AEPP Podcasts 2018 (40-2) page 1 of 5 Craig Gundersen, Thomas Jayne, & Ayala Wineman

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1 AEPP Podcasts 2018 (40-2) page 1 of 5 Allison Scheetz: Welcome to the Applied Economic Perspectives and Policy podcast, a production of Oxford Journals and the Agricultural and Applied Economics Association. Today s podcast features a discussion between Craig Gunderson, Thomas Jayne, and Ayala Wineman about recent featured article published in AEPP. If you are interested in reading the article or learning more about AEPP visit academic dot o-u-p dot com slash aepp. Craig Gundersen: Welcome to the Applied Economics Perspectives and Policy podcast series. I am Craig Gundersen, Managing Editor of the journal and Soybean Industry Endowed Professor of Agricultural Strategy in the Department of Agricultural and Consumer Economics at the University of Illinois. Today we will focus on the recent featured article "Land Prices Heading Skyward? An Analysis of Farmland Values in Tanzania" coauthored by Ayala Wineman, a Research Associate in the Evans School of Public Policy and Governance at the University of Washington, and Thomas Jayne, University Foundation Professor in the Department of Agricultural, Food, and Resource Economics at Michigan State University. Ayala and Thom, welcome to our podcast. The recent development of land markets in Tanzania and elsewhere in sub-saharan Africa is an important occurrence with implications for farmers, potential farmers, and consumers. The lack of longstanding markets, though, has meant there is relatively limited knowledge about changes in land values over time, the distribution of those changes, and the determinants of land values. In their paper, Ayala and Thom take, make an important contribution to our understanding of land values in Tanzania with implications for countries with similar structured land markets. Ayala, the land markets in Tanzania have only recently developed, and this is one of the reasons for the subsequent increases in land prices. What are the reasons for the thinness of markets historically, and what has changed recently? Ayala Wineman: Yeah, so, land markets in Tanzania have historically been somewhat thin for a few reasons. These include low population densities, the influence of customary authorities, and a history of government skepticism of land markets. So, first, what does population density have to do with the emergence of a land market? Historically, where rural population densities were low and land was abundant, land didn't have an economic value that necessarily warranted a market. Second, although all land in Tanzania is officially owned by the national government, in practice, land has also been controlled to some extent by customary authorities, and clans may understandably prefer that land belong to the clan or the lineage and, therefore, that it cannot be transferred through a private transaction, especially to non-clan members. The third factor I mentioned was around government skepticism of land markets, and at the time of Tanzania's independence, President Nyerere was extremely skeptical of land sales markets, arguing that the ability to sell and buy land would result in the concentration of land in the hands of a small elite class. And so, land sales were prohibited, at least on paper. Now, you asked what has changed recently to give rise to a more active land market, and the answer probably lies in policies that both reduced customary influence in Tanzania and have officially recognized the existence of a land market. In the 1970s, official responsibilities for land governance were shifted to democratically elected village councils, and this had the effect of sharply reducing the influence of customary authorities. It's also possible that the cultivation of a unified national identity facilitated internal migration in Tanzania, especially rural-to-rural migration, and these migrant flows have also been linked in the literature to the development of a land market. In addition, the Land Act of 1999 for the first time recognized customary rights to land as being transferrable. Now, this doesn't mean that land was never transferred or sold AAEA Page 1 of 5

