Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
55
investment destination79. For instance, FDI that has been undertaken from a natural resource
motivation put strong emphasis on site selection criteria such as location and availability of
resources whereas export-orientated FDI particularly rewards locations that offer cost
advantages. Such site selection criteria include utility costs and labour costs.
Particularly with regards to agricultural FDI in the COMCEC Region, it is a rather complex matter
to produce a comprehensive overview of the exact site selection criteria that agricultural
investors strongly emphasise. This should be related to the diverse nature of agricultural
activities and value chains, ranging from agro-processing manufacturing to horticulture and
crops. However, the availability of suitable land and water resources function have been
perceived as critical site selection factors of agriculture-specific investors. Two location
benchmarking studies with respect to agricultural activities in sub-Saharan Africa can further
embark on such agricultural-specific site selection criteria. Conducted by the World Bank’s
Multilateral Investment Guarantee Agency (MIGA) in 2005, the study researched upon critical
site selection factors for certain industries in nine sub-Sahara African countries, including
COMCEC Member countries Mali, Mozambique, Senegal and Uganda. Objectives included to
identify countries’ comparative advantage in certain industries vis à vis competing locations and
to analyse the investment climate and attractiveness for these industries in sub-Sahara African
countries. Location benchmarking had been applied as tool to compare countries and measure
their potential to attract FDI from the defined industries. Two of such industries included
agriculture-related sectors: horticulture and food & beverage.
The study showed that the horticulture sector, which embraces the production and marketing of
highly perishable products designed for fresh consumption with a relative high-value per unit 80,
has an increasing share of production in developing countries. FDI plays a significant role in the
successful horticulture development stories in Africa despite its modest amount of FDI
compared to other sectors. Investors in the horticulture industry are typically characterised as
searching for politically stable, pro-business environments with low labour and real estate costs
combined with good quality of infrastructure81. After all, horticulture investors are heavily
dependent on reliable access to land and export markets in order to comply with just-in-time-
shape delivery required by its buyers. Horticulture requires a combination of labour-intensive
activities (e.g. pre-packaging work) and lower labour costs as there appear to be export
opportunities for high quality pre-packaged vegetables. Availability of inputs such as pesticides,
fertilisers and packaging material are perceived as essential.
These characteristics can be translated into the following critical site selection factors and their
drivers:
Quality factors (in order of importance)
 Access to markets and supplies: good logistics and infrastructure;
 General business environment: politically stable and pro-business; and
 Availability of real estate and arable land: climatic requirements.
79 OIC, 2009.
80 MIGA, 2007.
81 FAO, 2008.