Resource frontiers and agglomeration economies: Understanding the diversity of investment logics in Southern and Eastern Africa

This blog post is based on Abeygunawardane et al. 2022 and this Twitter thread by @dilini_abey

We looked at transnational agriculture and forestry investments in understudied frontiers in Southern and Eastern Africa across Mozambique, Zambia, Tanzania, and Ethiopia. Our sample covers ~11% of the investments recorded in the four target countries.

We reconstructed the underlying logics these investments in a Bayesian network with firm and actor level interview and spatial data to assess where these investments are likely and how these vary across heterogeneous investors. We compiled a unique data set based on extended hours of interviews with managers including the top-level decision makers such as CEOs, CIOs, and managing directors often deemed unapproachable both at the individual and firm level.

We find that investment logics, characterized as a trade-off between resource frontiers and agglomeration economies, varied by investor’s related-skill sets and existing market reach. Experienced investors focusing on high-value crops invested preferentially in remote subsistence frontiers, seeking land with specific agroecological conditions. In contrast, newcomers – such as the typical speculators – focused more on proximity to infrastructures and markets. Investors with extensive skill sets and market reach expand the land use and deforestation frontier but are also likely to better survive the high transaction costs of operating in unfavorable markets.

Overall, we emphasize the importance of avoiding overly simplistic narratives, and we highlight the diversity of assets, skillsets, motivations and logics of investors in agriculture and forestry in Southern and Eastern Africa.

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