2 AEPP Podcasts 2018 (40-2) page 2 of 5 before, but it surely helps the market when market transactions are widely sanctioned. During our study period that begins in 2009, at least one-fifth of farmland households accessed some land through purchase. Finally, I do want to note that while the increasing commodification of land is likely, at least partly, behind the recent rise in land prices, causality also goes in the other direction. So, even though population density in Tanzania is relatively low, there are certainly areas of high-density settlement that are getting more crowded, especially around cities, and there's also a trend of increasing commercialization among farmers and increasing levels of technology adoption that presumably make farming more profitable. So, the rising value of land also drives the land markets to become more active. Craig Gundersen: Ayala, while land prices on average, as you know have increased across Tanzania, this masks quite a bit of heterogeneity, especially in terms of plot size and region of country. What did you find in terms of these differences, and what may explain these differences? Ayala Wineman: Great. In terms of plot sizes, we find that farmland prices are rising quickly for plots up to 5 hectares, but they're not rising, at least in a statistically significant manner, for larger plots. Now, in a cross section, small plots tend to generally have higher per-acre prices, and this can be attributed to the fact that they are more likely to be found near cities, where population densities are higher. In some settings, these small plots close to urban markets are used to produce higher-valued and more perishable crops, because they have easier access to urban markets. And small plots also have higher values, because they have multiple potential uses. So, they can be used as small farms, but they can also be turned into residential or commercial properties in peri-urban areas. So, why would the value of small plots increase over the study period between 2009 and 2013? The same factors that contribute to higher prices for small plots in a cross section likely drive the relatively faster increase in prices for small plots over this time period. Processes of urbanization in which the population shifts into cities mean that population densities are rising in areas that tend to hold relatively small plots. So, urban sprawl places upward pressure on surrounding farmland as demand rose for more places for people to live. And rising urban incomes mean that markets for agricultural products are expanding, particularly for farmers that are oriented to urban consumers. So, farming process and land values are rising around cities. You also asked about geographic patterns. In terms of geography, we find that among Tanzania's administrative zones, average land prices rose at a different pace in different zones. For example, while prices for all plots rose by about 6 percent per year during our study period, they rose by 13 percent per year in the Southern Highlands, which are known as the breadbasket of Tanzania. In the paper, we don't speculate much on the causes of this geographic heterogeneity, but it at least compels us to recognize that blanket generalizations should be avoided. Craig Gundersen: Thank you for your responses to those first two questions. And now I'll turn to Thom. Thom, as expected, the correlates of land values in Tanzania are similar to what are found in, say, the United States. There are, however, some instances where the correlates are not generally found in the U.S. Can you discuss both of these categories? Thomas Jayne: Sure. And, Craig, I just wanted to thank you for giving us the opportunity to share our results on this podcast. So, thank you for that. So, now to your question, yeah, in many ways, the correlates of land values in Tanzania are really consistent with what we are, you know, have found over AAEA Page 2 of 5

3 AEPP Podcasts 2018 (40-2) page 3 of 5 time in the U.S. and elsewhere in the world. So, for example, we find that land values are positively and significantly correlated with the net value of crop production per acre, which is sort of related to price levels. And the period of time over which we did this study spanned this time period that covered this, you know, surge in world food prices that started around 2006, 2007, you know, and continued for quite a long time. So, to some extent, our results are influenced by what was going on in global markets, which seeped into domestic Tanzanian markets and it influenced the viability of agriculture. Tanzania had an annual average growth rate in agriculture of about 4 percent in-- 4.8, excuse me, 4.8 percent annual growth in real terms, inflation-adjusted terms. So, that's very high. Over the same period, the world average was about 2.75 percent. So, Tanzania was one of the fastest-growing agricultural countries in the world during this period in percentage-growth terms. And this got capitalized into land prices pretty quickly. So, in some ways, you know, kind of hearkening back to some of the work that, you know, many agricultural economists have done in the United States, we see similarities there. One of the factors that has been salient in the United States that isn't yet happening in Tanzania is the impact of commodity policies, which can have a very big, you know, impact on the profitability of growing crops. So, this is a deviation, since we don't really have these same commodity policies operating in most of Tanzania, but we have found evidence in other place in Africa, like in Kenya, where the National Cereals and Produce Board, which is a grain-marketing board which has really inflated maize prices in Western Kenya, has been capitalized into those land prices there much in the same way that they have over the years in parts of the United States, as well. We are also finding that, you know, indicators, soil quality and the presence of irrigation and higher expected rainfall, which all point to greater agricultural potential, are also correlated with land prices in Tanzania. We're also finding that places that are closer to urban areas are producing more rapid increases in prices, similar to many parts of the United States, as well. And there's competition happening now for, you know-- so, rural Africa is growing fairly rapidly and the growth rate is quite high and places that were rural 20 years ago are becoming small towns and even big towns, you know, and are very-- so, rapid demographic change leading to cities that were not really there 20 or 30 years ago. And where this has happening in the outlying, you know, hinterland areas outside of these new urban areas, we're seeing these land markets are starting to develop. And this is part of the phenomenon of what's leading to the marketization of land prices-- land markets and rising land prices in these areas. So, in many ways, we're seeing some of the same kind of drivers as we've seen historically in the United States, as well. Craig Gundersen: Thom, this work was generously funded by USAID Food Security Innovation Lab and the Bill and Melinda Gates Foundation Guided Investments in Sustainable Agricultural Intensification in Africa. Can you talk a bit about how this paper helps advance policies that could be used to meet the broader goals of improving food security and promoting agricultural development in Africa? Thomas Jayne: Yeah. Sub-Saharan Africa is a very dynamic area at the moment. It's growing rapidly, both in terms of the population and in terms of, you know, economic growth rates. As I said a moment ago, agricultural productivity is among the highest in the world in Tanzania. So, there is much-- and this is well-understood-- there is much greater global interest in African farmland. People like Derek Byerlee and Klaus Deininger, you know, wrote 8 or 9 years ago about this, quote-unquote, "lab grabs" happening in Africa and the extent to which foreign investors are coming in and, you know, these statistics about 60 percent of all the world's remaining unutilized land is in sub-saharan Africa. So, all of these points, I think, AAEA Page 3 of 5

