Commercial farms and smallholders in Zambia: competition, spillovers or peaceful coexistence? Jann Lay a,b, Kerstin Nolte a, Kacana Sipangule c a GIGA German Institute of Global and Area Studies b University of Göttingen c Kiel Institute for the World Economy

Motivation Agriculture in Zambia is smallholder dominated Rather recently: Increased commercial farming activity Are smallholder farmers affected by the presence of large-scale commercial farms? How? 2

Potential links between smallholders and commercial farms 1st phase: Land acquisition -Increasing land scarcity -Compensation 2nd phase: Setting-up of the project -Increasing land scarcity -Employment creation -Infrastructure development -Environmental impacts (e.g. deforestation) 3rd phase: Operating farm -Increasing land scarcity (farm extensions) -Employment creation -Knowledge transfer -Improved agricultural infrastructure -Increased competition -Impact on agricultural prices -Environmental impacts (e.g. chemical fertilizer use) Ongoing project implementation 3

This paper … Analyzes the geographical patterns of large-scale farming operations in Zambia Quantitatively evaluates the impact of commercial farming on smallholder agriculture –Maize yields –Fertilizer use –Land cultivated Uses a diff-in-diff approach on survey data plus continuous treatment effects (of duration of presence of large-scale farm) 4

Data Post-harvest surveys (PHS) for small- and medium-scale holdings –2003/2004–2006/2007, (2007/2008), 2010/2011–2013/2014 –Pooled: households PHS for large-scale holdings 2013/2014 –Year of farm establishment and origin of owner –867 farms, median size 250 ha, mean ha, min (per definition) 20 ha, max ha Datasets matched by Ward 5

Key variables Outcome variables –Maize yield per hectare ( : ~1500 kg/ha, : ~1800 kg/ha) –Fertilizer use (2003: ~23%, 2013: ~60%) –Area cultivated (mean ~2 ha) Other information on farm households –Socio-demographic characteristics (age, education) –Assets (mainly productive assets for agriculture) Ward-level information –Presence of large-scale farms –Population, population density 6

Increased activity of large-scale farms in Zambia, by ward (cumulative since 1994) 7

Commercial farms and infrastructure: Investments with access 8

Commercial farms and land cover: Both rain-fed and irrigated 9

Commercial farms and population density: Indeed not so populated at times 10

Impact estimation: Diff-in-diff estimator 11

Diff-in-diff explained The difference in the change in yields/fertilizer/land size between  Smallholders in wards with a large-scale farm and  Smallholders in wards without a large-scale farm Change: 2003/05/06 (t=0) average to 2011/12/13 average (t=1) Careful: Still likely to be a biased estimate of the impact since farmers in wards where large-scale farms are established may be on different trajectories But still informative/indicative 12

Impacts on yields 13

(No) Impacts on fertilizer use 14

(Considerable) Impacts on land cultivated 15

Robustness Results also hold if regressions are robust to a number of different samples –Sample that only includes wards without “initial treatment” –Sample that only includes “ever treated” wards Matching on ward characteristics (infrastructure access, soil quality …) yet to be done First results from a continuous treatment effects model (dose-response function through the generalized linear model approach … matching difficulties not solved, caution) 16

Continuous treatment effects of duration of the presence of large-scale farms 17

Conclusions Increased large-scale farming activity since liberalization –With some foreign investor involvement –Mainly in relatively well-connected areas –Also rain-fed cultivation –Most in not-so densely populated areas Impacts of the presence of large-scale farms on smallholders –Higher yields –No impact on fertilizer use (incidence, maybe put to better use) –Impact on smallholder farm size to be further investigated (maybe consolidation effect?) Indicative evidence of some positive spillovers 18