South Africa: Difficulties Of Financing Farmers During Drought

Commercial banks in South Africa face enormous credit risks due to agricultural producers defaulting on loans and being increasingly unable to provide security for loans.

... 61% of the approximately R160 billion (1US$=14.8ZAR; June 2019) in farming debt in South Africa was owed to commercial banks...many farmers were unable to repay their loans due to failed harvests, ever-increasing input costs, and low livestock prices.
“Agricultural land is typically offered as security by a farmer when applying for credit and a mortgage bond is [then] registered on the property. Decreasing value of agricultural land and the uncertainty about loss of ownership [due to land expropriation without compensation], negatively impacts the value of the collateral held by banks.”


Besides having outstanding debt, defaulting farmers would no longer have access to loan facilities for planting or rebuilding livestock herds.

Many emerging farmers did not own land to use as security for funding, and the limited capital they have would, in all probability, be “swallowed up” during a drought.

Many farmers had left and would continue to leave the sector in search of more lucrative and less risky business opportunities.

Full article

German agricultural concern invests US$25 million on Zambian dams

German company, Amatheon is constructing two dams at a cost of over US$25 million to boost farming activities through irrigation in the Mumbwa area of Zambia. The two dams Abba and Katanga, are expected to be fully operational by 2016/17, respectively.


Amatheon Agri Group founder and chief executive officer Carl Heinrich Bruhn said the total investment for Abba dam is over US$15.6 million while Katanga cost is US$10.6 million. Bruhn said Katanga is a joint venture between Amatheon Agri Zambia and Toyota Tsusho Corporation with intentions to develop 2,700 hectares of land for cropping of maize, wheat and soya beans while Abba is part of a farming bloc expansion to develop 10,000 hectares for irrigation farming as well as cattle ranching and rain-fed cropping.

Amatheon operates projects in Zimbabwe, Zambia and Uganda. 


African Agriculture

Malaysian palm oil investment in Liberia causes dislocation crisis

It's now an almost boringly familiar story: the central government negotiates to lease huge chunks of fertile countryside to a foreign investor who promises to bring 'develoment,' jobs and many other benefits. Local communities are told little about the land giveaways until they are displaced. Few jobs or other benefits materialize for the locals and resentment sets in.

In this case its about a Malaysian company developing palm oil plantations in Liberia.  

'Angry villagers accuse Sime Darby of cutting a private deal with the government and failing to consult them. Last December, they rioted against the company, seizing its bulldozers and blocking the plantation project. They say their crops are gone and their sacred lands are desecrated. The jobs, they say, are too few and too poorly paid, especially now that they’re forced to buy their food in the marketplace rather than growing it.'

“Everybody made mistakes on this,” Liberian President Ellen Sirleaf Johnson told the villagers. “More consultations and more talks with the people should have taken place.”

Considering all the publicity about how frequently these sort of "mistakes" have happened in so many other places before, this sounds pathetically weak coming from the Liberian president. 

While dispossessed farmers are clearly victims, that does not necessarily mean they are innocents in the matter. Lump some payments that were offered and eagerly accepted seemed like a fortune "until the money runs out and they realize they’ve got nothing to fall back on."

One farmer was paid $130 for his two acre farm. We are told he is now contract worker for the palm oil plantation, 'getting 3 cents for every hole that he digs for a palm seedling.' Not only is his income now less than what he is said to have earned before, his loss is far more than just financial. 

Blame poverty, lack of education. But where was the government when its citizens were giving away their heritage for a few pieces of silver? Obviously too busy doing deals with the investor to think of more robust protections for its citizens in signing these deals.


Calling it a "mistake" sounds awfully hollow of the Liberian president.

 African Agriculture

DuPont Pioneer now closer to takeover of South Africa's Pannar Seeds, but still fighting public relations battle

U.S. seed ginat Dupont Pioneer had to fight long and hard to get regulatory approval to 'merge' with (really take over) South Africa's Pannar Seeds. Despite spirited opposition by activist groups, Dupont was given approval to go ahead with the deal earlier this year, although that is being appealed.

Among the reasons for opposition to the takeover were fears of  a further swamping of South Africa with GM seeds, fears of a further reduction of 'seed sovereignty' and the general implications of the country's seed supply being significantly under the 'control' of a giant U.S. corporation.

Even though the merger deal is done, the merged entities are still fighting speculation that the price of maize, the country's staple crop and an important export commodity, would dramatically shoot up as a result of the Dupont Pioneer takeover of Pannar. 

Economist Mike Schussler got a lot of attention when he speculated in August that as a result of the merger, South African seed maize prices could rise as much as 15%. He also painted an alarming picture of the potential for collusion between Dupont Pioneer and the other seed giant, Monsanto, to push up seed maize prices. 

This caused much alarm as there is already a feeling that consumers are  squeezed by current maize flour prices. Schussler painted Dupont Pioneer as the big bad wolf. The company is clearly sensitive to this charge after the bruising battle to acquire Pannar.

Dupont Pioneer put out an outraged statement refuting Schussler's contention, with a spokesperson saying immediate post-merger prices were expected to increase by less than 2%.

It was carefully pointed out that out Schussler made his comments at a 'Syngenta-sponsored media event.' Sygenta and Monsanto are Dupont's competitors in the South African market, although the former is a relatively small  player.

Dupont Pioneer's statement also claimed that Schussler's research was sponsored by Syngenta, thereby cleverly planting a seed in the reader's mind about the objectivity and motivation for the research!

African Agriculture      

Herakles' palm oil plantation in Cameroon: progress or a disaster waiting to happen?

by Chido Makunike

Cameroon's location in the heart of the central African tropics makes it ideal for palm oil cultivation. Not surprisingly, the new rush by foreign investors for African agricultural land has not left fertile, lush Cameroon unaffected.

An excellent July 18 Reuters special report  highlights some, but far from all, of the reasons the new wave of foreign investments in African farm land are so controversial.

World demand for palm oil has doubled since 2000, we are told, and farming it in the traditional Asian growing countries (Indonesia, Malaysia) has increased challenges and costs. So investors are increasingly looking to central Africa.

Herakles Farms, owned by New York venture-finance firm Herakles Capital, is one of many investors with plans for huge palm oil holdings in Cameroon. As with all such investments, they promise Cameroonians 'steady work, roads and health care.'  

But not everyone is jumping up with joy at the Herakles investment. The concerns expressed are now familiar to anyone who has kept up with the land investment rush in recent years. There are allegations of traditional and government leaders doing shady deals behind the backs of the people they lead, fears of displacement and loss of livelihood; and there is also scepticism about the various benefits promised. Will the jobs and other social benefits promised be equal to or exceed the resource-mining, the permanent changes to the society? Without details (and monitoring) of the promised 'steady work, roads and healthcare,' it is impossible to say. 

Herakles is also accused of being under-handed in various ways in how it solicited local community input about its investment plans.


The article depressingly shows that despite years of heated debate about the pros and cons of these large-scale farming investments, very few of the main reasons for conflict have been dealt with by governments or investors.

For the investors, doing business with strong-arm governments that have little regard for the opinions of their people buys them a sort of 'stability' in often socio-politically volatile investing environments. Yet the times have changed to a more open, informed era in which it is no longer quite as easy as before to repress people with complete impunity. Even where government guns can keep a sullen, unhappy population under control, for investors there is now a considerable potential financial and reputational cost to being seen to be in bed with governments that neither respect nor represent their people well.

One fear expressed by some of the locals is that the proposed new Herakles palm oil plantation ("over 60,000 hectares of land - 10 times the size of Manhattan") will remove from community use one of the few remaining areas suitable for viable food cropping. Will 20, 30 or 40 years of mostly low-wage 'steady work' compensate for this kind of loss?

Speaking of steady wage-labour, which are the kind of low-range jobs that will be mostly on offer, it is a toss up whether such jobs mean an overall improvement in the livelihoods of the workers concerned, and of the communities. When the workers have these tenuous low-wage jobs as well as access to their traditional farmlands for the rest of their families to continue to work, it could be argued that the long-term security and earnings synergy of the  two income streams does indeed lead to greater security.

The lack of much of a cash economy in remote, poorly developed rural areas often wins the day in the argument over whether to allow/welcome investments such as that proposed by Herakles. The attitude is 'any jobs/steady income is better than subsistence farming.'  But if an extended family is giving up their ancestral land (the source of food security, cultural grounding, 'belonging,' independence, etc) for one or a handful of its members to have wages, the net gain is highly debatable.

But a huge investment such as that proposed by Herakles will act as an anchor for other kinds of investment in the area, won't it, increasing job opportunities and general economic prospects, won't it? Not necessarily, and certainly not automatically. In the absence of a dedicated plan to lure accompanying services to the area, those 'new opportunities' that will spring up on their own are likely to be brothels, bars and so forth. Single large agricultural or mining investors that come to dominate an area have proven this general rule all over Africa, and many places elsewhere.

When the large extractive investor pulls out for whatever reason, even  after a decades-long presence, there is often pitifully no long term 'development' left behind. Where there hasn't been a long-term plan between the area-dominant investor and the government, not only does the 'steady work' evaporate, so do the means/resources to keep the local school and clinic running. In addition, the environmental mess and the social and cultural dislocation is often such that the community can no longer simply resort to their previous subsistence agricultural existence. 

This is the reality of many similar investments all over Africa. One would have hoped that all these previous experiences would inform the discussion between Herakles and the Cameroonian government, but there is little indication that this is in fact the case, at least from reading the Reuters article.

The main investment driver's stated motivations are fascinating to hear.   
Bruce Wrobel, chief executive of Herakles Farms, is not the stereotypical culturally deaf and blind foreign investor who cares about nothing else as long as he has the minister or president's signature/protection.   

Reuters tell us that, "Since a 1999 visit to West Africa during the civil wars of Sierra Leone and Liberia, Wrobel's aim has been to mix business with philanthropy in order to assist the continent." 

Wrobel's do-gooder credentials are further bolstered by how he 'helped cut telephone costs for millions of East Africans, he says, via his fiber-optic cable joint venture Seacom. A hydro plant run by his Sithe Global Power company in Uganda has reduced power blackouts there.'

But all this impressive 'helping' that he has done was in the course of doing business for profit, which is fine, even good; certainly much better than the unsustainable, unsuccessful brand of aid-based do-goodism that has been inflicted on Africa for decades now. Where governments are alert and responsive to their people's needs, for-profit investment certainly has much more potential to be harnessed into long-term development than aid-based 'projects.'

Strangely, Wrobel out seems to be conflicted about whether he wants to do ethical for-profit business in Cameroon, or whether he is primarily going there is a Peace Corp worker.    

Listen to this mushy mumbo jumbo from Wrobel: "Our big concern is that over a relatively short period of time there will be no way for the African consumer to compete with the Chinese and the Indian buyer. That could lead to some of the types of instability and food riots that we saw a few years back."

Wrobel may well be a genuinely good guy who is sincere in his do-gooder rhetoric. But part of the history of the foreign exploitation of Africa over the last 100 years or so is that very often, the exploiters have claimed to be motivated by pity for Africans. It is tired, it is old, and it is increasingly met with suspicion.

If Wrobel really wants to show a new model of ethical farming investment at a time of growing scepticism, the best way he can do so is by practically showing that his Cameroonian palm oil venture has thought about and is addressing the many doubts and worries about such enterprises.  

 African Agriculture

 

Trying to make sense of the African Development Bank’s muddily explained ‘fund of funds’ for agribusiness

Chido Makunike

The African Development Bank issued a statement on May 30 about its new ‘Initiative to Invest in Agribusiness in Africa.’

I saw the message heading of the Press Release in email inbox and reacted with interest and excitement. After all, although there is a tremendous amount of talk about availing more funds to African agriculture, the money that actually gets to the ground is a tiny percentage of the talking.

While now skeptical about announcements of new funding schemes, the email heading nevertheless piqued my interest. The AfDB is not a retail lender, but does get involved in various national-level interventions that means when it has a new scheme to roll out, it could be important to the affected sector in participating countries.

However, on reading the Press Release, not only did I not understand what its ‘Fund of Funds focused on agribusiness investments on the African continent’ is about, I went back to my usual cynicism that this is yet another of a long line of announced plans that will mean little or nothing to the average person or company working in agriculture in Africa.

To try to illustrate the reasons for my skepticism, let’s go through the AfDB Press Release together.

‘ARUSHA, Tanzania, May 30, 2012/ -- The African Development Bank Group (AfDB)  launched today, at the AfDB Annual General Meetings, a Fund of Funds focused on agribusiness investments on the African continent. This transformative initiative will address growing food security concerns and unleash the largely untapped potential of the African agriculture and agribusiness.’

Normally one would expect the first brief paragraph to not only explain what took place and the potential significance, as this one does. One would also expect that there would also be a description of what ‘this transformative initiative,’ the Fund of Funds, actually is!

Maybe their just whetting our appetite; saving the explanation for the second paragraph. Let’s not get prematurely impatient; lets read on, the AfDB is sure to soon make everything about this no doubt exciting new initiative crystal clear.

‘The launch of the initiative comes as African agriculture and food security gain increasing prominence on the global agenda, with the recent G8 Summit in Camp David pledging to promote investments in sustainable agriculture on the continent.’

Nothing yet about what the AfDB’s ‘Fund of Funds for agribusiness’ is yet. However, the G8 summit mention, before the elucidation of what the new scheme is, makes a certain cynic suspect that the AfDB is simply looking forward to getting some of the service charges and commissions from parceling out the monies it is hoped will be flying around from the G8-announced Alliance for Food Security And Nutrition.

The AfDB specifically wants us to know that its chief executive, whose photo is for some unclear reason included in the Press Release, taking up space that could have gone to provide a little more relevant and clarifying information, was actually in attendance at the prestigious meeting.

‘Speaking from Camp David,’ the AfDB statement tells us, ‘AfDB President Donald Kaberuka stated: “There was broad consensus that it is the right thing to do…” blah blah blah, waffle waffle waffle.

Mouhamadou Niang, an AfDB’s official, is quoted in the statement as saying some syrupy sweet things about the G8’s initiative. In the lush praise for the G8 we learn, in an almost incidental way, that the AfDB is the initiative’s ‘sponsor,’ whatever that means.

‘‘The Fund of Funds will be in compliance with a state-of-the-art environmental and social management system, currently being developed by AfDB in cooperation with the WWF (World Wildlife Fund.)’’

The WWF is referred to as the ‘environmental advisor,’ but it is not clear whether it is advisor to the G8 food security initiative, advisor to the AfDB’s Fund of Funds, or to both. And although we have been told how well it will be environmentally and socially managed, we still haven’t been told what the Fund of Funds is or what it will actually do.

However, we are given some tidbits, some small hints, as if it was a crossword puzzle to which you are given clues, but are expected to put the words and themes together yourself.

Here are those clues: ‘‘The initiative is in line with AfDB’s strategy to support private sector development on the continent... will catalyze investment into the agribusiness sector with the ultimate goal of inclusive job creation and promoting innovative, environmentally sustainable approaches throughout the agribusiness value chain.’’

Yes, but how will it accomplish all these politically correct, very noble goals that everybody talks about?

When the statement says it is ‘the first initiative of this nature on the continent,’ apart from simply being told that by the AfDB, how can we decide for ourselves if this is something new under the sun when we are not told what it is; who it is targeted towards, how it will work?

Is the AfDB’s briefly-worded and yet long-winded, unhelpful, uninformative statement simply a way of saying that thy have positioned themselves as middlemen to receive and then pass on (minus the usual service charges of course!) some of whatever money may actually end up in Africa as part of the G8’s newly announced agriculture support initiative? If so, how would that be new and different?

It’s possible that cynicism about the AfDB’s Funds of Funds is uncalled for and unfair. Maybe the person who wrote the Press Release did not try to put himself or herself in the shoes of the recipients, and instead wrote it as if it were a memo to AfDB colleagues who already have all the inside information a distant reader could not be expected to have.

Either that, or the statement was written to be purposefully as confusing and uninformative as possible, because the AfDB Fund of Funds is merely the umpteenth purported finance initiative that will fail to address the real challenges faced by African agriculture, but will certainly still be eagerly looked forward to and benefit certain strategically-positioned ‘stakeholders!’

The more words are spoken about addressing the basic problems of African agriculture, the more things stay largely the same.

I have read the statement they kindly emailed to me several times, but I still don’t have a clue what the African Development Bank’s Fund of Funds is. Perhaps it will turn out to be a wonderful new initiative that actually plugs the many gaps in funding that is relevant to the bulk of Africa’s agriculture, but it is impossible to tell from the statement as written.

However, not all was lost. I am pleased to end on a positive note, by mentioning that AfDB president Donald Kaberuka looked very smart and dashing in the photo that was embedded in the statement.

I assume a good time was had by all at Camp David.

African Agriculture

If Jain Irrigation is in trouble back home in India, can it raise $375 million to invest in Africa?

Why do foreign profit-seeking ventures in Africa have to so often be hidden as if they were free 'assistance?'

There is widespread new global interest in and excitement about the potential to make money in Africa, including in agriculture. The great potential itself is not new, but apparently there are more people across the world now willing to see it, partly by looking beyond the dominant ‘international media’ stereotypes about Africa.

But clearly, the paradigm switch from seeing Africa as a place of opportunity rather than as a perennial target of aid is proving very difficult for some. The CNN/BBC/’international media’ stereotypes are for many still much stronger on the imagination than the realization that along with its problems, ‘Africa’ is also a place on the move, with ‘normal’ people and great opportunities both because of and in spite of the many challenges.

Jain Irrigation, an India-based company is eager to exploit the opportunities that lie in providing irrigation equipment to the agriculture sector in African countries. The G8 Summit seemed to Jain like a good opportunity to express its Africa interest. Like many others, they can already smell money to be made from the newly announced G8 plan for the private sector to play a bigger role in agricultural ‘development’ in Africa.

