African cities are growing rapidly This growth can be attributed to the increase in population from natural births within cities and migration of people from rural areas in search of better job opportunities. The increase in urban population has led to an expansion of urban boundaries into peri-urban and rural areas, And the associated increase in demand for land previously not classified as urban has sped up the development of land markets in Sub-Saharan African (SSA) cities. It is in the context of this trend that a spike in global energy and food prices in 2007 and 2008 led to a sharp – albeit temporary – increase in demand by international investors for rural agricultural land in Africa and beyond, stoking fears of a “land grab.”
At an IFPRI virtual brownbag seminar held on 21st April 2021, Dr. Sarah Tione, a Doctoral Fellow with the Norwegian University of Life Sciences, presented a study that explored the spatial and intertemporal variation in farmland prices in Malawi around this critical period.
The study builds on the von Thünen theory of agricultural investments and rent and on Capozza’s and Helsley’s stylized urban growth model which say that land values decrease with distance to central business areas as well as the quality of land in rural areas and peri-urban areas and development costs in urban areas. Using implicit willingness to accept (WTA) sales and rental land (shadow) prices from three rounds of nationally representative Integrated Household Survey (part of the Living Standards Measurement Survey) from 2010, 2013 and 2016, the study makes several conclusions:
- Land shadow prices increase with increasing farm household-level population pressure in rural as well as in per-urban areas. In other words, the more people live off a piece of land, the higher they value it.
- High food and energy prices during the “land grab” period in Malawi (2007-2013) induced higher expected profitability in farming among small holder farmers even in remote rural areas, temporarily increasing shadow sales prices of land in rural and peri-urban areas. After 2013, rural land shadow prices declined again along with global energy and food prices, but not as much as expected, especially given that national policy pivoted away from large-scale agricultural projects around the same time.
- Land shadow sales prices are high relative to rental prices in peri-urban areas suggesting that peri-urban landowners expect the land to be transformed in the future for urban farming purposes like poultry, vegetable or flower farms, or to non-agricultural uses.
Dr. Tione concluded by stressing that in an environment where land value is affected by population growth and urbanization, land markets should be factored in rural and urban development policies in Malawi. Development policies should consider whether land markets can be an affordable avenue for accessing land, particularly among land-constrained households and the youth, or whether interventions are needed to enhance access to land for specific groups or purposes.
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