More and more foreign companies are realizing the investment potential of emerging markets. One company,
Renaissance Partners, an investment bank and business advisory firm, is taking full advantage. The company is one of the several partners investing in the conversion of a 2,400 acre coffee farm near Nairobi, Kenya into a gated suburb named Tatu City. The company boasts that the future community will be able to house up to 62,000 people and create “thousands” of local jobs. In addition, the community will bring modern amenities such as electricity and water lines to the surrounding area. The success of the project has influenced Renaissance to invest in other real estate projects in Ghana, Nigeria, Senegal and Rwanda. Renaissance is also taking on an even larger project in Congo, which will spread over 6,400 acres.
Despite the obvious benefits, Tatu City has also produced some concern. One problem, seemingly overlooked, is the fate of the coffee farm workers whose jobs will surely disappear after construction begins. In a recent article by the Financial Times, vice-president of Renaissance Partners, Josphat Kinyua, claims that building real estate will be a better use of the land as a result of the farms strategic location near a highway leading to Nairobi center. By changing the land into real estate, the value of the land will be ten times its current share price.
There’s no doubt that converting the area into real estate will be more economically beneficial, however, the plan seems to disregard the fate of locals whose livelihood may greatly depend on their continued work at the farm. Renaissance reassures that the coffee farm will remain in business until the community actually begins development, though it is still unclear what will happen to farmers after this begins. Will they be trained and employed by Tatu City or will they be left on their own to find new employment? Perhaps a program can be developed by investors to either train farmers for work in the city or to find farming opportunities elsewhere.
There is also concern for the fate of coffee companies dependent on this land for business. Vava Angwenyi of Vava Coffee is dependent on this land to produce coffee for export. She pleads that as a result of this loss, “We fear that five years from now Kenya may not be producing enough coffee for export.” The problem with blaming foreign investment alone is that the coffee industry has been dwindling over the last 50 years in Kenya. As such, it’s a bit much to put blame on these investments as the cause of coffee’s decline. In fact, Mr. Kinyua suggests that governments take a more active role in investment policy and introduce a law which will require companies to compensate for any arable land used.
At this point, the fate of this particular coffee farm seems to be sealed. However, in order to protect arable land in Kenya, the government may need to introduce policies regarding how land is used. Only 8 percent of Kenya is usable for farming and if Kenya wishes to continue its agriculture sector, it must take more protective measures for this land. Tatu City will be the first of many privately-planned communities in sub-Saharan Africa. As more companies realize the investment potential in Africa, there is sure to be a rise in foreign investment over the upcoming years. It is for this reason that it is especially important that sub-Saharan African governments reform their land usage policies in order to ensure that they can reap the benefits of investment while not jeopardizing other viable sectors. If done correctly, this may accomplish what foreign investment did for both China and India in stimulating massive economic growth.