Natural Capital Valuation Viewed from an African Context


  • 2013•06•03

    Emmanuelle Quillerou


    Photo by Damien du Toit

    The lack of accurate natural capital valuation of land combined with large-scale foreign investment into land has recently triggered contestation and social unrest, particularly within the African context.

    One example is the growing tension between stakeholders and investment companies in Sierra Leone. A plantation investor compensated farmers $5/ha/year for the use of their land under a 50-year contract. Local communities, however, perceived this payment as unacceptable. This is because the level of compensation received was perceived as not covering in full the loss of valuable trees and plants destroyed in the clearing of the land — or more specifically, the loss of services previously provided by these trees and plants. This perceived unfairness led to social unrest and demonstrations, turning what could have been a win-win situation into a lose-lose one.

    Such contestation was not an isolated case and has occurred in other countries, especially across the African continent. Social unrest typically deters foreign investors and limits further opportunities for development. All this because local communities have been ignored in the bargaining process, and the true economic value of land is clearly underestimated by the investor and the national government when closing the deal.

    Economic valuation of land has the potential to clarify the true value of land and its services to all stakeholders affected by the land deal. It provides a basis for assessing development opportunities and setting “fairer” compensation levels, thereby reducing economically and socially detrimental unrest. It also uses the language of investors, donors and policymakers to make a case, potentially improving communication between various stakeholder groups.

    “Economic valuation has been mostly undertaken in developed countries, but not as systematically within the African context.”

    Methods for economic valuation have been developed by academics and practitioners over the past 30 years. Despite being theoretically well known, economic valuation of land and the ecosystem services it provides is still subject to high levels of criticism. This is because of several remaining issues linked to practical implementation of these valuation methods, complicating the derivation of reliable and consistent economic values.

    Some people consider that not everything can be valued in economics terms, because they should be regarded as “priceless”. This is typically the case for emblematic species, such as East African mountain gorillas, or for religious and spiritual practices. Economics is one tool that can facilitate dialogue between different actors and trigger action, and should ideally be complemented by sociological, ecological and technical approaches for a richer and fuller picture.

    Economic valuation has been mostly undertaken in developed countries, but not as systematically within the African context. Economic valuation methods require high levels of data and capacity for derivation of an economic estimate, which tend to be less easily available in developed countries. Decision-makers also typically lack adequate capacity to critically assess the values produced in both developed and developing countries.

    This is, however, slowly changing following initiatives such as the Stern review on climate change (2007), The Economics of Ecosystems and Biodiversity (2010), the UK National Ecosystem Assessment (2011), the setting up of the Offering Sustainable Land Use Options (OSLO) consortium and the more recent Economics of Land Degradation (ELD) initiative. There is now greater awareness of the potential provided by economic valuation and this has initiated an on-going learning process for all stakeholders across the world.