Experts worry about negative consequences
INTERNATIONAL AGRICULTURAL LAND DEALS
AWARD ETHIOPIAN VIRGIN LANDS TO FOREIGN
COMPANIES
By Genet Mersha | August 13, 2009
During the last one year, the international media have reported with noticeable
frequency on international agricultural land deals in Ethiopia. In Ethiopia, land is
under government control and, therefore, cannot be sold or bought. Of the dozen
or so African countries engaged in such deals, for varied reasons the cases of
Ghana, Madagascar, Mali and the Sudan have also attracted similar attention.
Perhaps the only commonality between Ethiopia and these countries is that they
are all far ahead of others in that experience, as they have concluded several
international farmland lease deals in the past five years. Nevertheless, much of the
information is still under wraps.
more concerned they become by the consequences of such deals between
unequally matched partners. The fear is that, the hunger in many developing
countries for farm investment from rich foreign companies may end up compelling
them to hand over their only assets to international investors (through international
contractual agreements).
Stefano Manservisi, director-general of aid and development at the European
Commission says, “We are very concerned because this is another way to exploit
developing countries… 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.”
Of equal concern is the survivability of millions of small-scale farmers against the
onslaught of competition by well-greased commercial farms. An analyst at the
Forum for Biotechnology and Food Security in India says, “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” (Guardian April 7, 2009).
Not least, against the backdrop of rapid global climatic change, the worry of those
who have seen the light is the impact of fast expanding commercial agriculture on
the natural environment. In this connection, without including existing commercial
farms, recall that even the 13.3 million small-scale agricultural holders in Ethiopia
open up over a million hectares of virgin lands annually, i.e., according to the
Ethiopian Central Statistics Agency (CSA, 2008 Abstract).
Why worry about land rental deals?
International investors interested in African agriculture are fast growing in number.
Their action is induced by the need of the rich with less endowed agricultural lands
to ensure their continued supply of food with cheaper prices and winning the
competition against ethanol. Others are interested in making more money. The
objective of Chinese holdings in Ethiopia for sesame production, or the new Indian
venture in Ethiopia into tea, bio-fuel, and sugarcane and cotton production has no
any other reason.
Still others are keeping worried looks on the heavy burden of food prices on their
balance of payments, as in the case of the Gulf Cooperation Council (GCC), which
spent $10 billion in 2008 on food imports (Bahrain’s Gulf Daily News). Therefore,
motivated by the need to counter this problem, the GCC have announced this year
their desire to turn Africa as their breadbasket. The process has started by
strengthening the GCC-Africa Co-operation Forum, funded by both OPEC Funds
and national earmarks by the five member countries of the GCC had already held
its first meeting in Bahrain recently. Initially, Mozambique, Senegal, Sudan and
Tanzania have signed on. Thus, virgin farmlands have been selected and the
infusion of huge investments has begun in earnest into these countries.
Oliver De Schutter, special envoy for food at the Office of the UN High
Commissioner for Human Rights, says, “This is speculation betting on future
prices. What we see now is that countries have lost trust in the international
market. We know volatility will increase in the next few years. Land prices will
continue to rise. Many deals are even now being negotiated. Not all are complete
yet.”
Similarly, China has taken steps to produce sesame in Ethiopia as of this year,
which is the first of its kind. Recall that Ethiopia is the fourth largest sesame
producer in the world; its natural sesame from whitish Humera seeds and machine-
washed from Wollega fetch highest prices. Other parts of Ethiopia also produce
good sesame; but what they need is some help in improving the production
techniques and the producers’ exposure to the market. This requires improved
policies to enhance agricultural production and overcome the country’s weak
export capacities that have stood as barrier before millions of producers.
Until now, China has been Ethiopia’s leading export destination for most of its
sesame. The EU and the US that normally imported from India have also turned to
Ethiopia’s natural sesame lately. Records on global exchanges indicate that 150
countries import sesame seeds. While the prospect for sesame producers is
brightening up, clearly the tilt to involving millions of ill-equipped peasant
producers in unmatched competition by China on fertile virgin lands mostly should
be cause for serious concern for Ethiopia and its friends. Since August 2008,
sesame has been fetching $1,380 per tonne in the international commodity market.
The natural sesame from Ethiopia has been priced around $1,400 for sometime,
according to Business Standard.
Consequently, it is hardly with unfounded reasons that such investor interests and
the latest trends in African agriculture have compelled the international community
to break its silence. The concern is that Sub-Saharan Africa is fast becoming a
hotspot for international land acquisitions.
In terms of local responses so far, the controversy has ended up in the overthrow
of the government in Madagascar. As its first action, Madagascar’s army backed
leader last March cancelled a deal by South Korea’s Daewoo Logistics to lease a
million hectares of Madagascar—equivalent to the size of Qatar—to grow food,
according to Reuter. Ever since, Madagascar’s has been embroiled in serious
instability and political polarization. In some other deal making countries, negative
sentiments may be there, although for now governments and businesses have
managed to prevent any possibilities for loud or violent forms of expression of
resentment.
Growing international concerns
controversies. Last spring, different non-governmental organizations engaged the
FAO and its experts in intense debates along that direction. Their concern zeroes in
on what they referred to as “land grabs.” The point they are driving home is
concern for the voiceless, stressing the imperative need for careful review of the
future trend of agriculture in developing countries in general and food production
in particular.
David Hillam, FAO deputy director in charge of the trade and markets division
who opened the Washington conference entitled ‘Land Grab”: The Race for the
World’s Farmlands’ last March expressed the overall concern cogently. He said,
“Imagine empty trucks being driven into, say, Ethiopia, at the time of food
shortages caused by war or drought, and being driven out again full of grain to
feed people oversees…Can you imagine the political consequences? That is why
proper legal structures need to be put into place to protect land rights, and why we
should look at some form of international code of conduct.”
Ruth Meinzen-Dick, researcher at the Washington-based International Food Policy
Research Institute (FPRI) encapsulated the essence of the debate at the
international level to IPS saying, “The bargaining power in negotiating these
agreements is on the side of the foreign investor, especially when its aspirations
are supported by the host state or local elites.” Uwe Hoering, a German
development expert, who followed these debates dubbed the whole land deal issue
“a new form of agrarian colonialism.”
There is no doubt that the arrangements are complex. Let alone for the media,
even professional researchers find it difficult to get a crack at it, even when
vigorous analyses of such deals, filling the gaps and developing informed
understanding of the opportunities and risks is a part of their vocation. What
makes it complicated is the home governments’ role and connections with the
robust, politically and financially well-wheeled investor companies, countries and
individuals, not to speak of their ultimate objectives and the consequences.
Whereas the media’s interest in the matter has aroused international curiosity, until
recently concern over the matter has hardly moved beyond scratching the surface
of the mega-million dollar international deals on agricultural lands.
Ethiopia, part of new study on international farmland lease
arrangements
With the publication in May 2009 of a report entitled Land Grab or Development
Opportunity? Agricultural investment and International Land Deals in Africa,
the information gap for now is being filled somewhat. This international report,
backed by an extensive research undertaken in Ethiopia, Ghana, Madagascar, Mali
and Sudan—the very countries on which media reporting has sharply focussed,
depends on data available in the countries. Case studies on legal arrangements were
also conducted in Mozambique and Tanzania. The report is the outcome of
collaborative efforts between FAO, the International Fund for Agricultural
Development (IFAD) and the International Institute for Environment and
Development (IIED).
Funding for the international research was provided by bilateral governmental
agencies such as Danida (Denmark), DFID (UK), DGIS (the Netherlands), Irish
Aid, Norad (Norway), SDC (Switzerland) and SIDA (Sweden). The publication of
the report was funded by FAO, IFAD, and DFID, the latter through IIED.
The report stresses that land is central to identity, livelihoods and food security of
peoples in the host countries. That in view, therefore, it does not shy from
expressing its concerns boldly. Such is one that, for instance, many of the
countries involved in this practice do not have in place institutional mechanisms to
protect the rights of small-scale farmers and rights and interests of the local
population, nor the environment. These countries also do not have qualified
personnel and sufficient experiences in land markets to assess and determine land
lease contracts in market values. For all that is known to date, in many instances
deals have been kept either in total secrecy or under less transparent cover. This
could be either the choice of host countries or those skilful international investor-
negotiators wishing to keep their deals under wrap, or coincidence of the interests
of both parties.
Where have the rental fees gone?
A question in the minds of citizens in these countries and around the world is
whatever happened to the money, for instance, which is not even reported in the
case of Ethiopia in the records of government treasury, or as part of income, for
instance, in the national budget outlays. For example, the 2010 Ethiopian national
budget was approved less than three months ago, with no reference at all to such
incomes. If indeed, it is aggregated under the revenue section, it is long overdue
that it was indicated specifically as revenue from land rental fees.
The finance ministry usually reports in national budgets sources of revenues and
incomes such as direct and indirect taxes, foreign transfers, foreign aid and loans,
private transfers, royalty, dividends and project support, etc. Why not this one?
That would have been one helpful indication of what the monies from land rents
are used for. Surprisingly, the information does not even appear anywhere in the
quarterly and annual reports of the National Bank of Ethiopia (NBE).
Can there be an explanation for this? Or should we remain silenced for fear of
labelling , as usual, those raising such a questions of national concern by
government and its agents as work of the power hungry diaspora, or hired guns
for the opposition that the regime portrays its questioners as anti-peace or anti-
‘Ethiopian democracy’? This time no matter the label, we are all in it for our
country’s future and, therefore, good citizens would not change their minds on the
pressing need to put the information on contracts on agricultural lands with foreign
firms and the incomes in the public realm.
Even in its cautious and minimalist approach, the above-mentioned international
report indicates that land under investor claim in Ethiopia between 2004 and early
2009 to be 607,760 ha. FAO estimates put that as 1.39 % of suitable land for
rain-fed agriculture. The number of projects over 1,000 ha is 157 and the total
investment commitment is reported as $78,563,023, which is far down from the
real figure. It certainly is not so huge in terms of magnitude.
The report also warns that these figures may not be all that there is to it. There are
a number of deals that have not been reflected in the national data records. The
authors attribute that partly to inadequate national record keeping system. For
instance, although not in the public arena yet, the Tribune Business claims (March
2009), quoting the London Independent, Saudi Arabia alone had paid Ethiopia $100
million for farmlands in March to grow wheat and barley. Therefore, there is
concern that some of them may not even be reported at all.
There is no doubt that good governance means transparency. Why should a
government suppress information, unless it fears that its fingers will be held in
fire? Therefore, there is no justification whatsoever for those government of
Ethiopia, as it is involved in international farmland deals, to remain less transparent.
It is duty bound to inform its citizens what the essentials of the deals it has signed
are and to what purpose the monies are or have been utilized so far.
Transparency in practice would avoid the politically harmful suspicions of
corruption, allegations of siphoning capital to foreign banks to which the name of
the regime in Addis Ababa has often been mentioned. This means that, in addition
to authoritarianism and violations of human rights, the land deals are conspiring to
obliterate the regime’s image.
If this charge is allowed to continue in a hash-hash manner, as is the case now, it
would prove to be an added impediment to the already weak national cohesion and
national development in a politically polarized country. Its stigma is no less than the
kiss of death. It would stain Ethiopia’s name. As usual in such circumstances,
government may turn to suave American and British public relations firms to
cleanse the regime’s image. I dare say, it would be to no avail in the face of
evolving international campaigns that are gaining momentum.
A commentator on the London Independent article under the title ‘Land Grab”:
The Race for the World’s Farmlands’ already wrote a letter that reflects the
sentiment in the streets of Brussels, London, Rome and Washington. The writer of
the articles says, “The real problem is that the elite in African countries are
desperate to take cash from foreigners. They then apply this cash to purchase
‘security and defense equipment.’ And this is turned on the locals, especially locals
who have their own ideas on what should be the land policy. This is not new
colonialism. It is the elite of Africa (a combination of soldiers, thugs and
opportunist politicians) strengthening their own power base.”
Data sources for the report, the pros and cons of the issue in
outsiders’ eyes
The purpose of the international report is to highlight both the opportunities and
risks involved in international agricultural land deals. Its authors say governments
in different countries are their sources of information. They emphasize they have
reviewed national inventories of approved and proposed land acquisitions in those
countries, conducted interviews with concerned national officials and international
experts, including reviewing the relevant literatures on the matter.
Of special significance is that the report has benefited from links with a parallel
study led by the World Bank, involving FAO and IIED early on. Overall, the report
sheds some light on some information and provides reasonable understanding of
the state of such arrangements. While it attempts to make recommendations,
especially for the benefit of the host countries, some critics of the report see them
as inadequate, ‘wishy-washy’ and dismiss them by virtue of that as being of little
value to developing countries.
Critics, amongst them, Uwe Hoering, a German development expert, accuse the
report of “emphasises on the macro-economic advantages that the foreign grab of
African land could represent, such as higher state revenues, and new chances of
development in rural areas. But when it comes down to formulating norms to be
applied to guarantee that African national interests are respected, it can only
provide weak suggestions which, in addition, (it says) should be voluntarily applied
and not too restrictive for the foreign investors.”
The Economist expressed its concerns from two different angles. Whereas it sees
the values of “foreign investment in some of the most miserable places on earth”
that these farmland leases drive, it worries about the fact that “most of these deals
are shrouded in mystery.” It adds, “This is rarely a good sign, especially in
countries riddled with corruption… Secrecy makes it impossible to know whether
farms are really getting more efficient or whether the deals are done mainly to line
politicians’ pockets. Next, most of these deals are government-to-government.
This raises awkward questions. Foreign investment helps countries not only by
applying new technology but also by reorganising the way people work and by
keeping an eye on costs. Few governments do this well, corrupt ones least of all”
(May 21st edition).
Case of land lease in Ethiopia
The international report states, “Obtaining geo-referencing for approved and
proposed land deals proved difficult in most country studies, though in Ethiopia
data obtained by the country team enables plotting investment amounts and land
area sizes by region against FAO data on land suitability [see map below]. The map
suggests that documented land deals tend to concentrate in regions with more
fertile lands and/or closer links to markets. This mapping exercise only gives a
broad-brush picture of the spatial distribution of land deals, however.” This FAO
map is unpublished; it is reproduced here from the international report.
In their reviews of national inventories, the authors of the international report have
established that since 2004 Ethiopia, Ghana, Madagascar, Mali and Sudan have
approved allocations of 2,492,684 ha of farmlands. For the five countries, this is
exclusive of allocations below 1,000 ha. The report contends that its figures may
not necessarily be complete, especially in land sizes and the revenues thereon.
So far, there has been limited information in the public arena on the full details of
Ethiopia’s land deals with foreign companies or foreign government’s and
individuals. What is reported on the foreign media is a German company that has
been working for some time now on biofuel project on about 13,000 ha. Another
German entrepreneur has been allocated 150,000 ha for livestock project. In
addition, land has been leased to Saudi Arabia for report commercial farming of
rice, which is augmented recently with palm oil production. Not known also
clearly has been the sizes of farms held by Ethiopians in partnership with foreign
individuals and companies.
Other than the above, what is public knowledge is on 21 July 2008 Prime Minister
Meles had given President Omar Ismail Gulleh of Djibouti 7,000 ha of land to grow
wheat. In addition, Mr. Gulleh is a recipient of 10,000 sq. m. of lakeside land 45
km from Addis Ababa to build commercial farming of rice, which is augmented
recently with palm oil production. A few years back, the president has already built
his villa in Dire Dawa, whose value is estimated $5 million, according to news
sources. Of course, what is not disclosed to Ethiopians is what their leaders have
received from foreign governments.
The unavailability of information to the public gives the impression that in Ethiopia’
s case the genesis of international deals on agricultural lands is August 2008, after
Prime Minister Meles Zenawi announced on the Financial Times that Ethiopia was
“eager to give Saudi Arabian investors access to hundreds of thousands of ha of
farmlands for investment and development.” That impression/or inadequate
information has been inaccurate, since we now know from the international report,
Ethiopia has been at the forefront of the renting of farmlands to foreign companies
and, in some cases, to foreign state enterprises since 2004.
More land allocation made official in Ethiopia
The Ethiopian government has recently set up the Agricultural Investment Support
outfit to deal with land lease and related issues. The director of that agency on 29
July told Reuter in Addis Ababa of the marking of 1.6 ha of land “for investors
willing to develop commercial farms.” Ethiopia is so much after more deals now
that it has put into its farmlands offers many attractive goodies.
“Investors who qualify have the opportunity to receive loans from local banks up
to 70.0 percent of their capital investment as well as attractive incentives and tax
holiday,” according to the director of the newly established office quoted by
Reuter. It appears that no lesson has been taken from bank loans to foreign
investors in the horticultural sector, some of which vanished without traces, even
payment of what they owed to their labourers. They have only left their significant
contributions to the already substantially high stock of non-performing loans on
the books of Ethiopian banks.
There is an indication by an Ethiopian government official that land selection and
allocation is carried out by the regional states. He says that was the case in Afar,
Amhara, Benishangul Gumuz, Oromia and the SNNP regions. Not mentioned in the
list by the official is Tigray region. However, FAO’s unpublished aerial map shows
an allocation of as much as 7,500 ha (see map above).
It is reported that foreign firms that have started operation include a Chinese
company aiming to produce sesame seeds, Indian companies engaged in the
production of sugar cane, tea and cotton and bio-fuel. In addition to rice, wheat
and barley, a Saudi Arabian company has contracted to work on palm oil
production. One of the findings of the report is that private companies rather than
foreign state-owned entities own the major shares of the approved investments.
Criteria for land allocation in Ethiopia
All land lease projects documented by the national inventory in Ethiopia involve
allocations of (or applications for) government leases of diverse durations from 10
to 50 years (e.g. 10, 30 or 50 years). In determining what lands are to be allocated
to foreign investors, the seemingly applicable determinants are whether land is
“available”, “idle” or “waste” to justify allocation. These concepts feature quite
prominently in some of the other countries mentioned in the report as well.
In Ethiopia, for example, all land allocations recorded at the national investment
promotion agency are classified as “wastelands”, i.e., no pre-existing users. A
critical analysis by the researchers has found that was not the case indeed. At
least, some of the lands allocated to investors in the Benishangul Gumuz and Afar
regions have been in use previously for shifting cultivation and dry-season grazing,
respectively. In this connection, recall that in a July 29 interview with Reuter, the
Ethiopian official in charge of the recently formed Agricultural Investment Support
claimed, “The regional states set aside virgin land suitable for large-scale
commercial farming.” It is not clear how the regional officials give away land that
could be needed by the farming/herding population on rotational basis.
In Ethiopia, land rents are split into four deals out of the six projects the report’s
research team has examined. Several deals – including the contract from the
Benishangul Gumuz Regional State—involve five-year exemptions from land fees,
as shown in article 4(a) of the contract. Prices range from $3 to $10 per hectare
per year. It is clear to anyone that these fees are low, let alone in the international
context but also for domestic commercial farmers. In recognizing that, so far only
the rental fees in Oromia have been somewhat raised recently.
As mentioned above, significant levels of tax incentives are given to investors in
Ethiopia. For example, profit tax in Ethiopia estimated at $20 per hectare per year
is exempt for a period of five years. As a result, for 602,760 ha allocated of the
documented projects is estimated to entail tax revenue loss to Ethiopia over five
years of $60,276,000.
How reliable are land lease information?
Although government agencies are its primary sources, the international report
acknowledges that information on land size deals may vary from the reality on the
ground. It speculates that this may be because a share of international land deals is
hardly reflected in government statistics. In Ethiopia’s case, for example, enquiries
at the state-level Oromia investment promotion agency found evidence of some 22
proposed or actual land deals, of which nine were over 1,000 ha, and were not
recorded along with the other 148 in the national investment promotion agency
records.
The report is of the view that it is possible to those state-level agencies in other
Ethiopian states may also have records of additional projects that some land
acquisition deals may not have been recorded at all. Furthermore, the report
acknowledges, “Datasets tend to be incomplete, which translates in gaps in its
analysis. For example, in Ethiopia information about the land size of many deals
proposed or concluded in 2008 is missing.” In addition, an investment by German
company Flora EcoPower was reported to involve 13,000 ha (Reuters, 2009),
while it is recorded at the Ethiopian investment promotion agency as 3,800 ha only.
Why does Ethiopia need international land lease?
It is this writer’s view that, although the Ethiopian government is unwilling to
admit publicly the failure of its agricultural policy, its efforts in trying to attract
foreign investors with hefty incentives is clear evidence of that failure. Moreover,
already its 2010 budget allocation places agriculture to a third place in terms of
priority, sign of its discouragement, or sign of resigning responsibility and
relegating food production to foreign companies. This is happening for the first
time since the regime assumed power, a further affirmation of its policy failures.
In equal measures, what its action dose is arouse serious doubts about the future
of agriculture in the country.
Yet, in inviting international investors, the government’s intention on one hand is
said to be to improve the country’s food production capacity and on the other to
earn more foreign exchange. Ninety-eight percent of the agricultural projects
recorded at the Ethiopian Investment Promotion Agency involve food production,
compared to only two percent for bio-fuels (though in terms of land area the split
is slightly different: 94 percent versus six percent), according to the international
report. However, the little told story in Ethiopia is the quiet retreat of domestic
investment from agriculture, which is not a good omen for the rural population.
The statement by the director of the Ethiopian Agricultural Investment Support is
understandably cautious. In response to the question how much food production
by foreign companies would contribute to the domestic economy, his response
was, “The contribution to the country’s economy of those companies that began
work is yet to be quantified.” One thing that is not clear is also how the
government intends to reconcile its expressed interests with its contractual
agreements, where it is seen leaning backwards to the breaking point. Most of the
contracts do not specify what percentage of production would be slated for export
and to the domestic market, not to speak of government’s capacity to benefit in
foreign exchange from the farmland lessees’ export revenues.
A different perception
Nevertheless, those that may go along with the government’s actions say they
keep an open mind about its deals, despite their acceptance of the enormous future
problems that many foresee. For instance, VOX (June 2009), a publisher of
research-based analysis, writes, “The agricultural sector in developing countries is
in urgent need of capital. Decades of low investment have meant stagnating
productivity and production levels. In order to halve the world’s hungry by 2015,
as targeted by Millennium Development Goals, FAO calculations show that at least
$30 billion of additional funds are required annually…Developing countries’
capacity to fill these gaps is limited and official development assistance is no real
alternative… The question is not whether international investments should provide
a supplement to other capital inflows, but how their impact can be optimised.”
Unfortunately, VO/X’s sympathy has an obvious blind spot. It ignores the plight of
millions of small-scale farmers that are beyond the reach of domestic and foreign
capital and technology and cannot compete with international firms with rich
backstopping and years of experience. This is more so at a time when those little
domestic resources are beginning to ignore them, as shown in the case of Ethiopia’
s national budget for 2010. Foreign aid has been known for its lack of sympathy
and provision of real investments for agriculture in developing countries.
On the other hand, a comparison of data by the international report between FDI
and domestic investment in Ethiopia, Ghana, Madagascar and Mali suggests the
majority of the investment involves higher shares of FDI. However, what
surprised the authors of the report is the extent to which national entrepreneurs
and companies are also acquiring land in some of those five African countries,
which it says its mention is virtually ignored in the international media reporting.
In Ethiopia, domestic investors account for the large majority of commercial
agricultural projects. The sum of their land deals add up to 362,000 ha and an
investment of $54 million, compared with 240,000 ha and $24 million for FDI.
Given recent developments on the matter, there is no doubt that the data may have
already been outdated in both Ethiopia and the other countries where case studies
were undertaken. Details not known clearly have also been the sizes of farms held
by Ethiopians in partnership with foreign individuals and companies.
Why is the outside world so concerned about international land leases
in Africa?
The simple answer could be the fact of it being a new practice in a region whose
institutions have terribly failed citizens and many African governmental practices
are linked to corruption. Therefore, the various concerns discussed in the
international report and in the news media could be summarized as lack of
experience by government agencies in land deals, environmental considerations,
corruption, the inability of the voiceless to defend their interests and possibility of
opening up the host countries to speculator-investors.
The report has found out that the terms and conditions of investment on
agricultural lands display a huge diversity among countries and even individual
projects. It indicates that its main findings, which are based on a small number of
international land deals, include the need to take account of:
The report candidly states, “Although on paper some countries have progressive
laws and procedures that seek to increase local voice and benefit, big gaps
between theory and practice, between statute books and reality on the ground
result in major costs being internalized by local people – but also in difficulties
for investor companies. Many countries do not have in place legal or procedural
mechanisms to protect local rights and take account of local interests,
livelihoods and welfare. Even in the minority of countries where legal
requirements for community consultation are in place, processes to negotiate
land access with communities remain unsatisfactory. Lack of transparency and
of checks and balances in contract negotiations creates a breeding ground for
corruption and deals that do not maximize the public interest. Insecure use
rights on state-owned land, inaccessible registration procedures, vaguely defined
productive use requirements, legislative gaps, and compensation limited to loss
of improvements like crops and trees (thus excluding loss of land) all
undermine the position of local people.
Virtually all the contracts analyzed by this study tend to be short and simple
compared to the economic reality of the transaction. Key issues like
strengthening mechanisms to monitor or enforce compliance with investor
commitments, maximizing government revenues and clarifying their
distribution, promoting business models that maximize local benefit (such as
employment creation and infrastructure development), as well as balancing food
security concerns in both home and host countries are dealt with by vague
provisions if at all.”
Why should Ethiopians be concerned about international land lease
agreements?
The terms of farmland deals are hardly made public. Although a theoretical
possibility exists in a few cases for some transfer of technology for agricultural
development, risk also exists to peasant farmers who cannot compete with well-
resourced commercial farms. Take, for instance, the case of barley and oilseeds
producers in Ethiopia. China is given an unknown size of farmland to produce
oilseeds, sesame especially. Saudi Arabia is also given unquantified land to produce
barley and wheat. In the case of China, if our country’s experience to date were of
any relevance, they would definitely bring Chinese workers to do the job. This not
only would deny the country employment possibilities but also the transfer of
experience and technology would be minimal, which otherwise FDI has been
credited for.
At the same time, for the last several years China has been Ethiopia’s important
destination for sesame export. China uses sesame for chocolates, biscuits, and
extraction of oil for both its external and domestic markets. If China were to
satisfy its enormous needs for oilseeds and its export revenues through its own
production in Ethiopia, the marketing disadvantage would surely be to Ethiopia.
There is also the possibility that this may drive prices down on two accounts.
First, the major importer, china, may not need its share of Ethiopian exports.
Secondly, Chinese possibility of overproduction could drive prices down. On top
of that, Ethiopia’s weak export capacities are likely to be depressed during this
competition with China. It is obvious that the competition would hurt millions of
small-scale farmers in Ethiopia.
For instance, land under oilseeds in 2008 fell to 707 thousand ha from its high of
797 thousand ha, because of price discouragements to small-scale farmers. With it
also declined the export volume and foreign exchange earnings, at a time when
international prices were much higher than the previous years and more countries
were interested in Ethiopian production. Surprisingly, over the years small-scale
farmers’ production of sesame has shown consistent but limited productivity
growth.
Perhaps, decline in international prices was one of the factors affecting decline of
sesame farmland sizes in 2008, compared to 2005/06. Land under sesame by small-
scale framers in 2008 was 186 thousand ha, which is 26.3 percent of the total land
devoted to oilseeds, down from 211.3 ha in 2005/06, according to the CSA.
Therefore, the emergence of a highly competitive partner now in sesame
production may end up being another discouragement to million of small-scale
farmers.
Strengthening such concerns is also the Chinese business model itself, about
which Prof. Desta, Asayeghn has written extensively under the title China’s South-
South Cooperative Investments. He says, “Unless corrected, the Sino-African
investment is likely to fatten the pockets of state elites and marginalize the
African masses. In line with the objectives of the South-South Cooperation, the
degree of control must be reversed if there is going to be technological transfers
from China to Africa. Also, China has done little to integrate Africa into the
global value chains. It is claimed that Chinese-capital investments in Africa are
new (Greenfield) rather than takeover investments. Chinese investments in
Africa are constrained by not being environmentally friendly. Though an
essential part of the technology transfer package, it is worth mentioning that a
review of the literature shows that the Sino-African investments, similar to the
Euro-African, have failed to handle Africa’s negative environmental
externalities.”
What is said about sesame production by China is also true about the future of
barley farmers. There has been slight improvement in barley productivity growth.
In 2005/06, lands under barley were 998 thousand ha, which picked up in 2006/07
to one million ha. However, by 2007/08, like sesame, it plummeted to 985
thousand ha, an indication of the price factor in 2006/07. In the light of this, any
possible prospect for small-scale holder agriculture in Ethiopian may face its worst
nightmare. Alternatively, would the competition by foreign commercial farms
become a positive force to the millions of small-scale farmers producing cereals,
pulses, oilseeds or would they be compelled to shift to producing something else?
The trigger for this article, i.e., the above-mentioned international report, warns,
“Decisions taken today will have major repercussions for the livelihoods and food
security of many, for decades to come. This means that choices made now must
be based on strategic thinking rather than piecemeal and opportunistic
negotiations.” In the best interests of her country and her fellow citizens, this
writer fully concurs with that assessment and conclusion.
INTERNATIONAL AGRICULTURAL LAND DEALS
AWARD ETHIOPIAN VIRGIN LANDS TO FOREIGN
COMPANIES
By Genet Mersha | August 13, 2009
During the last one year, the international media have reported with noticeable
frequency on international agricultural land deals in Ethiopia. In Ethiopia, land is
under government control and, therefore, cannot be sold or bought. Of the dozen
or so African countries engaged in such deals, for varied reasons the cases of
Ghana, Madagascar, Mali and the Sudan have also attracted similar attention.
Perhaps the only commonality between Ethiopia and these countries is that they
are all far ahead of others in that experience, as they have concluded several
international farmland lease deals in the past five years. Nevertheless, much of the
information is still under wraps.
- Consequently, this venture into
unknown territories by poor
developing countries with weak
institutional capacities and frail
system of rule of law has sent
worrying signals to concerned
global citizens. This, thus, has
placed the new mode of
international agricultural land
deals in developing countries
under laser-sharp scrutiny.
more concerned they become by the consequences of such deals between
unequally matched partners. The fear is that, the hunger in many developing
countries for farm investment from rich foreign companies may end up compelling
them to hand over their only assets to international investors (through international
contractual agreements).
Stefano Manservisi, director-general of aid and development at the European
Commission says, “We are very concerned because this is another way to exploit
developing countries… 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.”
Of equal concern is the survivability of millions of small-scale farmers against the
onslaught of competition by well-greased commercial farms. An analyst at the
Forum for Biotechnology and Food Security in India says, “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” (Guardian April 7, 2009).
Not least, against the backdrop of rapid global climatic change, the worry of those
who have seen the light is the impact of fast expanding commercial agriculture on
the natural environment. In this connection, without including existing commercial
farms, recall that even the 13.3 million small-scale agricultural holders in Ethiopia
open up over a million hectares of virgin lands annually, i.e., according to the
Ethiopian Central Statistics Agency (CSA, 2008 Abstract).
Why worry about land rental deals?
International investors interested in African agriculture are fast growing in number.
Their action is induced by the need of the rich with less endowed agricultural lands
to ensure their continued supply of food with cheaper prices and winning the
competition against ethanol. Others are interested in making more money. The
objective of Chinese holdings in Ethiopia for sesame production, or the new Indian
venture in Ethiopia into tea, bio-fuel, and sugarcane and cotton production has no
any other reason.
Still others are keeping worried looks on the heavy burden of food prices on their
balance of payments, as in the case of the Gulf Cooperation Council (GCC), which
spent $10 billion in 2008 on food imports (Bahrain’s Gulf Daily News). Therefore,
motivated by the need to counter this problem, the GCC have announced this year
their desire to turn Africa as their breadbasket. The process has started by
strengthening the GCC-Africa Co-operation Forum, funded by both OPEC Funds
and national earmarks by the five member countries of the GCC had already held
its first meeting in Bahrain recently. Initially, Mozambique, Senegal, Sudan and
Tanzania have signed on. Thus, virgin farmlands have been selected and the
infusion of huge investments has begun in earnest into these countries.
Oliver De Schutter, special envoy for food at the Office of the UN High
Commissioner for Human Rights, says, “This is speculation betting on future
prices. What we see now is that countries have lost trust in the international
market. We know volatility will increase in the next few years. Land prices will
continue to rise. Many deals are even now being negotiated. Not all are complete
yet.”
Similarly, China has taken steps to produce sesame in Ethiopia as of this year,
which is the first of its kind. Recall that Ethiopia is the fourth largest sesame
producer in the world; its natural sesame from whitish Humera seeds and machine-
washed from Wollega fetch highest prices. Other parts of Ethiopia also produce
good sesame; but what they need is some help in improving the production
techniques and the producers’ exposure to the market. This requires improved
policies to enhance agricultural production and overcome the country’s weak
export capacities that have stood as barrier before millions of producers.
Until now, China has been Ethiopia’s leading export destination for most of its
sesame. The EU and the US that normally imported from India have also turned to
Ethiopia’s natural sesame lately. Records on global exchanges indicate that 150
countries import sesame seeds. While the prospect for sesame producers is
brightening up, clearly the tilt to involving millions of ill-equipped peasant
producers in unmatched competition by China on fertile virgin lands mostly should
be cause for serious concern for Ethiopia and its friends. Since August 2008,
sesame has been fetching $1,380 per tonne in the international commodity market.
The natural sesame from Ethiopia has been priced around $1,400 for sometime,
according to Business Standard.
Consequently, it is hardly with unfounded reasons that such investor interests and
the latest trends in African agriculture have compelled the international community
to break its silence. The concern is that Sub-Saharan Africa is fast becoming a
hotspot for international land acquisitions.
In terms of local responses so far, the controversy has ended up in the overthrow
of the government in Madagascar. As its first action, Madagascar’s army backed
leader last March cancelled a deal by South Korea’s Daewoo Logistics to lease a
million hectares of Madagascar—equivalent to the size of Qatar—to grow food,
according to Reuter. Ever since, Madagascar’s has been embroiled in serious
instability and political polarization. In some other deal making countries, negative
sentiments may be there, although for now governments and businesses have
managed to prevent any possibilities for loud or violent forms of expression of
resentment.
Growing international concerns
- Meantime, at the
international level fresh
controversies have begun
to brew amongst experts,
individual activists, and
non-governmental
organizations. Many are
urging international
organizations to step up to
the plate and do their job
on behalf of people that
are ignored by their
governments. For now,
much of the media
reporting has remained
superficial.
controversies. Last spring, different non-governmental organizations engaged the
FAO and its experts in intense debates along that direction. Their concern zeroes in
on what they referred to as “land grabs.” The point they are driving home is
concern for the voiceless, stressing the imperative need for careful review of the
future trend of agriculture in developing countries in general and food production
in particular.
David Hillam, FAO deputy director in charge of the trade and markets division
who opened the Washington conference entitled ‘Land Grab”: The Race for the
World’s Farmlands’ last March expressed the overall concern cogently. He said,
“Imagine empty trucks being driven into, say, Ethiopia, at the time of food
shortages caused by war or drought, and being driven out again full of grain to
feed people oversees…Can you imagine the political consequences? That is why
proper legal structures need to be put into place to protect land rights, and why we
should look at some form of international code of conduct.”
Ruth Meinzen-Dick, researcher at the Washington-based International Food Policy
Research Institute (FPRI) encapsulated the essence of the debate at the
international level to IPS saying, “The bargaining power in negotiating these
agreements is on the side of the foreign investor, especially when its aspirations
are supported by the host state or local elites.” Uwe Hoering, a German
development expert, who followed these debates dubbed the whole land deal issue
“a new form of agrarian colonialism.”
There is no doubt that the arrangements are complex. Let alone for the media,
even professional researchers find it difficult to get a crack at it, even when
vigorous analyses of such deals, filling the gaps and developing informed
understanding of the opportunities and risks is a part of their vocation. What
makes it complicated is the home governments’ role and connections with the
robust, politically and financially well-wheeled investor companies, countries and
individuals, not to speak of their ultimate objectives and the consequences.
Whereas the media’s interest in the matter has aroused international curiosity, until
recently concern over the matter has hardly moved beyond scratching the surface
of the mega-million dollar international deals on agricultural lands.
Ethiopia, part of new study on international farmland lease
arrangements
With the publication in May 2009 of a report entitled Land Grab or Development
Opportunity? Agricultural investment and International Land Deals in Africa,
the information gap for now is being filled somewhat. This international report,
backed by an extensive research undertaken in Ethiopia, Ghana, Madagascar, Mali
and Sudan—the very countries on which media reporting has sharply focussed,
depends on data available in the countries. Case studies on legal arrangements were
also conducted in Mozambique and Tanzania. The report is the outcome of
collaborative efforts between FAO, the International Fund for Agricultural
Development (IFAD) and the International Institute for Environment and
Development (IIED).
Funding for the international research was provided by bilateral governmental
agencies such as Danida (Denmark), DFID (UK), DGIS (the Netherlands), Irish
Aid, Norad (Norway), SDC (Switzerland) and SIDA (Sweden). The publication of
the report was funded by FAO, IFAD, and DFID, the latter through IIED.
The report stresses that land is central to identity, livelihoods and food security of
peoples in the host countries. That in view, therefore, it does not shy from
expressing its concerns boldly. Such is one that, for instance, many of the
countries involved in this practice do not have in place institutional mechanisms to
protect the rights of small-scale farmers and rights and interests of the local
population, nor the environment. These countries also do not have qualified
personnel and sufficient experiences in land markets to assess and determine land
lease contracts in market values. For all that is known to date, in many instances
deals have been kept either in total secrecy or under less transparent cover. This
could be either the choice of host countries or those skilful international investor-
negotiators wishing to keep their deals under wrap, or coincidence of the interests
of both parties.
Where have the rental fees gone?
A question in the minds of citizens in these countries and around the world is
whatever happened to the money, for instance, which is not even reported in the
case of Ethiopia in the records of government treasury, or as part of income, for
instance, in the national budget outlays. For example, the 2010 Ethiopian national
budget was approved less than three months ago, with no reference at all to such
incomes. If indeed, it is aggregated under the revenue section, it is long overdue
that it was indicated specifically as revenue from land rental fees.
The finance ministry usually reports in national budgets sources of revenues and
incomes such as direct and indirect taxes, foreign transfers, foreign aid and loans,
private transfers, royalty, dividends and project support, etc. Why not this one?
That would have been one helpful indication of what the monies from land rents
are used for. Surprisingly, the information does not even appear anywhere in the
quarterly and annual reports of the National Bank of Ethiopia (NBE).
Can there be an explanation for this? Or should we remain silenced for fear of
labelling , as usual, those raising such a questions of national concern by
government and its agents as work of the power hungry diaspora, or hired guns
for the opposition that the regime portrays its questioners as anti-peace or anti-
‘Ethiopian democracy’? This time no matter the label, we are all in it for our
country’s future and, therefore, good citizens would not change their minds on the
pressing need to put the information on contracts on agricultural lands with foreign
firms and the incomes in the public realm.
Even in its cautious and minimalist approach, the above-mentioned international
report indicates that land under investor claim in Ethiopia between 2004 and early
2009 to be 607,760 ha. FAO estimates put that as 1.39 % of suitable land for
rain-fed agriculture. The number of projects over 1,000 ha is 157 and the total
investment commitment is reported as $78,563,023, which is far down from the
real figure. It certainly is not so huge in terms of magnitude.
The report also warns that these figures may not be all that there is to it. There are
a number of deals that have not been reflected in the national data records. The
authors attribute that partly to inadequate national record keeping system. For
instance, although not in the public arena yet, the Tribune Business claims (March
2009), quoting the London Independent, Saudi Arabia alone had paid Ethiopia $100
million for farmlands in March to grow wheat and barley. Therefore, there is
concern that some of them may not even be reported at all.
There is no doubt that good governance means transparency. Why should a
government suppress information, unless it fears that its fingers will be held in
fire? Therefore, there is no justification whatsoever for those government of
Ethiopia, as it is involved in international farmland deals, to remain less transparent.
It is duty bound to inform its citizens what the essentials of the deals it has signed
are and to what purpose the monies are or have been utilized so far.
Transparency in practice would avoid the politically harmful suspicions of
corruption, allegations of siphoning capital to foreign banks to which the name of
the regime in Addis Ababa has often been mentioned. This means that, in addition
to authoritarianism and violations of human rights, the land deals are conspiring to
obliterate the regime’s image.
If this charge is allowed to continue in a hash-hash manner, as is the case now, it
would prove to be an added impediment to the already weak national cohesion and
national development in a politically polarized country. Its stigma is no less than the
kiss of death. It would stain Ethiopia’s name. As usual in such circumstances,
government may turn to suave American and British public relations firms to
cleanse the regime’s image. I dare say, it would be to no avail in the face of
evolving international campaigns that are gaining momentum.
A commentator on the London Independent article under the title ‘Land Grab”:
The Race for the World’s Farmlands’ already wrote a letter that reflects the
sentiment in the streets of Brussels, London, Rome and Washington. The writer of
the articles says, “The real problem is that the elite in African countries are
desperate to take cash from foreigners. They then apply this cash to purchase
‘security and defense equipment.’ And this is turned on the locals, especially locals
who have their own ideas on what should be the land policy. This is not new
colonialism. It is the elite of Africa (a combination of soldiers, thugs and
opportunist politicians) strengthening their own power base.”
Data sources for the report, the pros and cons of the issue in
outsiders’ eyes
The purpose of the international report is to highlight both the opportunities and
risks involved in international agricultural land deals. Its authors say governments
in different countries are their sources of information. They emphasize they have
reviewed national inventories of approved and proposed land acquisitions in those
countries, conducted interviews with concerned national officials and international
experts, including reviewing the relevant literatures on the matter.
Of special significance is that the report has benefited from links with a parallel
study led by the World Bank, involving FAO and IIED early on. Overall, the report
sheds some light on some information and provides reasonable understanding of
the state of such arrangements. While it attempts to make recommendations,
especially for the benefit of the host countries, some critics of the report see them
as inadequate, ‘wishy-washy’ and dismiss them by virtue of that as being of little
value to developing countries.
Critics, amongst them, Uwe Hoering, a German development expert, accuse the
report of “emphasises on the macro-economic advantages that the foreign grab of
African land could represent, such as higher state revenues, and new chances of
development in rural areas. But when it comes down to formulating norms to be
applied to guarantee that African national interests are respected, it can only
provide weak suggestions which, in addition, (it says) should be voluntarily applied
and not too restrictive for the foreign investors.”
The Economist expressed its concerns from two different angles. Whereas it sees
the values of “foreign investment in some of the most miserable places on earth”
that these farmland leases drive, it worries about the fact that “most of these deals
are shrouded in mystery.” It adds, “This is rarely a good sign, especially in
countries riddled with corruption… Secrecy makes it impossible to know whether
farms are really getting more efficient or whether the deals are done mainly to line
politicians’ pockets. Next, most of these deals are government-to-government.
This raises awkward questions. Foreign investment helps countries not only by
applying new technology but also by reorganising the way people work and by
keeping an eye on costs. Few governments do this well, corrupt ones least of all”
(May 21st edition).
Case of land lease in Ethiopia
The international report states, “Obtaining geo-referencing for approved and
proposed land deals proved difficult in most country studies, though in Ethiopia
data obtained by the country team enables plotting investment amounts and land
area sizes by region against FAO data on land suitability [see map below]. The map
suggests that documented land deals tend to concentrate in regions with more
fertile lands and/or closer links to markets. This mapping exercise only gives a
broad-brush picture of the spatial distribution of land deals, however.” This FAO
map is unpublished; it is reproduced here from the international report.
In their reviews of national inventories, the authors of the international report have
established that since 2004 Ethiopia, Ghana, Madagascar, Mali and Sudan have
approved allocations of 2,492,684 ha of farmlands. For the five countries, this is
exclusive of allocations below 1,000 ha. The report contends that its figures may
not necessarily be complete, especially in land sizes and the revenues thereon.
So far, there has been limited information in the public arena on the full details of
Ethiopia’s land deals with foreign companies or foreign government’s and
individuals. What is reported on the foreign media is a German company that has
been working for some time now on biofuel project on about 13,000 ha. Another
German entrepreneur has been allocated 150,000 ha for livestock project. In
addition, land has been leased to Saudi Arabia for report commercial farming of
rice, which is augmented recently with palm oil production. Not known also
clearly has been the sizes of farms held by Ethiopians in partnership with foreign
individuals and companies.
