Farmland - Ethiopia offers land dirt cheap to farming giants

Ethiopia - country of the silver sickle -
offers land dirt cheap to farming giants
Addis Ababa sells vast fertile swaths to international
companies in effort to introduce large-scale commercial
agriculture

15 January, 2010 | By Xan Rice in Bako (Guardian)

Workers at an 11,000ha farm in Bako, Ethiopia, run by the Indian
company Karuturi. The company also runs a 300,000ha farm in
the Gambella as part of Ethiopian government effort to promote
large-scale agriculture Photograph: Xan Rice

This is a country of the bent back and the silver sickle, where virtually
all the crops have felt the calloused fingers of the peasant farmer
working his tiny parcel of state-owned land. The ox pulls the plough
and the donkey the cart, and fertiliser counts as agricultural technology.

Chugging into this picture on a bright green John Deere tractor came
Hanumantha Rao, a former sugarcane farmer from India who is at the
forefront of a revolution sweeping through Ethiopian farming. He
hurried up to a hilltop on his company's farm in Bako, four hours' drive
from the capital, Addis Ababa, and swept out an arm to indicate the land
he has leased from the government: 11,000 hectares to grow rice, maize
and oil palms.

In the fields below, boreholes were being sunk and roads graded. An
airstrip will soon allow for a crop-spraying plane. Besides the new
tractor Rao had been riding on that morning, there were 30 more on
site. That was not many, he insisted, and neither was the farm
especially large.

Further west in Gambella, Karuturi Global, the listed Indian horticulture
company that employs Rao, is bringing in 1,000 new tractors to work
the 300,000 hectares it has leased – making it one of the biggest farms
in the Horn of Africa, if not the continent. "It is 120 kilometres [75
miles] wide," Rao said proudly. "Three hours to cross by Jeep."

Ethiopia's great land lease project is moved swiftly ahead. In an effort to
introduce large-scale commercial farming to the country, the
government is offering up vast chunks of fertile farmland to local and
foreign investors at almost giveaway rates. By 2013, 3m hectares of idle
land is expected to have been allotted – equivalent to more than one fifth
of the current land under cultivation in the country.

The move is part of a wider trend that has seen other African and Asian
countries seek to take advantage of high global demand and the cost of
crops by offering agricultural land to foreign companies, private equity
funds and governments, particularly those of import-dependent Gulf
countries.

If done properly, the investments have the potential to increase local
food availability and create badly needed jobs. If not – as was the case
with the attempt by the South Korean firm Daewoo to lease half of
Madagascar's arable land to grow corn for export in 2008, a deal many
saw as 21st- century colonialism – they could prove disastrous.

In a food-insecure country such as Ethiopia, where several million
people rely on food aid, the idea of offering fertile land to outsiders has
raised concerns. But government officials point out that Ethiopia has
vast reserves of underused land – 60m hectares of the country's 74m
hectares suitable for agriculture is not cultivated – and insist no local
farmers will be adversely affected. Esayas Kebede, investment support
co-ordinator at the agriculture ministry, said that foreign companies
were essential for the move from subsistence to commercial farming, a
key part of the country's development strategy.

"There is no crop that won't grow in Ethiopia but we cannot produce
quantity and quality. Why? It's a vicious cycle of the lack of capital and
technology," he said. "So leasing land is a real opportunity for us."

So too for Karuturi. The Bangalore-based company, which is the
world's largest grower of roses, has negotiated an extraordinarily good
deal with the government. For its farm in Bako, Karuturi is paying no
rent for six years and then only 135 birr (£6.50) per hectare per year
for the remainder of the 50-year lease. In Gambella, a remote and
sparsely populated region close to Sudan, the rent is only 15 birr per
hectare (73p).

The company believes the potential for large profits is so great that it
plans to invest nearly $1bn in its Ethiopian agricultural operations,
according to managing director Sai Ramakrishna Karuturi. Within eight
years, he hopes to be producing 3m tonnes of cereals – mostly maize
and rice – a year on the Gambella farm, as well as palm oil and sugar.
Some of the produce will be sold in Sudan and Kenya – where the
company is in talks with the US Agency for International Development
to build grain silos at a border town. Like all the foreign land investors
in Ethiopia, the company is free to export as much of its produce as it
likes, but Sai Ramakrishna Karuturi said most would be sold
domestically, where there is a ready market.

"Ethiopia is a food importer and will continue to be for some time. With
the high cost of transportation in Africa, it does not make sense for us
to try to export beyond the region."

As with land, labour is also extremely cheap. The minimum wage in
Ethiopia is about 8 birr (39p) a day. Karuturi, which hopes eventually to
employ 20,000 people on its two farms, says it pays 10 birr (49p) a day
and provides meals to its workers.

Rao, general manager of the Bako farm, said there was no shortage of
locals desperate for jobs. "People here are very poor. They would work
for 1 birr, and no one else pays more than 5 birr. So we are paying
double."

Outside the farm gates, the feeling about Karuturi among peasant
farmers was mixed. The company's 11,000 hectares were fallow before
it arrived – the black clay soil is rich in nutrients but difficult to work
without a mechanical plough – but some locals had grazed their cattle
there and used to cross the farm to the nearest river, which is no longer
possible.

Teresa Agassa, a 38-year-old man in gumboots who works a one-
hectare plot, said it was good that some local people now had jobs –
even if the wage was too small. But he spoke enviously of Karuturi's
tractors.

"They're only for the company's benefit. Maybe there can also be
benefits for us – but we will only know in the future."

Ethiopia's farming revolution

In the late 1970s Ethiopia's communist regime nationalised all land, and
private ownership remains outlawed. The millions of small-scale
farmers work under licence from the state, and most plots are one
hectare or less, which has hampered efforts to improve food security.
But the centralised tenure system has made it easy for the government
to offer hundreds of idle farms to investors at cheap rates. A detailed
database contains information on soil types, weather patterns, the
nearest rivers, and suitable crops. The agriculture ministry is advertising
1.68 million hectares of land in the Benishangul-Gumuz, South Omo and
Gambella regions. The greatest interest has come from India and Saudi
Arabia, including Saudi Star Agricultural Development, which is
growing 10,000 hectares of rice in Gambella. Firms from other Arab
countries, and from China, Japan and the US have also expressed
strong interest in leasing land.

Courtesy