4 AEPP Podcasts 2018 (40-2) page 4 of 5 have been well-known and are partially to account for the development of land markets in some parts of sub-saharan Africa. But much less well-understood, and I think part of our paper alludes to this, is much greater interest in African farmland by local African investor farmers. So, this perception that sub-saharan African farm, you know, agricultural systems are dominated by, you know, small-scale farmers using hand-hoe technology, that's becoming rapidly outdated. And the fact that there are people with money in urban areas ever since the rise in global food prices, these people have seemed to find investing in land to be a very profitable proposition for them. So, the profile of these domestic African investor farmers is rapidly influencing the face of African agriculture today. And this is part of why we're seeing some of these increases in land prices in favorable, you know, agricultural areas of the region. So, you know, getting back to your question about what the policy implications from all of this, there are-- our paper kind of points out both the opportunities and the threats associated with these dynamic changes in land markets. So, on the positive side, the conversion of land from where the former traditional allocation system, which was really done by local authorities, chiefs and admins or a nonmarket means of allocating one, the erosion of those institutions and the increasing dominance of land markets based on willingness to pay is tending to put more and more land into the hands of people who can productively utilize it. And, you know, many of these more capitalized, urban-based, medium-scale, you know, investor farmers are acquiring land in the region. And this is leading to dynamic shifts in land use and probably contributing to overall agricultural productivity growth, at least production growth, maybe productivity growth, in the region. Now, on the negative side, there is this concern, a valid concern, that as these people are buying up land and squeezing, it's potentially squeezing out other, you know, local people who otherwise would have been allocated that land through traditional institutions. So, certainly, this question about displacement is a serious one that may, you know, accompany the rise of these land markets. It's clear to say that the rise of these land markets is disrupting traditional institutions and authorities whose power really derived from the authority to allocate land to people in the community. So, the development of land markets is part and parcel of more wholesale changes in social systems, in some ways uprooting the traditional social fabric and creating new, new power structures in the area. So, some people may regard this as just an inevitable part of economic development, and other people may be regarding it as kind of an erosion of a way of life. So, you know, our paper doesn't really come down one side or the other, but it does try to put in stark relief some of these issues and that there are winners and there are losers from these alternative policy options, the alternative policy options being, do we encourage the development of land markets as a new institutional form in much of Africa, or do we retain and protect the traditional institutions for land allocation, much as, you know, Ayala mentioned a few minutes ago that Tanzania's first president, Nyerere, was very skeptical about moving to land markets, because he suspected that this would lead to a lot of social disruption, which we may, in fact, be seeing in parts of the region. So, you know, we're basically trying to show empirically, first of all, that where land is rising-- where land prices are rising, why they are rising, what are the correlates of this, and the potential winners and losers who are going to be affected by the status quo of letting this continue along its current trajectory. Craig Gundersen: Ayala and Thom, many thanks for taking the time to share your insights into this important topic. Thomas Jayne: Wonderful! Thanks so much, Craig. It was a pleasure. AAEA Page 4 of 5

5 Ayala Wineman: Thanks for having us. AEPP Podcasts 2018 (40-2) page 5 of 5 Allison Scheetz: The article discussed today Land Prices headed Skyward: An Analysis on foreign Land Values in Tanzinia, was co-authored by Thomas Jayne, University Foundation Professor at Michigan State University and Ayala Wineman a Research Associate from University of Washington. It can be found in Volume 40 Issue 2 of AEPP. If you have any feedback or questions, please send an to podcasts at oxford journals dot org.if you are interested in learning more about AEPP or signing up for free AEPP content alerts, visit academic dot o-u-p dot com slash aepp. For more information about the Agricultural & Applied Economics Association, go online to aaea dot org. The music featured in today s episode is the song Forward by Northbound. You can find it online at free music archive dot org. Thanks for listening. AAEA Page 5 of 5