tanzania’s SAGCOT the model for a new G8 food security initiative, or is it more like a cautionary tale?

Join the conversation

  1.  avatarJustin Morgan

    Great piece.

    I think it brings out some of the main points on SAGCOT and private sector. Additional to what is shared above, a concern must also be the differences in incentives for the government, small scale farmer, larger private sector and population at large – these are currently not being addressed. It would appear that the government is focused on the catalytic fund to attract private sector investment, but not making the necessary steps to improve the business environment to attract the private sector (be that national or international). The small scale farmer is looking for access to the newly proposed market opportunities, but a fundamental asset (their land) is not being secured or protected. To date, most of the conversations of SAGCOT are still happening in closed rooms, but much of the population is still largely unaware of what SAGCOT is.

    Reply
  2.  avatarAudax

    I totally agree with most of the issues raised in the report. Probably the most important thing here, would be finding local solutions. While the research does not totally discredit (not sure) SAGCOT as an idea, but I think the government and donor partners under SAGCOT at country level could organise a nationwide multistakeholder meeting that could trash out most of the issues raised.

    I am of the opinion that it might not be too late to redress the situation, bearing in mind that over the last 3years SAGCOT remains a non-starter (particularly at local level).

    What we have experienced in most of national investment through promotion of private sector could be better describes as rent seeking companies that do not take us to higher levels. Two major questions would be:
    1. Should we stop everything and deliberate on governance issues as well as link between companies and smallholders (SMEs& smallholder farmers)?
    2. Is the government (and all the partners in SAGCOT) ready to revise the current approach and ensure thorny issues such as land receive enough attention and clarity forthe betterment of the entire Tanzanian society?

    Lastly, I would imagine that the president will have to listen to local practitioners before rushing to Camp David. Has the president read such reports being refered in the OA blog? May be he got his own means of getting briefing/information. The question would be who does he listen to? How do we deliver such messages and a bureacratic system

    Reply
  3. Pingback: From Poverty to Power by Duncan Green » Blog Archive » Sudan meltdown; homeland security v secret police; global carbon map; ethical supply chains; Kony2012 ebook; private sector-led aid; stuff organizers say; the dangers of texting: links I l

  4.  avatarJonathan M. White

    Porter, thanks for your comments on the GMF report. One of the reasons why Tanzania is advancing SAGCOT is because of the recognition that economic growth has not resulted in the expected reduction in poverty. The government realized that GDP alone was not enough. Tanzania is taking a new approach – one that includes the private sector, civil society, international partners, and the government under a common agenda.

    Investments in SAGCOT will only be allowed if companies demonstrate that they are linking to smallholder farmers, through direct market linkages or contract farming, for instance. To the credit of the government and its partners, they have publicly committed to including and achieving benefits for smallholder farmers. To not fulfill that objective would be a severe (if not fatal) blow to the entire endeavor.

    The report does not state that the SAGCOT partnership will encourage land grabbing. However, Experts Group members recognized that there are concerns about large foreign land purchases that could have a negative impact. Accordingly, they called for increased efforts to ensure a transparent process for investments in land in Africa – this was a key recommendation. The report does not call into question the effectiveness of the public funds behind SAGCOT. The report states that most investors are still waiting to see the institutions and catalytic fund in place before making commitments.

    Donor-private sector partnerships can help smallholder farmers. Such partnerships are not the silver bullet. Depending on the circumstances of smallholders – their resources, access to finance and markets, food quality/standards, links to social capital/crop associations, knowledge, and potential for learning – they may or may not be able to immediately link with commercial ventures to earn incomes and start building assets. Some technical assistance may be required and/or safety nets, until improvements occur (see page 20 figure 1). Accordingly, Experts Group members emphasis how important it is to combine transformational partnerships with improved commitments to traditional safety nets.

    Both the public and private sectors, to varying degrees, have constructive roles to play. I don’t think we’re looking exclusively at private sector solutions or government solutions – both need to be at the table. This is not to say that this is easy. It’s extremely challenging and will take time. It would seem to be a positive step though to question past efforts that left poverty to either the market or government alone to solve.

    Reply
  5.  avatarPorter

    Thanks Jonathan. I really appreciated the Transatlantic Experts Group report’s nuanced approach to the subject, and in particular the continuum on page 20 that you mentioned about where a private sector partnership can be useful (high value crop production) and where it’s of less use (subsistence farming). It’s possible that SAGCOT will come through for small scale producers in the end, but it’s unlikely in situations where they haven’t been part of the decisionmaking process from the start.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *