Does Foreign Land Acquisition Deprive Per Capita Income in Africa?

Abstract

This study investigates the implications of large scale foreign land acquisitions on per capita
income in Africa. It employs data from World Development Indicators, World Governance
Indicators and World Trade Indicators on key variables such as arable land per person,
agricultural land as percentage of land area, net food import, regulatory quality, among others
(1995-2012) on selected African countries where instances of foreign land deals have been
reported. The study formulates empirical models that draw from institutional development
theory, which was estimated using Fixed Effects (FE) and Generalised Method of Moments
(GMM) techniques in order to handle the issues of country-specific effects and endogeneity.
The results from the empirical analysis show that agricultural land influences per capita
income significantly. It hereby implies that as more agricultural land are cultivated; the
wellbeing of the populace is likely to be enhanced primary through increased income for
farmers, increase in real money income for non-farmers, drastic reduction in food inflation
and foreign exchange gains for the government. The results of the study suggest the need for
controlling the issue of massive foreign land deals through viable institutional framework,
though there is need for foreign investment in Africa’s agricultural sector but sound
institution is pertinent in order to avoid rent seeking behaviour among stalk holders.