Here are snippets from a May 21 Times of India article:

‘Jain Irrigation Systems said the company will invest $375 million over the next few years to improve income of small and marginal farmers in African countries, including Nigeria, Kenya and Rwanda…The company said that it is launching significant African expansion programme which aims to provide an integrated set of irrigation and infrastructure solutions for small-holder and commercial farmers. It would also invest in creation of storage, handling, supply chain and processing infrastructure in the African countries.’

It reads like yet another ‘project’ from a selfless, kind-hearted external ‘donor’ touched by the plight of Africa’s ‘small and marginal farmers.’ Yet behind the propaganda about investing to ‘improve the income’ of those farmers, what Jain obviously has in mind is to set up a presence in the countries mentioned in order to sell its products and services to these ‘small and marginal farmers.’

In other words, they want to do business in these countries. What is wrong with that? If they provide a good deal, indeed irrigation products accessible by small holder farmers should be a potentially very lucrative business opportunity for Jain. So why pretend to speak about it as if the planned/purported $375 million investment will be some kind of donation?

It turns out that the company may be in some trouble, and perhaps in not such a strong position for the currently fashionable ‘business philanthropy’ bandwagon that Africa is currently a target (victim?) of, and that Jain seems to want to join.

But according to ‘Jain Irrigation Systems: Can’t pay its huge debt and wants to conquer Africa,’ published in a different publication on the same day of the company’s Africa investment announcement, ‘from where will it get the money, still remains unanswered…because the company has huge debt on its balance sheet in India and has not been paying its dues to the banks. Even its receivables for FY11-12 were 343 days, which means the company has yet to receive cash for its sales done almost a year ago.’

Aha! So perhaps this is a company in trouble at home, hoping to make easy pickings in Africa?

Sure, it is a welcome development that the rest of the world is waking up to the fact that there are opportunities galore in Africa, and that perhaps much of the media they are exposed to gives them a very distorted, uni-dimensional picture. But boy, do those who naively think the ‘poor helpless Africa’ of their stereotypes is a place to just pick money off the streets have a steep learning curve waiting for them!

Here’s wishing Jain Irrigation good luck and good business, both back home in India and if and when it comes to Africa!

African Agriculture

Has Saudi Star learned right lessons from deadly anti-'land grab' attacks on its Ethiopian farm?

Chido Makunike

Major agricultural investor in Ethiopia, Saudi Star, has bigger problems there than it might have expected.

Negative publicity regarding Ethiopia’s aggressive drive to attract foreign investors into its agricultural sector has been relentless in recent years. The government is accused of brutally relocating communities to make way for the foreign investors, a charge it denies.

But now the local resentment has boiled over. In recent weeks there have been a number of reports of fatal armed attacks against Saudi Star. Ethiopian employees and Pakistan sub-contractors of the company are said to have been killed by groups thought to be opposed to the land give-aways, the government, or to both.

In a statement in response to what it said was the killing in late April by armed men of at least six Pakistanis and four Ethiopians, the Solidarity Movement for a New Ethiopia (SMNE) summarized the reasons for ill-will against Saudi Star and other big investors, and against the government.

The SMNE statement said the assailants attacked a group of workers being dropped off at their company residential compound at the end of the day, as well as the Pakistanis (‘‘allegedly agricultural experts hired by Saudi Star’’) working in the offices. The statement claims that soldiers guarding the site ran away rather than confronting the armed gunmen, and only returned later to pick up the dead and wounded. A few policemen who tried to resist the 15-minute attack were apparently overwhelmed, one of them also being killed, and the gunmen were able to escape.

Says the SMNE, ‘‘These deaths could have been prevented. Since 2009, we have been calling for transparency and inclusion of the local people in the decision-making surrounding the long term leasing of agricultural land in Ethiopia to foreign investors and regime cronies for next to nothing.”

It then goes on to mention human rights abuses many other reports and organizations have alleged are associated with the Ethiopian’ government’s relocations and the land-leasing drive.

Getting to the crux of the matter, SMNE says, ‘‘Neither the Meles regime, Al Amoudi (the owner of Saudi Star) nor any other investor should expect there to be no reaction to these “takeovers” of land and water sources from the people whose ancestors have claimed this indigenous land for centuries. When they take away land and water, they take away the means to sustain life for the people. Some Anuak (the predominant ethnic group of the area in question) have said they now are waiting to die; others will fight. This should not come as a shock to anyone.’’

The presence of soldiers and policemen shows there was a realization of the potential for trouble. Other investors have almost boasted about the government’s protection of their farms, and the implied sense of security that provides. Yet the very need for these farms to also be armed camps, probably more so from now on than before, is a big part of the investors' problem. If feelings against them are so strong that there are groups willing to go as far as to confront the government’s on-site security forces and to commit mass murder, this is a heightened element of investment risk. It needs going back to the drawing board to think of how to relate to and engage with the locals, rather than merely to hire more guns and effect more ruthless security measures.

Yet the latter is exactly what the SMNE fears. It says, ‘‘Indigenous people fear collective retaliation by security forces…(prime minister Zenawi) Meles will crack down on all the people. It is the blueprint of their regime and they have done it many times before. They will try to hunt down the rebels in the bush, but they will be hard to find so in their frustration and in order to teach a “collective lesson” they will target the local people.’’

The ‘rebels’ may have other long-standing grievances with the government, but the deep unpopularity of the ‘land grabs’ has given them a powerful, emotive new issue to champion. In an already volatile situation, a foreign investor who makes no effort to respect and engage with the local communities becomes a very easy target for pent-up frustrations. This is especially so when the locals are dispossessed and treated with contempt, when no significant local benefits from the investment are apparent, and when they become thought of as allies and enablers of central government authorities the locals may consider as a significant part of their woes.

It is not a good way for a foreign entity to start a long-term investment!

If they didn’t know it before, Saudi Star seems to be slowly waking up to the fact that they might have a problem that will not go away simply because they have the protection of the government.

A May 30 Bloomberg report, ‘Saudi Star Offers Jobs to Overcome Criticism of Ethiopia Project,’ says offering ‘jobs and training’ to locals will be a key part of how it counters opposition.

‘Jobs and training’ are almost always mentioned as some of the major benefits that will accrue to locals as part of the controversial new wave of farmland investments. The locals perhaps weren’t told about this in this case, didn’t believe it or haven’t seen those jobs materialize since 2009, when Saudi Star’s rice project began.

But apart from that, it may be too late to easily appease the locals with promises of future ‘jobs and training.’ The importation of foreign ‘agricultural experts’ in the absence of accompanying training of locals will only have inflamed feelings even further. Local suspicions and resentments of investors and the central government are likely to be much higher and harder to overcome now than would have been the case if both parties had taken local sensibilities into account right from the conception and initial implementation stages of the project, rather than as an afterthought of an attempted public relations exercise three years later.

Besides, ‘jobs and training’ are not the only concerns now. They cannot compensate for the humiliation and resentment at alleged forcible relocations to make way for companies like Saudi Star. All over the world, governments often have to move people for reasons of what can be broadly considered the common or national good. But there is ample evidence,also from all over the world; that there are right, good and effective ways to do it, and that there ways to do it that only cause many short and long  term problems. These are the kind of big issues of ‘development’ that once poorly done cannot simply be corrected by offering some ‘jobs and training.’

According to the Bloomberg article, Saudi Star’s Chief Executive Officer Fikru Desalegn believes that ‘providing employment for residents of the Gambella will “definitely teach the public it is very useful for them,” Fikru said. Other benefits for the 13,000 residents of the area will include investment in infrastructure such as roads and vocational education by the company, he said.’

All this remains to be seen, not only in whether it materializes, but also in whether it will be sufficient to assuage the deep local grievances about the manner in which foreign investors have been suddenly thrust among them.

Meanwhile, ‘Work has resumed on the Saudi Star project and the federal police are guarding the area, Fikru said,’ Bloomberg tells us. “All the culprits were caught,” Fikru said. “Things are normalized. All our contractors are back to work.”

But are things really ‘‘normalized,’’ or are more soldiers and police simply going to cover up the many abnormalities for a while, until the next flare up of violence?

The style and manner of ‘land grabs’ or investments (take your pick) unfolding in Ethiopia has precedent in other parts of Africa, and indeed elsewhere. So much attention is paid to the potential benefits for investors and central government that little attention is paid to the sensibilities of communities. But land grabbing history in Africa and elsewhere has shown that these local communities, typically thought of as ‘backward’ and against outside efforts to ‘develop’ them, can get their comeuppance in unexpected ways, at a loss to all concerned.

It didn’t have to be this way. More humility and sensitivity to local concerns from the beginning by both the host government and sometimes just as arrogant investors could have resulted prevented some of the predictable but still alarming backlash against companies like Saudi Star.

In the recent land rush, it is astonishing how often it appears that otherwise smart people with millions of investment dollars at their disposal fail to ask some important basic questions before sinking their teeth into big projects.

It will be fascinating to watch how things develop with the Saudi Star and other investments in Ethiopia in the in the near and long term.

African Agriculture

If you have an agro-investment in southern Africa, are you automatically equipped to operate in western Africa?

by Chido Makunike

From the Business Day Online (Nigeria) of 6 April 2012, under the heading 'Nigerian agriculture to benefit from equity deal: '

''Zeder Investments Limited, a South African listed agricultural investment company, is committing $46.7-million to acquire and expand an agricultural business, Chayton Africa, which is focused on primary production.''

