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Land investment is considered to be a profitable and sustainable way to earn long-term safe returns. The investment in land should be backed by transparency and understanding of the right mechanism involved in land acquisition and management. Land investment can be of two types: Agricultural Land Investment and non – agricultural land investment.

The sector presents many opportunities. Investment in agricultural land is growingly becoming a famous alternative to diversify an investment portfolio as it allows the investors to take part in the global mechanism of crop production ensuring long-term food security.

The upcoming issues of food security and climate change have been a challenge for human existence. The research of McKinsey Global Institute found the global middle class expanded to 1.6 billion in the past 20 years, when the percentage of people living above the poverty line in developing countries increased from 10% to 50%. The research institute estimated the global middle class will triple in 20 years.

Additionally, the living standard is improving and people are ready to pay more for better food, which ultimately increases the demand for food grains.

In China, farmland investment has been a growing trend in the last five years and there have been large scale land acquisitions by Chinese firms in different parts of the world. The role of foreign investors and agriculture investment funds increased since 2000. Farmland in Africa has been on target and many large business organizations acquired extensive farmlands in Africa. The main cause of the rise in agriculture investment in Africa is -

1. The government promotes food grain production in their country to meet the local demand
2. The farmland based companies want to ensure the food grain produced through an extensive agricultural process is integrated into the supply as it gives them better rates for the produce
3. The agriculture based projects provide opportunities to the local farmers to gain funds which can be utilized for improving the mechanism of food grain production and for increasing the production of food grains.

The interest of the US, China and the Gulf states in agricultural land investment in Africa is eminent. Many countries in Africa are developing and these countries own massive natural resources and unused farmlands which can be converted to productive use. The main crops grown in these regions are rice, corn and wheat. Palm oil plantation, rubber and coffee plantation are also very common in Africa.

Foreign investment in agricultural land is mostly made with the purpose of improving exports and profits through higher yield as the soil is fertile. The land acquisition rules in the sub – Saharan region is flexible and supportive of foreign investments. In certain regions of West Africa the land acquisitions rules are based on dual system, where the rights to land and customary rights are combined.

Foreign investment in agricultural land in developing countries is ethical investment which allows the investors to gain profits through food production and bring food to all. The investment in agricultural land can be public or private. However, the mechanism should be based on strict rules to prevent land grabs and violations of land acquisition rights.

Why invest in palm oil plantation projects?

Palm oil trees have been planted successfully across the tropical region of the equator at 20 degrees. The production of palm oil has increased globally by more than two times the amount and there have been a rise in demand for palm oil as the price of vegetable oil is increasing and these oils are also used in the production of bio-fuel.

These cultivated land regions which give a high yield of oil per hectare may not be suitable for the growth of other crops but the plantation of palm oil offers great benefits to the investors and is produced by many large industrial plantation groups that aim to produce palm oil to meet the rising global demand.

Many processed foods contain palm oil, which contains glycerol and fatty acids. Palm oil has highly saturated fatty acids. Unrefined palm oil is a great source of vitamin E. The world’s largest producer of palm oil is Malaysia and it holds 51% of the global share (since 2007). Palm oil produces oil which accounts for 30% of the total edible oil.

Malaysia and Indonesia are the largest producers of palm oil and the market in palm oil plantation is expanding in both countries because it offers many benefits. These industrial plantation projects provide high profitability to investors and job opportunities to the local people. Hence, these projects are supported by the local groups.

Palm oil is produced from the fruit of palm trees and the seed kernels. The edible oil is used as cooking oil in West Africa as the oil remains almost solid at room temperatures rather than being in liquid form which makes it appealing for the preparation of food and products made for toiletry and household cleaning. Palm oil is used in the manufacturing of many forms of bakery product.

Many countries are self sufficient in palm oil and are expanding the plantations to meet their local demand. However, with the rise in global population the demand for palm oil is also increasing. Currently, US imports about 2-3 percent of palm oil (2010 records). Although US is not the largest consumer of palm oil, it is one of the leading countries which has been participating in palm oil production and plantation projects. The European Union imports about 11% of the total palm oil (2010) and various other countries have been importing the rest of the portion.

Palm oil is considered to be energy crop which offers the scope to produce renewable energy which can be used to meet the local demand for power. The production of palm oil has been a controversial topic as it results in the increase deforestation.

The climate footprint of palm oil is generated from the process of deforestation and the emissions which are related to the growth and processing of palm oil. Emissions caused by deforestation can be avoided by investing in the land which has been established for plantation. Plantations which are grown on unused land reduce the dilemma of deforestation.

– by Leesa Milano

The document is the letter of support from the Sierra Leone government for Capital Alternatives and Plantation Asset Management projects. The government of Sierra Leone recognizes the projects as an effort, which is part of its vision and growth plan.

Capital Alternatives and Plantation Asset Management project

The growing global demand for palm oil

Investments in agricultural land in West Africa has been promoted as it allows investors to ensure higher productivity of food grains which can meet the local demand for food and it also allows investors to harvest food grains for the purpose of export.

