Can commercial farming promote rural dynamism in sub-Saharan Africa? Evidence from Mozambique

Abstract

Abstract The impact of commercial farms on smallholders in developing countries remains highly controversial. This study draws on four periods of investments in commercial farming in Mozambique to frame an empirical analysis of their contemporary economic spillovers. We investigate the degree of selection of commercial farms into more favourable locations as well as the extent of heterogeneity in the effects of different commercial farming models on proximate smallholders. The analysis uses survey data covering all large commercial farms in Mozambique and which are linked to a nationally-representative survey of 6000 smallholders. Contrary to widespread assumptions that investors target only marginal farm land, we find that commercial farms are highly selective in their locations, preferring areas close to existing infrastructure and markets. Controlling for selection bias via reweighting and fixed effects, we find the presence of a commercial farm is associated with moderately higher incomes among neighbouring smallholders but a lower incidence of wage employment. Furthermore, these effects vary according to the type of commercial farming in place. More inclusive commercial models, such as those associated with outgrower schemes, appear to generate larger benefits. We conclude that broad generalizations about commercial farming investments must be replaced by more nuanced discussions of alternative investment models.