So far so good. We are then told that Chayton Africa has made investments in Zambia since 2010 and now ''it is thinking on moving on to cocoa-rich west African regions, e.g. Nigeria, Ghana and Cote d’Ivoire.''

In what reads like script taken from the written-about company's public relations release or website, Business Day Online informs its readers that Chayton Africa ''produces 10 percent of Zambia's soya and 5 percent of the country's wheat.''

Such loosely thrown-about statistics can hide as much as they reveal, and would anyway be impossible or very difficult to independently verify. For the purposes of this post, let us assume that its ''acquired six farms totalling just over 4,000 hectares with 1,250 hectares being farmed, and 430 hectares under irrigation'' do indeed account for Chayton Africa's purported significant footprint in Zambia's agricultural economy.

For some who don't know any better, or have to rely on popular, stereotypical (sorry; no offense, but nvariably Western) media, Zambia and Nigeria would obviosuly be part of the same messy but now opportunity-though-danger-filled, armophous and fairly uniformly similar blob called 'Africa.'

So therefore, it would seem to make perfect sense that once having acquired some going farms in Zambia, it would not be a big deal to look for opportunities in West Africa, a mere 4000 kilometers away. If one can acquires some soya and wheat farms in Zambia, what could be the big deal about acquiring or starting cocoa farms in Nigeria, Ghana and Cote d’Ivoire? Big deal-it's the same Africa, innit it?

These are rhetorical questions beyond the scope of a blog post like this to attempt to answer. However,  they are absolutely fundamental, necessary questions to ask for the type of investor who gets more excited by gold-rush, herd mentality-type hype than by common sense and prudence. Recently there seems to be even more of the former than the latter. Investors seem to be in not just a land rush, but also in a rush to outdoor each other in almost casually tossing about figures of the millions or billions they are investing in African agriculture, and the vast returns they will easily, obviously, quickly reap.

Sure, Zambia is on the same geographic land mass as are Nigeria, Ghana and Cote d’Ivoire. And yes, given the vastness of the African continent, the history of migrations and the barriers that increased with colonial fragmentation, there remain some astonishing commonalities amongst African peoples/cultures/nations, even those spatially far apart.

But it is also true to say that there are important ways in which southern Africa and western Africa are two vastly different worlds. They differ in a manner (beyond the scope of this post!) that should be of concern to any investor said to be ''thinking on'' transposing their business experience in one region to that in the other.

Speaking generally and loosely, I would say an investor/business entity from southern Africa to western Africa, or vice versa, should give themselves from three to five years to just get a good grip of the differences, how they might impact on their prospects of success, and what modifications in thinking/attitudes/strategy are required to avoid certain failure.

But surely, seasoned agricultural investors from South Africa would be much better equipped to understand this and do the necessary 'due diligence' and preparation than those from say, the U.S., Europe or elsewhere outside the continent, whose general 'Africa learning curve' would presumably be much, much steeper? Wouldn't they?

Perhaps, but far from at all necessarily so (sorry, beyond the scope of this post).

Chayton's diversification to West African cocoa from Zambian soya and wheat is still at the 'thinking on' stage. One reader wonders why not just do that 'thinking on' privately, quietly rather than expose yourself to possible embarrassment if the plans don't materilalize, or even if they do but then fail because you only find out later just how vastly different doing business in one part of Africa can be from doing it in another part 4000 km and a veritable world/planet away?!

There is a question that often comes to mind on reading splashy investment multi-million dollar 'investment' announcements that on closer inspection are at no more than the 'thinking on' stage, or are at the very beginning of implementation. Given the very many new things that will have to be learned about operating in a new country/region/culture/environment, particularly in a sector with its own peculiar subset of high risk such as farming, why do so many investors jump the gun? Why not instead begin your investment away from the limelight, quietly going through the inevitable initial years of mistakes and/or failures, and only then surprise the world with the announcement (if necessary) of your first successes?

Of course, the need to engage in some high profile hype to entice investment funds is understood. But a severely under-reported but now emerging phenomenon of the recent wave of African agriculture investment fever is the number of high profile investment groups who appear to have more fund-raising ability than basic common sense, inquistiveness and humility.

However, no doubt the people behind Chayton Africa have or are pondering the huge, vast differences between growing soya and wheat in Zambia, and entering the cocoa production sector in West Africa, or vice versa for any other investor for that matter. At least one hopes so for the sake of their funders!!!

African  Agriculture

    

US agric group to partner Nigerian government in ‘Africa’s biggest rice farm’

by Maram Mazen

Dominion Farms Ltd., an Oklahoma- based farming company that produces rice in Kenya, agreed to start a rice farm with the government in Nigeria that would be Africa’s biggest with production at 300,000 tonnes a year.

The $40 million rice farm will reduce Nigeria’s rice imports by 15 percent and cut rice costs by 54 billion naira ($342 million) a year, Agriculture Minister Akinwumi Adesina said in Abuja, the capital, at a press conference attended by officials from Dominion Farms Nigeria Ltd. Terms of the ownership were not announced.

“There’s absolutely no reason in the world for Nigeria to be a food importing nation,” Adesina said. Nigeria must be a “food self-sufficient and food exporting nation.”

Nigeria is the world’s largest importer of rice, at 2.3 million tons a year on consumption of 4.9 million tons, according to the U.S. Department of Agriculture. Demand in the country will be 35 million tons by 2050, Adesina said.

Nigeria will produce enough grain in four years to cover its needs, which would allow it to export to other West African countries and compete with Thailand and India, Adesina said.

The farm will stretch over 30,000 hectares in Taraba state in Nigeria’s east, according to a statement from the Agriculture Ministry. About 90 percent of the land will be operated by contract farmers, and the rest will be run as a corporate farm and for training purposes, according to the statement. The farm will require 15,000 workers.

Dominion Farms is based in Guthrie, Oklahoma, and operates a 17,000-acre leasehold in western Kenya, according to the company’s website.

Agriculture accounts for 44 percent of gross domestic product, and contributes to about 77 percent of all employment in Nigeria, Adesina said. Africa’s top oil producer spends “well over” 1.3 trillion naira annually to import the four basic food items of wheat, rice, sugar and fish, he said.

Nigeria plans to add 20 million tonnes of production over the next four years of crops including rice, cassava, corn, soybeans, sorghum and cotton, Adesina said.

Bloomberg

Land conflicts cause South African sugar investor to abandon Tanzania for Mali

A subsidiary of South African sugar concern Illovo has given up a ten year effort to set up a plantation in Tanzania over long running land squabbles with locals. The Tanzania Daily News reported in January that the company is now seeking to establish the operation in Mali.

Kilombero Sugar Company had initially planned to invest in about 8,000 hectares out of a potential 23,000 hectares for cane cultivation, but the endless compensation claims from locals them decide the project was more trouble than it was worth.

The Sugar Board of Tanzania (SBT) is reported to have said the total land, if fully developed, had the potential to produce 240,000 tonnes of sugar every year. Tanzania suffers from periodic shortages of sugar which have to be plugged with imports.

Many villagers had refused to vacate the land, and others engaged the courts in long-running disagreements over fair compensation for their land. An agreement by the villagers in 2011 to seek an out of court settlement to the dispute was achieved when the investor had apparently lost interest.

An SBT official is reported to have ‘blamed politicians for instigating confrontations between villagers and the investor.’

A company official said Kilombero had given up its efforts to set up the plantation in Luipa, Kilombero District of Morogoro Region and was pursuing opportunities in Mali, which “has friendly investment policies and good incentives."

An editorial in the Daily News put the blame on government for not compensating the villagers as stipulated in the country’s land laws.

Authorities are making fresh moves to attract new investors.

African Agriculture

Brazilian agribusinesss Agricola looks to Mozambique for expansion

SLC Agricola turned the tables on the wave of foreign interest in Brazilian farmland by seeking farms outside the South American country, probably in Africa, in a drive to expand its empire.

The farm operator, based in the southern Brazilian state of Rio Grande do Sul, unveiled an "internationalization plan" which will see it acquire, and plant, foreign farmland by 2015-16.

"The initial focus will be the African continent," SLC Agricola said, adding that it was to study Mozambique "in depth."

The foreign quest will supercharge a drive to increase its farmland by 2020-21 to 700,000 planted acres, of which 20% will be abroad, implying 140,000 hectares in foreign acquisitions. SLC's current land bank spans 300,000 hectares, including conservation areas, all in Brazil.

The move contrasts with a scramble for South American land by many foreign investors, particularly in countries such as China and Saudi Arabia which are large food importers.

Both Argentina and Brazil, South America's top two farming nations, have drawn up restrictions on foreign ownership of land, although such reforms have provoked controversy. Brazil is still, 18 months after issuing interim restrictions, in reaction to talk of Chinese plans for large-scale land purchases, to unveil definitive rules.

However, the growing expense of South American farms is prompting many Brazilians to join the throng of investors seeking foreign plots, relying on agricultural expertise, as well as money, for success in what can be a politically-charged process to win deals.