The land rates are increasing in the region at a contract rate and investors can also earn through land rents which is generated by renting the land to farmers or private management companies which are involved in plantation or agriculture based projects.

Palm oil plantation

The investments in palm oil plantation projects are increasing in West Africa due to a number of reasons – the cost of crude is increasing, the increase in price of vegetable oil and increasing demand for agricultural land investments. The growing demand for fossil fuels raises the demand for bio-fuels. The increased use of palm oil for the production of bio-fuel has been a major cause in the rise in price of palm oil.

About 80% of the total palm oil which is produced across the globe is used as cooking oil. The food products prepared from palm oil are cakes, sauces and condensed milk. Palm oil is a great source of nutrition and it also offers ingredients which have anti carcinogenic properties. These features allow the oil to protect human body from various diseases. Due to its nutritional value, palm oil is increasingly used in foods in households and for the preparation of industrial products.

Palm oil is also used commercially for the preparation of detergents, soaps, medicines, cosmetics etc. One of the largest producers of palm oil products is Unilever which is known globally for its products.
Furthermore, governments globally are promoting the use of palm oil for the production of bio fuel. In Africa some regions are trying to move away from the use of fossil fuels and shift to natural ways of producing electricity. It is expected that the palm oil plantation projects in a certain region in Africa will produce oil which will be used to fulfil the power needs of the region.

Investment in palm oil

Investors from across the globe have invested into palm oil plantation as it is believed to provide safe and higher returns. Palm oil plantation projects in western Africa are supported by its climatic conditions and soil. The soil and weather support the plantation projects. Certain unused land area in western Africa have been converted into palm oil plantation projects.

Indonesia and Malaysia are the largest producers of palm oil and these countries have been progressively increasing plantation in palm oil. The increased acreage of palm oil plantation in Malaysia and Indonesia has been criticised because it has been a major cause of deforestation. However, in western Africa palm oil plantation projects are not based on deforestation.

The plantations are environmentally friendly and hence, the investors have supported these projects. These plantations are also backed by the local communities as it provides employment opportunities to local communities.

– by Stewart Atwell

Experts forecast surge in the price of palm oil

Many institutional and high worth investors from the Middle East, China and Europe are pouring money into the palm oil projects in western Africa. The main cause for the rise in investments in palm oil is the rise in the price of cooking oil post recession.

Investments in palm oil barrels and palm oil plantation projects are attracting investors because the market experts predict a surge in the price of palm oil in the second half of the year 2012.

It has been found that the share price of companies based on palm oil production has increased in the second quarter.

Experts believe the price of palm oil will surge by at least 16%, however, investment in palm oil plantation projects in western Africa face a range of risks such as

1. The unpredictability related to the political conditions, economy and the social instability
2. The changing regulations related to the FDI projects
3. Local oppositions to the FDIs
4. The current land holding regulations
5. The judicial system
6. The poor infrastructure and the facilities of logistics

Challenges of agricultural land investments in western Africa

The firms offering investment opportunities in the western Africa face the issues of land development targets, corporate social responsibility, obligations to the government / local communities and the development of value added services to create beneficial Agri- development projects.

The factors of human resources which involve, education, Agri labour, health care, technical conditions and management is also imperative in this regard. The cultural compatibility and working with local hierarchies pose risks to these development projects.

The rights of the indigenous people who are living in the area and the negotiation with the indigenous people who belong to the border regions are the main challenges faced by the project developers and the management team. The countries which have been facing internal conflicts and confusion over the borders and its natural surroundings may not provide the appropriate resolution in the matter of dispute. The participation of government of both the countries is important to ensure the deals are safe.

Labour pool in western Africa

The plantation projects in western Africa involve employment of local communities who have benefited in many ways by these investments as it provides employment to the people living in the palm oil plantation belt. Many young unemployed individuals join these projects and earn a living through it. Many workers in these regions are underemployed. Agriculture offers employment to 70% of the people and plantation projects provide many other benefits along with employment.

The literacy rate in the region is very low and the skill level is also very low. The young men and women who are interested in joining these projects are offered training and a skill development programme is also conducted to allow the youngsters to secure jobs.

The cost of handling the plantation projects in the region depends on factors -

• The fuel cost / transportation costs ( which can be 50% higher)
• The cost of importation or consumables
• Cost of development of resources in plantation sector
• The cost of development of uncultivated land into usable land
• Labour costs and taxes

– by Leesa Milano

Growing demand for investment in gold in China

The demand for gold increased in the last one year by 16% globally and a total of $59.7 billion has been spent on gold by investors. Gold investment was mainly boosted by investment from China, which increased by 10 percent.

The demand for gold was 1,098 tonnes in the first quarter of the year 2012, which was 5 percent above the record high as compared to 2011. According to the reports released on gold, demand trends for gold dropped in the first quarter in 2012. China is expected to be one of the biggest markets for Gold, where the demand for gold jewellery increased by 8% and the market share of demand was 30% of the global demand in gold jewellery.

