Can commercial farming promote rural dynamism in sub-Saharan Africa?: Evidence from Mozambique
This working paper by UNU-WIDER, aims to bring evidence to the debate around the impact of large commercial farms on neighbouring smallholders in low-income sub-Saharan Africa. The analysis combines nationally representative agricultural survey data from Mozambique on over 6,000 smallholders collected in 2012 with a new micro-dataset covering all large farms in the country. These farms, which are by definition commercial, are defined as those currently cultivating an area of over 50 ha. The analysis consisted of two steps. First, is was investigated whether there is a systematic relationship between characteristics of these large farms and average smallholder or local characteristics. Evidence was found that operating commercial farms are more likely to be located near areas with lower than average education levels, urban areas, and farmers using more advanced production techniques. Second, the association between the presence of a large farm and various welfare outcomes (such as total household income) was investigated. A moderate positive association between the presence of a commercial farms and the welfare of local smallholders was found. However, this association does not appear to hold in general. Rather, it appears to relate primarily to commercial farms that produce permanent crops (e.g. fruit trees, sugar cane); also, smallholders who are outgrowers seemed to benefit disproportionately from the presence of medium-sized commercial farms. Critically, these findings point to significant heterogeneity in the local economic effects of commercial farms rather than any kind of automatic spillover effects. The implication is that a more nuanced policy position is demanded with respect to promoting rural dynamism through new commercial models. In particular, the creation of suitable incentives for and regulation of outgrower schemes needs to be a priority. The remainder of the paper is structured as follows: section 2 reviews insights from economic theory concerning the expected benefits for farmers operating in proximity to large commercial ventures. Section 3 introduces the data sources and provides a descriptive snapshot of the changes in large commercial agriculture in Mozambique between 2002 and 2012. Section 4 reports the analysis of patterns in large farm location decisions and outcomes for surrounding smallholder farmers. Section 5 concludes. The authors recommend that that future research would do well to focus on the specific circumstances, including the contribution of public regulation and oversight that determine when and how smallholders benefit from the introduction of new forms of commercial agriculture. They also indicate that policy needs to move beyond simplistic notions of promoting commercial farming and, rather, focus on the incentives for and regulation of outgrower schemes.