Mozambique has appeared particularly welcoming to Brazilian farmers, with Mozambican farm minister José Pacheco raising the topic on a visit to the South American country last year.

Pinesso Group, based in the major Brazilian agricultural state of Mato Grosso, has unveiled plans to expand its African operations, centered in Sudan, into Mozambique.

In September 2011, farmland investment company Agrifirma Brazil – whose backers include Lord Rothschild, which is advised by commodities investor Jim Rogers? revealed it was to place most of its Brazilian farm operations into a joint venture and seek "attractive opportunities elsewhere.”

full article...Agrimoney

Why agri-investors should consider sustainable farming and good community relations

Almost all the land deals that foreign investors are engaged in, whether in Africa or anywhere else, are based on typical high-inputs industrial farming, including extensive use of fertilizer and agro-chemicals. These methods have become standard for large scale farming everywhere, and the cost of inputs that are needed to get a certain return can be fairly narrowly calculated, helping investment decisions.

Alejandro Litovsky argues that in investment destinations where the soil is still relatively fertile, less inputs-intensive farming could offer benefits and should be explored.

He says, “Managing soil erosion, ensuring human security and keeping within ecological limits, especially regarding water, are risks to the long-term value of the land, the portfolios of investors and the economic competitiveness of host countries. As global agribusinesses face growing social and environmental pressures, investors seeking to manage the resulting risks will require an innovative approach to risk management: including ecological limits and human security in the agricultural equation.”

Litovsky says “Large-scale farming still operates in the bygone world of the Green Revolution relying on the heavy use of chemicals and intensive, mono-crop cultivation as a means to boost agricultural output.” He goes on to suggest that agro-investors might want to invest in organic farming instead, “to ensure the long-term value and resilience of the soil.”

What Litovsky suggests may be sound from many perspectives including even eventual cost-saving and profitability, but it arguably involves a mind set that is fundamentally different from that of most agri-business, where the land and every other chain of the process, including humans, are simply factors of production. While the need for a tractor maintenance budget may be obvious, stereotypical agribusiness thinking may not include the time, effort and resources to devote to soil maintenance.

One of the criticisms of agribusiness is that it is akin to mining: you keep extracting the natural resources until they are finished, and/or pump ever more ‘inputs’ to get outputs. The decline of natural soil fertility is countered with increasing application of fertilizer. That is just an accepted part of the whole philosophy of industrial farming which it would likely be very difficult to change for most agro-investors.

“So too agricultural models can better integrate networks of smallholder farmers into a radical rethink of their business models, to build the social resilience,” writes Litovsky.

There are certainly some agribusiness who use this ‘hub and spokes’ model, but for many others, it is simply too much trouble. They much prefer to have centralized production that is entirely under their control for all sorts of reasons.

Litovsky states, “Given the typically low levels of government accountability in sub-Saharan Africa, land investments, even if entered into by well-meaning investors, can have dire consequences for local communities. The unintended risks to human security may be significant, whether because these communities are forcibly evicted from the public lands they have cultivated, often without formal rights, for generations, or because new irrigation schemes jeopardize water availability for small-scale subsistence farming.”

This is all true enough. There has been so much negative global publicity about ‘land grabs’ that no investor can be said to enter into these modern mega deals without awareness of these issues. But to be aware of them is not the same as being concerned about them. For many investors, the consent and protection of the host government is all they care about. There are countless current examples of how Litovsky’s perfectly valid argument that to protect their long term interests, investors should pay heed to more than the bare minimum of their contractual requirements with their host governments is ignored.

As for building social resilience, where the agro-investment is as a result of some sort of land ‘grab’ by the host government from the local communities, the investor not only comes in with bad relations with those communities from the beginning, he may not much care about good relations with them. Investors whose holdings are protected by armed police or soldiers are not unheard of, which may make them feel physically secure but automatically sets them apart from locals and makes the investment more precarious in the event of political change. It would seem to make sense, even from a purely business level, for a foreign investor to cultivate ‘social resilience’ and good community relations, but this seems a priority for surprisingly few investors.

Litovsky understands that appeals to the common global good may not make much of an impact on the thinking of many investors eager to turn a profit, and seeing no particular benefit to questioning a decades old agribusiness model. His answer to that is that “Incentives for pursuing these innovations are more likely to arise from fully understanding the risk challenges involved in the current model than from appeals to global sustainability.”

Alejandro Litovsky’s article, ‘Farmland security,’ is a thought-provoking read.

African Agriculture

Agriterra’s cattle ranching operations in Mozambique on target

Agriterra Limited, listed on London’s Alternative Investment Market, continues to expand its Mozambican cattle ranching operations.

The total herd now stands at 3,750, on course to reach 10,000 by 2015. The 5,000 target for 2012 is within reach.

Support infrastructure is being expanded, including a new 48 billion liter dam expected to increase per hectare capacity from 1.5 to 7 head, as well as new feedlots and an expanded stud ranch. The dam will be capable of irrigating 4,000 hectares and provide 132kV of hydroelectric power for the irrigation pumps.

In its efforts to encompass all aspects of the beef business, the company has opened a number of butcheries. A new abattoir with a capacity of 4,000 head per month will commence operations in August 2012. Average carcass prices range from US$ 835 to $1100 each.

African Agriculture

Is Ethiopia repeating Zimbabwe’s colonial-era land tenure mistakes?

by Chido Makunike

Ethiopia seems to feature more than any other African country in the charges of accommodating large land deals or land ‘grabs’ (choose depending on your bias) by foreign farming investors.

There is controversy about almost every aspect of them. Are the terms of the deals not too much in favor of the investors? What are those terms exactly? Will the host countries benefit much from them, or will they mostly be another type of resource plunder? How can Africa’s mostly communal land tenure systems be made compatible with commercial land leasing and ownership systems? Does the big new role of foreigners in answering that long outstanding question not create resentment and foster resistance to these deals?

Controversial as the deals may be, is it not necessary and unavoidable that at least some communal land gives way to high-intensity commercial use of one type or another? Has this not happened everywhere else in the course of ‘development?’ In respecting traditional communal land tenure indefinitely, would governments not actually be condemning many of their most vulnerable citizens to perpetual poverty, given declining soil fertility, increasing population pressures, climate unpredictability and so on; all factors that increasingly threaten the viability of rural life?

But then again, in countries where many have little else on which to sustain themselves except subsistence farming, is removing rural communities from their lands and livelihoods, no matter how basic, to make way for commercial farming not condemning them to an even more uncertain fate in new, unfamiliar territory?

These are just a few of the questions that face nearly all African countries, even those not currently in the news for ‘land grabs.’ These are issues that long preceded the current wave of land deals. None of the range of answers is as easy or straightforward as either supporters or opponents of the current deals would suggest.

Governments, investors and many others in between have often taken very simplistic positions on the land deals that leave out many of the complicated nuances. Media and various non-government organizations with their own rigid ideological or commercial interests at stake in supporting or opposing the land deals have only added to the confusion.

In making aggressive moves to develop a commercial agriculture sector, in many ways Ethiopia is going where Zimbabwe has been.

In certain media, any mention of Zimbabwe must automatically go hand in hand with phrases such as ‘Mugabe’s land grabs’ and the country ‘went from regional farming breadbasket to basket case.’ The idea is to emphasize the recent disruption of a system of title deeds-based farmland tenure that was long taken for granted, and a sophisticated, thriving commercial farming sector that was widely admired. ‘Mugabe’s land grabs’ from white farmers from about the year 2000 changed much of this. The country experienced several years of economic decline which it only arrested a few years ago, and is still  battling to rise from.

As successful as the ‘breadbasket’ was, the considerable emotion that events in Zimbabwe elicit in a surprising number of people even far removed, means that there is little interest in going back a little in history to see the roots of the eventual dismantling of the land tenure system that gave rise to it. How did that commercial, Western-style farmland tenure system come about?

It came about in ways somewhat similar to what is being alleged the present Ethiopian government is doing in displacing rural communities to make way for foreign farm investors.

From the early 1900s, white settlers in the then Rhodesia were given by the colonial governments huge parcels of land from which Africans had been uprooted. The ‘villagization’ that the Ethiopian government is said/accused to be embarking on today sounds vaguely similar to the ‘tribal trust lands’ to which Africans were forcibly moved by colonial governments from the early days of Rhodesia.

In both cases, the main reason was to give prime land to the favored elite of the time, whether white settlers then in Rhodesia or investors in Ethiopia today. However, incidental benefits for the displaced communities were also cited as justifications for the land grabs. In Rhodesia, it was said that the concentration of once widely scattered communities into fewer, smaller areas would make it easier for the colonial government to provide them various services, such as agricultural extension, schools and so on. In Ethiopia today, relocations which critics say are forced and violent, but which the government insists are voluntary, are explained as being to better enable access to schools, clinics and other basic social services.

Few of Rhodesia’s early white settlers had any farming experience at the time of getting land which had been grabbed from Africans. Many were rewarded with land for their role in African conquest, and some as thanks from then colonial power Britain for their service in Europe’s early 20^th century civil wars.