The total investment for retail and institutional investors who bought ETFs was valued at $2.4 billion (51.4 tonnes of gold), which was purchased in the initial 3 months of the year. Although the demand for gold in China is increasing, the demand for gold in the neighbouring country India, has decreased. The demand for gold jewellery in India fell by 19% and the demand in investments fell by 46%. However, it is believed that demand may increase as the government abolishes taxes on gold.

Increasing Gold Investments in China

There are many reasons for increasing investments in gold in China, which includes the following -

1. Poor European market performance – The trend of investments in Gold is driven by the poor performance of European markets and Europe’s debt crisis, which resulted in weakening currencies.
2. Gold gains during the crisis – Gold is expected to gain for the 12th consecutive year in 2012 because the European policymakers want to avoid the breakup of the Euro Zone. The investors holding on to their share in gold mainly use it to avert risk, especially due to the rising risk of the financial crisis.
3. Poor global equity market performance – Investors are looking towards gold due to the poor performance of global equity markets.
4. Value of money is reduced – Since the value of money is decreasing due to excessive money printing , it is important for government investors, individuals and institutional investors to hold on to gold.
5. Increasing demand for gold jewellery – It is mostly China’s middle class that is keen to invest in Gold. They are the biggest consumers in metal this year, and the experts believe the trend will continue to rise because at least 25% of the total population in China will be middle class by 2020. The growing middle class seeks to invest in luxury items and Chinese consumers will be responsible for 44% of the global sales of consumer goods. Chinese buyers have been demanding for retail jewellers to open shops in various cities and to expand in China to meet the increasing demand for gold.
6. Amazingly, the trend for accumulating expensive metals is spreading from the main cities of China to third tier cities which will further increase the demand for gold.
7. China’s growing market for gold – China is a growing economy and its growth rate is expected to surpass the growth of western developed economies. China will become one of the largest markets for gold in 2012 and buying in gold will further be aided by the central banks that have been using gold as a diversifier as well as a safe source to secure the country’s wealth.
8. Gold investments reduce uncertainties / dollar pressure – Furthermore, stronger pressure on the dollar may raise the demand for gold. Investors claim they are optimistic of gold investments in the long term because there are too many uncertainties in the overall global market in the form of political , economical and financial uncertainties. The imports of gold in China from Hong Kong rose by 65% to 103.6 tons in the month of April in 2012 (as per the records of Census and Statistics Department of the Hong Kong Government).
9. Investors are avoiding property investments – Investors from China are avoiding property investment to prevent risk of investing in a property market bubble. However, Gold is an alternative safe investment and the demand for Gold is further expected to increase due to growing demand in China’s middle class.

– by Samantha Taylor

Investment in agricultural land and plantation projects in Sierra Leone

There exists a great imbalance between the demand and supply in food grains globally, and this resulted in the rise in the price of food grains by the end of 2008. Capital Alternatives provides investment opportunities in agricultural land in Sierra Leone in western Africa in rice farming and palm oil plantation projects, aiming to generate a food grain supply to meet local demand and also fulfil the global demand.

The investment in agricultural fields offered by Capital Alternatives are fully managed and insured. It is a great opportunity to make alternative investments in agricultural land to earn long term returns. The projects offer returns in the range of 50% to 120% in a year. The projects are managed by the local management firm, and it gives safe and secure returns. These projects have a flexible exit mechanism and the land offered is under the regulation of government’s code of conduct for land acquisition.

The deals are fully transparent and the local landowners are aware of the negotiations. The involved parties are informed before the negotiation, and the land deals are fully protected. Media and civil society are actively involved in project related activities, which ensures the deals are backed by local community and government leaders. The land rights are offered on a long term lease to the investors. The investors get the Title deed in their name and the project is based on the shared profit basis , where the investors will have to pay the set up cost , which is $3,000 per acre . There are no ongoing or hidden fees.

High returns - The investors get 40% of the net profits from the rice crop harvests.

Social benefit - A small percentage of the profits are invested towards assisting the local population through health, education and food. It contributes to economic growth and social stability of the region. It also provides employment opportunities to the local population and promotes the development in the living standard of the region.

Environmental benefit – The agricultural investments help in soil conservation. It is fully protected against practices such as increases in greenhouse gas emission and diversion of water through environmental uses.

Fully monitored - The projects are fully monitored for environmental impact assessment, and it guards against any form of loss of biodiversity or depletion of soil. The project aims to improve food production to meet the local demand for food grains.

Increasing food grain production- Rice is the staple food of the region and hence, the project is based on prime rice farm lands. The scheme promotes sustainable human development.

Similarly, Capital Alternatives palm oil plantation project in Sub Saharan Africa provides the opportunity to earn returns of up to 120% in a year. In the last few years the region attracted huge investments from global investors because the land is highly arable and provides escalating returns through land accreditation and annual harvests. The local community is also benefiting from the inflow of capital, which contributes to infrastructure development and improves the lifestyle of people in the region.

—Stewart Atwell