Private investment in agriculture has been subject to debate. Supporters emphasize positive spillover effects generated by better access to inputs, credit and labour opportunities. Critics characterize this as land grab, in which resources are taken away without benefiting local communities.
Empirical research in Mozambique provides evidence of spillovers from large farm establishment. Small farms located within a 25 kilometer radius of large farms make more use of modern farm techniques, such as fertilizer and pesticide use and crop rotation, than small farms outside this radius.
Nevertheless, no empirical evidence was found of higher yields on small farms located within a 25 kilometer radius of large farms, but a decline in smallholders’ subjective well-being was reported.
The conclusion that investments in large farms can lead to positive spillover effects, but not automatically, implies that public funding and policies are needed to complement the private investment to ensure local communities benefit from private investment.