Title deeds-based land tenure on the grabbed land replaced the traditional communal tenure system of the dispossessed Africans. It was on this grabbed land that successive colonial governments supported the new land holders to develop into the impressive commercial farming sector that powered Rhodesia’s economy, and later Zimbabwe’s.

From a distance and from outside, and for a while even in the country itself, all that appeared on the surface was the farming and economic success. Below the surface, the sense of  grievance on which these successes were built was muted as long as the Africans enjoyed some of its crumbs, as farms workers or in the many downstream industries that resulted. But it never went away. It might have appeared as ancient history and finished colonial business for the then well-established descendants of the original white settlers, but it was a quietly present and continuing ‘issue’ for many Africans. The period from the colonial land grabs of the early 1900s to independence in 1980 was short enough that there were still many people alive who had personal memory of how they were chased from family lands, their cattle expropriated; forced labor and various taxes imposed on them. These stories were passed on from generation to generation in every African family.

The sense of African grievance that continued to fester over the land issue meant that all recognized the need for some type of land reform after 1980. One reason mostly polite discussion dragged on about the issue was the difficulty of how to raise the money to compensate the white land owners for any ceding of land to Africans they might agree to. In other words, the title deeds they held on land that had been grabbed from Africans several decades before were by most people seen as inviolate.

There was no talk, or very little, of invalidating the land deeds of black-ruled Zimbabwe because the land had been grabbed from Africans several decades before. It was sort of accepted that land reform negotiations would start on the basis and from the starting point of the colonial, title-based land tenure system, not the traditional African communal system that existed before that.                    

One of the reasons that ‘Mugabe’s land grabs’ have been so controversial, even emotional for many people, including those not directly involved, is that he invoked not the colonial title deed as the basis for land ownership legitimacy, but the land ownership rights of Africans before that; the ones that were grabbed from those Africans by the colonial governments. This was a very new post-colonial precedent that worries and outrages many people for all sorts of reasons not necessary to get into for the purpose of the present discussion.

Zimbabweans of all types were proud of their relatively developed, diversified economy and the ‘breadbasket’ commercial farming sector that underpinned it. All Zimbabweans suffered from the economic crisis that followed the recent land ‘re-grabs’ that were not well thought out. But it is interesting and important to note that there wasn’t/isn’t any  significant African sentiment for those land re-grabs to be reversed. Most Zimbabweans  want the land reform process and commercial agriculture fixed, but probably very few would advocate for the status quo to go back to the system of title deeds that originate in the era of colonial land grabbing.

If the old system of title deeds-based security of tenure is deemed illegitimate on the basis that they were issued on grabbed land, how is a new system of security of tenure to be built to give people the incentive to invest in land and ‘commercial’ farming again? Once today’s communal land has become a fully tradable commodity, how do poor rural farmers gain access to land and avoid being further marginalized by the few who can afford to buy it and acquire title deeds?  Despite the increasingly apparent problems plaguing it, is Africa’s communal land tenure system really outdated and to be discarded, or does it still serve useful functions that no other system can fully do? Could the traditional communal system and a new title-based system co-exist in the same area?

There are many answers proffered, but none that are universally accepted or that address all the related historical, legal, cultural, political and economic issues easily. 

It is easy to see the mess that this presents. For example, suppose you were a white farmer with a title deed in 2000 that lost his farm to the most recent ‘land grab.‘ What about if you had not inherited the land from an early 1900s British settler ancestor, but had bought it from the son or grandson of such a settler? Is ‘Mugabe’s land grab’ not clearly, obviously illegal and unfair to such a title holder? But what about if you were an African farm laborer on that same land, whose grandfather had been the early 1900s land holder from whom the land had been grabbed by the colonial government. It was then given, with title deed, to the white settler whose progeny then eventually sold the land and its title deed to today’s white farmer of my example.

Whose ‘ownership’ and whose ‘justice’ should prevail, and why?

If the colonial land tenure system was widely seen as unjust and illegitimate, clearly it is no longer possible or desirable to go back to the pre-colonial communal system, at least not on what had become ‘commercial’ farms. The people and times have largely changed. The need for that land to remain ‘commercially’ useful is recognized by all. Having demolished the system that existed for decades for its political/historical incorrectness, how do you build a new one that is politically correct while also giving land holders the room and incentive to invest and be productive? It is very far from straightforward.

To get back to today’s Ethiopian ‘land grabs,’ what is or isn’t happening in that country is from a distance very murky. It is almost impossible to accurately gauge the objectivity of the reports of those who slam or support the new land deals.

However, part of the lesson of Zimbabwe is that particularly in mostly agrarian societies, perceived ‘land grabs’ can set up a multiplicity of new problems decades after it appears they have been accepted as irreversible. Regardless of what impressive modern edifice is built upon land that there is majority consensus was unfairly ‘grabbed,’ especially in favor of ‘outsiders,’ there for a very long time will remain the explosive potential for conflict. All it needs is some small spark to set it off. 

Leading Indian agro-investor in Ethiopia, rose grower/exporter Karuturi Global, has been perhaps the most prominent beneficiary of what many people say are the government’s ‘land grabs ’ from its citizens.

Sai Ramakrishna Karuturi, the company’s founder, dismisses the attacks. In a recent interview, he gave some of his perspectives on land and farming in his host country.

”Land is an emotive and contentious issue. Of the 300 million hectares of land we have, only one-third is arable. Africa is better in terms of productivity, costs, taxes, duty-free access to European markets because of their least developed country status. A rose from India, when it lands in Europe, will cost about 14 euro cents and it will be about 30% less from East Africa,“ said Karuturi.

Clearly he is a bold entrepreneur, and no doubt that alone rubs some people the wrong way. As he repeatedly points out, his company is doing nothing without the approval of the Ethiopian government. But if the investment is seen by many Ethiopians as being because of a closeness to the sitting government rather than as being of benefit to the country, Karuturi is inevitably breeding long-term local resentment in addition to roses.

As seen in Zimbabwe, the ‘security of tenure’ and economic success that is built on the mistreatment of the local people may not be as secure as it seems, even if the comeuppance is many decades later. If the political situation suddenly changes, land tenure based on a perceived crony relationship with the previous ruling political dispensation will be one of the first things to be reformed.  

Karuturi has also been quoted as scoffing that many of the attacks on his and others’ land investments in Ethiopia and other African countries is by Western critics who have yet to come to terms with how China and India are displacing the West in many areas of engagement in Africa. While this cannot be dismissed entirely, Karuturi is ironically also making some of the same colonial - style moves that created long-standing resentment not only in Africa, but in his country India as well.

For example, it is quite likely that even for Ethiopians who basically support the investment thrust of their government and welcome the contributions of companies like Karuturi, the company’s widely publicized plan to bring in thousands of Indian tenant farmers to its Ethiopian holdings will be seen as a step too far. It suggests thinking and attitudes that are amazingly reminiscent of the origins of the complicated mix of land-related problems that plague Zimbabwe today.

In the land grabs from Africans of a century ago, the colonial governments obviously did not need to worry about the ‘public opinion’ of the dispossessed, disgruntled Africans. Today, no matter how autocratic a government may be, it is neither advisable nor entirely possible to ignore public sentiment. From a distance, in this regard the Ethiopian government seems to have contributed to the negative perception of the current land deals/grabs by poorly explaining them, and riding roughshod over critics. For both investors and host governments, these too are issues that may have an expensive belated political cost.

Zimbabwe is just one and perhaps the best known, most notorious example of the explosive potential of long unresolved land issues that Ethiopia could learn some lessons from on what to do and what not to do as it seeks to develop and ‘modernize’ its agriculture. It will be fascinating to watch how Ethiopia tackles the clash of land-related issues that have defied easy solution in many other African countries.

AfricanAgriculture

British forest firm that evicted Ugandan peasants closes shop

A British firm accused by Oxfam International of illegally evicting some 20,000 Ugandan peasants from arable land to plant trees suspended operations in early January, a decision it said stemmed from the withdrawal of $14 million in needed new investment funding.

In a statement e-mailed from London, the New Forest Company (NFC)’s Anthony Silverman claimed they 'lost' an additional $1 million of financing from the World Bank.

Oxfam, an aid and development charity, caused ripples last September when it alleged that NFC forcibly evicted poor villagers in Kiboga and Mubende districts, depriving them of livelihood and money to send their children to school.

Oxfams’s Executive Director Jerry Hobbs at the time said the Ugandan case “clearly shows how land grabbing is slipping through the net of existing safeguards, which are intended to ensure the protection of vulnerable people.”

In response, NFC promised to investigate the allegations it described as “extremely serious” but made no reference to outcomes of the probe, if it ever occurred, in its recent statement.

“Having planted millions of trees annually for the past six years and led the creation of a modern Ugandan forestry industry, we are sad to suspend tree-planting and laying off workers, forcing people back into poverty,” NFC Chief Executive Julian Ozanne was quoted as saying.

more...The Monitor

Nigerian regional government in rice cultivation deal with Spanish investors

The government of Kwara State in Nigeria has signed a Memorandum of Understanding with investors from Spain to develop rice cultivation, processing and packaging. The deal is said to be 'worth 70 billion Nigerian Naira' (1US$ = 163₦ ).'

The state government is to provide 30 per cent of the total cost, including 20, 000 hectares of land. The Spanish investors are to provide the remaining 70 per cent of the total cost of the investment for the period of four years.

The Spanish company and the representatives of Kwara state government agreed that the investment will be in stages. The company is to invest 70 million Euros annually for the period of four years, making a total investment of 280 million Euros. Based on the agreement, the state government will allocate 5,000 hectares of land for the process for each stage.It is expected that each stage of 5,000 hectares of land is expected to yield 40,000 tonnes of rice annually.


more...This Day

Is Indian investment in Ethiopian farms a 'land grab?'

When an Indian company invests hundreds of millions of dollars in Ethiopian commercial farming, is it boosting Ethiopia's food reserves and modernizing agricultural practices? Or is it grabbing land and displacing Ethiopia's poorest citizens?

The debate over Indian-owned Karuturi Global's investments in Ethiopia's Gambella region may sound extreme, but it is representative of the strong emotions one finds across the developing world about the subject of agricultural investment.

In Ethiopia – where critics are aghast at the government for inviting foreign capitalists to grow cash crops for export while millions still rely on handouts – the rancor is hindering much-needed constructive discussion on how to improve a sector of the economy that employs most of the population.

Much coverage of this debate tends to the sensational. A piece by the Guardian, for instance, claimed that there was evidence of displacement because of Karuturi’s rice, palm oil, sugar and cereals operations, but none was provided.

Huffington Post columnist Alemayehu G. Mariam – a vociferous US-based critic of the Ethiopian government – re-reported Karuturi's farm manager's comment that the company had not seen the land before renting it. Managing Director Sai Ramakrishna Karuturi begs to differ. "I stayed in Gambella for 45 days researching the area before narrowing down on the location," he responds.

The tone of these types of critiques – portraying deals merely as agro-imperialism facilitated by a bungling state – enrage officials, sidelining crucial issues and further reducing the already slim chances of engaging the government.

..more...Christain Science Monitor

Foreign farm investors flock to Ethiopia, but food self-sufficiency not in sight

by Keffyalew Gebremedhin

As if it were a rehearsal for year-end message, in early November the ministry of agriculture announced, “Ethiopia is working towards commercializing agriculture and [realizing] its full potential to provide each household surplus and income for its growing population.” As an idea that looks to the future, there is nothing wrong with that — except that the officials preferred to be opaque when it came to linking the anticipated outcome with the means they would employ.

This took place at an important regional conference, whose theme was Productivity and Enhancing food Security in Africa: New Challenges and Opportunities, held in Addis Abeba from 1-3 November. The official who represented the government and launched the conference chose to reiterate the usual set position, especially at a time when Ethiopia has continued to be hit harder by inadequate domestic food production and distribution, against the backdrop of double-digit-inflation. Data released by the government on 13 December indicated that in the last one year, inflation has pushed food prices by a whopping 50.3 percent.

Unfortunately, the agriculture ministry even seemed coy to show a vision behind the plan; as the government’s representative limited himself to iterating, “The government has taken strong policy measures to recognize agriculture as an engine of the economy and a means to fight poverty.” This took many people by surprise, since it sounded as if State Minister for Agriculture Wondirad Mandefro was announcing to the conference a new government strategy two decades after the Meles regime seized power and massive resources have been thrown at agriculture, without any sign of the country becoming self-sufficient in food production now or the likelihood of it at in the foreseeable future.

Instead, the state minister stated that the government has been spending on agriculture more than 14 percent of GDP, in his words, “exceeding the target set by Maputo Declaration to meet the Comprehensive African Agriculture Development Program targets.” He then recalled how it was foreseen in the government plan to double agricultural GDP to achieve food self-sufficiency at the household and national level through the growth and transformation plan (GTP 2011 – 2014/15). Not only the GTP is treated these days as an all cure; but also he made it the basis of his prediction of agricultural production.

If the news report is accurate, the official chose to rely on economic growth patterns of the past few years. He then boldly asserted that the economy would “continue to grow with a double-digit for subsequent eight years.” If that is the basis on which the future of the country’s goal of food self-sufficiency is being predicated, I lost him there. What else can one say in the face of such a known trouble ahead, save fearing for the state of the nation and future generations!

One person who was not entirely sanguine with everything he heard at the conference was Monty Jones, the Executive Director of the Forum for Agricultural Research in Africa. He politely took the floor to give a sense of what African countries needed to do. He urged them “to go beyond just research to increase productivity that enables to reduce hunger and poverty.”

As to this year’s harvest, ten days after the conference and in connection with the 2011 harvest season, Ms.Samiya Zekeria, Director-General of Ethiopia’s Central Statistics Agency (CSA), announced that she expected over 218.3 million quintals of output to be harvested from small-scale private farms on over 12.1 million hectares of land this year, according to the Ethiopian News Agency. She reported this represented an increase of 15 million quintals, compared with that of same period last year.

Tentative as this data is, it is difficult to establish whether the increases reflects productivity gains or mere expansion of land under crops. Last year’s CSA data indicated that crop land increased by about 200,000 hectares. Already on the face of this forecast, one is inclined to think that a great deal of work and appropriate policies are badly needed to guide Ethiopia’s agriculture to a better future.

Not long ago FAO’s Assistant Director General Hafez Ghanem alerted African journalists as to the what culprits are lurking behind the rise in food prices the world over. While he emphasized that agricultural investments alone are not sufficient conditions in and of their own, he urged each country to examine its particular conditions more seriously and adopt appropriate polices, instead of clinging to everything that is being presented as causes for the rising food prices.

The need for such an approach, he said, should be given sufficient consideration since “The available data show that the situation is different in each country. In some countries, price rises have meant higher prices for farmers, while in others this is not the case, which is generally the result of the fact that governments are hindering the transfer from the global market to the farmers.”

To the thinking of the assistant director-general, Ghana represented an example of a successful country regarding agricultural development. He observed in that regard:

Notwithstanding the fact that Africa still has a long way to go in the battle against hunger, even so, despite everything, [the region] has recorded some successes in this area. Take the case of Ghana in particular. This country has succeeded in achieving its Millennium Development Goal 
(MDG) aiming to cut the proportion of its population suffering hunger by half between 1990 and 2015. It did so by supporting its farmers in two important and priority sectors: public investment, particularly in research and development (RD), and ad-hoc policies, which specifically allowed farmers access to seed and the market. These were measures which had been adopted in other countries and explain their relative success.

This reminded me of a news item I read in late August from the association of coffee producers in southern Ethiopia, which wrote a letter to the prime minister and the National Bank of Ethiopia (NBE) urging them to take urgent measures to tide the growing shift by his members to the production of khat, a stimulant crop in young nation, for lack of bank loans and credits.

Looking at the problem from the economic, financial and land tenure angles, experienced by Ethiopian farmers, Atkilt Admasu and Issac Paul came with new evidence of misguided policies in their ASSESSMENT ON THE MECHANISMS AND CHALLENGES OF SMALL SCALE AGRICULTURAL CREDIT FROM COMMERCIAL BANKS IN ETHIOPIA: THE CASE OF ADA’A LIBEN WOREDA ETHIOPIA, published in the Journal of Sustainable Development in Africa (Vol 12, No.3 2010). Their study found out:

…Agricultural credit in the Woreda [Ada'a Libern] followed a two-tier delivery approach, where input loans were provided to farmers through cooperatives. The main variable to qualify farmers for such loans was their working land size. Nevertheless, due to the shortage of land in the Woreda, the amount of loans, availed in the form of fertilizers, improved seeds, and chemicals, were inadequate. As collateral for the loans, the Commercial Bank of Ethiopia secures federal government guarantee, which is considered as cash substitute collateral from Ministry of Finance and Economic Development( MoFED) on the Oromia Regional Government’s subsidy budget. The main reason for many of the default cases was found to be the lack of farmers’ awareness on repayment terms. In a nut shell, the government’s role in the small-scale farmers’ access to bank loans appeared crucial both during loan origination and collection.

At the same time, this shows that there is strong bias in government toward foreign investors. Thus, on the political side the problem is better summed up by the Bertelsmann Transformation Index (BTI), which in its 2010 report on Ethiopia wrote:

Indian and Chinese companies encouraged by the Ethiopian government have increased their investment in the agricultural, construction and communication sectors, but have not been able to compensate for deficiencies on the Ethiopian side. The further transformation towards a market economy has been slow due to ideological reservations in the political class and the fear that private investment could be used to bolster the political opposition.

Why should we be alarmed by Ethiopia’s present agricultural policy?

There is no doubt that the government has practically abandoned the 13.4 million small holders long ago, not to speak of nomadic pastoralists. The government is more obsessed with production of cash crops and earning more foreign exchange. Their explanation is that with the cash people could buy their food. It seems our leaders live on a different planet, since otherwise they could not have adopted this disastrous policy at a time when even the rich countries, oil producer included, are trying to run away from food imports, despite their healthier balance of payments.

With such a failed policy and dependence on commercial farms that produce cash crops or foods for export, Ethiopia should not expect to dig its way out of hunger. Nor can it develop as an economy, or make headway in this fiercely competitive world, safeguard the pride and dignity of its citizens and maintain the nation’s independence and sovereignty so long as the policies pursued force it into dependence on international food aid. If one of the state of mind that these agricultural investors would abandon their pursuit of profit and become the new food donors, there is a need for sanity tests.As it stands now, this policy is a road to slavery for a proud nation that cherishes its sense of independence for which huge and historic sacrifices have been paid!

Secondly, as I discussed a few days ago in another article in the context of realization of the Millennium Development Goals (MDGs), today in Ethiopia there is 15-20 million people facing hunger everyday. At the same time, according to United Nations reports, 46 percent of Ethiopians live on less than a dollar a day; 51 percent of children are stunted.

What this says is that these people are not a part of the new Ethiopia, whose economic growth is compared to a miracle by the investing world. What they do not realize is that these fast growths are servicing the interests of narrower group(s).

As it happens, for that matter even by official admission, today 12.2 million Ethiopians in 290 food insecure woredas (districts of the country) are categorized as incapable of supporting themselves and are dependent on international food aid. Under normal circumstances, i.e., when there is no drought or famine this number goes down to 7 – 8 million. While this is the reality, government leaders boast that no one has died of hunger in Ethiopia, although secret interviews of farmers filtering out of the country are showing that hunger is closer than a neighbor to many, especially in the southern and south-western parts of the country. Bear in mind that in the past, hunger, drought and famine was mainly a northern Ethiopian phenomenon.

The Productive Safety Net Project (PSNP), financed by the international community, has saved lives in the last five years. Unfortunately, its problem is that it has no successful mechanism for the graduation of the dependent people to become productive and self-supporting citizens, a fact which some in the World Bank have also come to realize.

Misguided commercial agriculture, mostly known by its misnomer (in Ethiopia’s case) ‘farmland grab’

While the dependency on international food aid, discussed above, remains a worrying as to the future of Ethiopia’s agriculture, one of the evolving dangers lies in the country’s fertile lands being doled out mostly to foreign investors. This has been criticized roundly. But nothing could convince Prime Minister Meles Zenawi about the errors of his policies. These are, as Stefano Manservisi put it in 2009, pushing local farmers in a wrong direction; he rightly pointed out that intensifying commercial agriculture at the expense of smallholders would only lead to the exploitation of developing countries. The end result is, he stressed, “The poorest countries are selling commodities, they are exporting migrants and now they are selling their land from which they will not take any kind of benefit in terms of food or whatever.”

Standing side by side (from left) are father Surya Rao Karaturi, and son Sai Ramakrishna Karuturi, founder and managing director of Karuturi Global Limited; with Anil Tumu, director of Karuturi Agro Products Plc, and Chombe Seyoum, managing director of Gedeb Engineering Plc. Left: a John Deere tractor.

What commercial agriculture could do to a nation, where local farmers are displaced and their lands are taken away by force or threats, is better articulated a few years ago by Devinder Sharma, analyst with the Forum for Biotechnology and Food Security in India. Firstly, he predicted discontent of pushed away citizens leading to civil unrest, the undercurrents of which are already being witnessed in Ethiopia.

Secondly and more importantly Sharma looks at the environmental consequences and observes:

Outsourcing food production will ensure food security for investing countries but would leave behind a trail of hunger, starvation and food scarcities for local populations…The environmental tab of highly intensive farming – devastated soils, dry aquifer, and ruined ecology from chemical infestation – will be left for the host country to pick up.

Moreover, there is also the problems of mistreatment and exploitation of the rural population by the investor farmers. The locals are embittered by the exploitation of their labor with payments in some instances of 25 ETB for tractor drivers, which is USD $1.45 a day and less in other areas. Ordinary daily laborers without skills get paid far less than that. Speaking of the exploitation, One Girma Umad, an employee of Saudi Star and who works as machine operator, told Addis Fortune that, although he appreciated the chance to work without having any prior skill sets, he was not happy about the pay. He observed in that regard, “I have managed to develop the skills needed through observation and personal practise…However, the 25 Br I get a day is not even enough for my daily meals.”

How could this be considered an income that should start these people something meaningful for themselves? Most of all, the opportunities for technology transfer are non-existent in most instances, especially in situations where Indian and Chinese investors have brought machine operators from their countries, as happened in Gambella and other leased lands.

Many of the issues surrounding such commercial agriculture remain unresolved. The problem is being felt like fresh wound by literate consumers around the world, because of the dangerous implications of this to food production by smallholder agriculture.

This week the PRI, Public Radio International has become the latest addition to raise a series of unanswered questions about the persistence of the government in Ethiopian in pushing farmers out of their holdings and handing over the most fertile lands to investors. Those who have experienced this misfortune continue to speak out.

On its part, government is denying it has pushed away anyone. It claims the lands were unoccupied as discussed some months back. At that time, Meles said:

What we are doing is putting all unutilized land in this country and we have a lot of unutilized land in the lowlands…What we have done is to build infrastructures in those areas and therefore open up the area for investments both by domestic and foreign private sector on the basis of a clearly set out lease arrangement. That is a win-win arrangement. It is not a land grab. And, therefore, we are very comfortable with the fact that we have put in place all the necessary guidelines, environmental and otherwise, to make sure that everyone benefits from this exercise.

Transforming Ethiopia

Africa succumbs to colonial-style land grab

Jonathan Rugman

It is being dubbed the second scramble for Africa: millions of acres of land are being snapped up by companies from Asia and the Middle East, our foreign Affairs Correspondent Jonathan Rugman reports.

Nations like Ethiopia are desperate for the investment. But critics claim it's at the expense of smallholder farmers - many of whom say they're being thrown off their land to make way for the large multi-nationals.

Think of drought-stricken Ethiopia and you might not expect to see modern machinery owned by a foreign multinational, cultivating vast farms in one of the poorest countries in the world.

The goal here is simple: to double Ethiopia's agricultural production and to make it self-sufficient. So that handouts from Britain, America and others are no longer required.

Vinay Shekar is on the front line of this agrarian revolution. He's a farm manager from India running an estate in Ethiopia. His company is called Karuturi and these 29,000 acres are a small slice of its empire - with the Ethiopians pledging almost 800,000 acres to the Indian firm so far.

Ethiopia's land is owned by its post-Communist government - and that land can't feed its people. Farming methods are medieval, with the land parcelled up among millions of small scale tenant farmers. So now the country's Agriculture Minister, Ato Wondirad Mande, is giving foreign companies like Karuturi cheap leases to revolutionise food production.

When they first came they told us an investor was coming and we would develop the land alongside one another. They didn't say the land would be taken away from us entirely. He told Channel 4 News: "We give land because we cannot produce on that land. Because of lack of capital and technology, that’s why. They open a big opportunity for employment and of course generation of taxes and other financial gain."

But farmer Gemechu Garbaba talks of loss, not gain. He’s pointing to Karuturi farmland, which he says the government took from him to give to the Indians instead.

"When they first came they told us an investor was coming and we would develop the land alongside one another,"Mr Garbaba told Channel 4 News. "They didn't say the land would be taken away from us entirely. I don't understand why the government took the land."

Mr Garbaba now grows maize on land nearby which he sublets each year from a neighbour. It is precarious, he says. He could lose his tenancy at any moment.

And at the family home his wife complains that the cattle have almost nowhere to graze because their old fields have gone.

"Since the land was taken away from us we are impoverished. Nothing has gone right for us, since these investors came," he added.

Next door Karuturi is beginning to work agricultural wonders. It runs the farm under a 50 year lease, and says it will sell most of its produce inside Ethiopia itself.

Who profits?

With their Indian manager watching them, these women say they are grateful to have a job earning just under fifty pence each per day.

Karuturi can see such good profits that it's investing nearly a billion dollars in Ethiopia. Though in an interview in 2010 the company's founder said it was shameful to accuse the firm of "land grabs" when the country's being transformed.

Sai Ramakrishna Karuturi, Managing Director at Karuturi Global, said: "Why do they need to import food? It’s a shame, I sometimes feel like it's a conspiracy - that people want Africa to remain with a begging bowl.

"Here we are creating employment, food, wealth – isn't that what Adam Smith spoke about - isn't that the reason the West is self sufficient? I don't think creating wealth is a crime."


Here we are creating employment, food, wealth – isn't that what Adam Smith spoke about - isn't that the reason the West is self sufficient? I don't think creating wealth is a crime. Karuturi MD, Sai Ramakrishna


Yet in this village hut everyone complains they have less food than before because Karuturi now farms where they once did.

Taresa Agasa helped put together a petition to change the government’s mind. But when that didn't work, he took a job as a security guard for Karuturi for 45 pence a day.

He said: "We wish we could eat three times a day. I know my children want this. But I cannot provide that. We live and survive only if we have land. And we would rather have our land back."

Ethiopia's agriculture minister claims there is no conflict with local communities and no need to provide compensation.

Yet people here speak bitterly of forced evictions, and this is just a snapshot of a story now playing out all over Africa - as multinationals strike land deals with governments desperate for investment.

The risk is colonial style plantations – with local people swept aside. In a world badly in need of more food, costing less.

Channel 4 News