Other than the above, what is public knowledge is on 21 July 2008 Prime Minister
Meles had given President Omar Ismail Gulleh of Djibouti 7,000 ha of land to grow
wheat. In addition, Mr. Gulleh is a recipient of 10,000 sq. m. of lakeside land 45
km from Addis Ababa to build commercial farming of rice, which is augmented
recently with palm oil production. A few years back, the president has already built
his villa in Dire Dawa, whose value is estimated $5 million, according to news
sources. Of course, what is not disclosed to Ethiopians is what their leaders have
received from foreign governments.
The unavailability of information to the public gives the impression that in Ethiopia’
s case the genesis of international deals on agricultural lands is August 2008, after
Prime Minister Meles Zenawi announced on the Financial Times that Ethiopia was
“eager to give Saudi Arabian investors access to hundreds of thousands of ha of
farmlands for investment and development.” That impression/or inadequate
information has been inaccurate, since we now know from the international report,
Ethiopia has been at the forefront of the renting of farmlands to foreign companies
and, in some cases, to foreign state enterprises since 2004.
More land allocation made official in Ethiopia
The Ethiopian government has recently set up the Agricultural Investment Support
outfit to deal with land lease and related issues. The director of that agency on 29
July told Reuter in Addis Ababa of the marking of 1.6 ha of land “for investors
willing to develop commercial farms.” Ethiopia is so much after more deals now
that it has put into its farmlands offers many attractive goodies.
“Investors who qualify have the opportunity to receive loans from local banks up
to 70.0 percent of their capital investment as well as attractive incentives and tax
holiday,” according to the director of the newly established office quoted by
Reuter. It appears that no lesson has been taken from bank loans to foreign
investors in the horticultural sector, some of which vanished without traces, even
payment of what they owed to their labourers. They have only left their significant
contributions to the already substantially high stock of non-performing loans on
the books of Ethiopian banks.
There is an indication by an Ethiopian government official that land selection and
allocation is carried out by the regional states. He says that was the case in Afar,
Amhara, Benishangul Gumuz, Oromia and the SNNP regions. Not mentioned in the
list by the official is Tigray region. However, FAO’s unpublished aerial map shows
an allocation of as much as 7,500 ha (see map above).
It is reported that foreign firms that have started operation include a Chinese
company aiming to produce sesame seeds, Indian companies engaged in the
production of sugar cane, tea and cotton and bio-fuel. In addition to rice, wheat
and barley, a Saudi Arabian company has contracted to work on palm oil
production. One of the findings of the report is that private companies rather than
foreign state-owned entities own the major shares of the approved investments.
Criteria for land allocation in Ethiopia
All land lease projects documented by the national inventory in Ethiopia involve
allocations of (or applications for) government leases of diverse durations from 10
to 50 years (e.g. 10, 30 or 50 years). In determining what lands are to be allocated
to foreign investors, the seemingly applicable determinants are whether land is
“available”, “idle” or “waste” to justify allocation. These concepts feature quite
prominently in some of the other countries mentioned in the report as well.
In Ethiopia, for example, all land allocations recorded at the national investment
promotion agency are classified as “wastelands”, i.e., no pre-existing users. A
critical analysis by the researchers has found that was not the case indeed. At
least, some of the lands allocated to investors in the Benishangul Gumuz and Afar
regions have been in use previously for shifting cultivation and dry-season grazing,
respectively. In this connection, recall that in a July 29 interview with Reuter, the
Ethiopian official in charge of the recently formed Agricultural Investment Support
claimed, “The regional states set aside virgin land suitable for large-scale
commercial farming.” It is not clear how the regional officials give away land that
could be needed by the farming/herding population on rotational basis.
In Ethiopia, land rents are split into four deals out of the six projects the report’s
research team has examined. Several deals – including the contract from the
Benishangul Gumuz Regional State—involve five-year exemptions from land fees,
as shown in article 4(a) of the contract. Prices range from $3 to $10 per hectare
per year. It is clear to anyone that these fees are low, let alone in the international
context but also for domestic commercial farmers. In recognizing that, so far only
the rental fees in Oromia have been somewhat raised recently.
As mentioned above, significant levels of tax incentives are given to investors in
Ethiopia. For example, profit tax in Ethiopia estimated at $20 per hectare per year
is exempt for a period of five years. As a result, for 602,760 ha allocated of the
documented projects is estimated to entail tax revenue loss to Ethiopia over five
years of $60,276,000.
How reliable are land lease information?
Although government agencies are its primary sources, the international report
acknowledges that information on land size deals may vary from the reality on the
ground. It speculates that this may be because a share of international land deals is
hardly reflected in government statistics. In Ethiopia’s case, for example, enquiries
at the state-level Oromia investment promotion agency found evidence of some 22
proposed or actual land deals, of which nine were over 1,000 ha, and were not
recorded along with the other 148 in the national investment promotion agency
records.
The report is of the view that it is possible to those state-level agencies in other
Ethiopian states may also have records of additional projects that some land
acquisition deals may not have been recorded at all. Furthermore, the report
acknowledges, “Datasets tend to be incomplete, which translates in gaps in its
analysis. For example, in Ethiopia information about the land size of many deals
proposed or concluded in 2008 is missing.” In addition, an investment by German
company Flora EcoPower was reported to involve 13,000 ha (Reuters, 2009),
while it is recorded at the Ethiopian investment promotion agency as 3,800 ha only.
Why does Ethiopia need international land lease?
It is this writer’s view that, although the Ethiopian government is unwilling to
admit publicly the failure of its agricultural policy, its efforts in trying to attract
foreign investors with hefty incentives is clear evidence of that failure. Moreover,
already its 2010 budget allocation places agriculture to a third place in terms of
priority, sign of its discouragement, or sign of resigning responsibility and
relegating food production to foreign companies. This is happening for the first
time since the regime assumed power, a further affirmation of its policy failures.
In equal measures, what its action dose is arouse serious doubts about the future
of agriculture in the country.
Yet, in inviting international investors, the government’s intention on one hand is
said to be to improve the country’s food production capacity and on the other to
earn more foreign exchange. Ninety-eight percent of the agricultural projects
recorded at the Ethiopian Investment Promotion Agency involve food production,
compared to only two percent for bio-fuels (though in terms of land area the split
is slightly different: 94 percent versus six percent), according to the international
report. However, the little told story in Ethiopia is the quiet retreat of domestic
investment from agriculture, which is not a good omen for the rural population.
The statement by the director of the Ethiopian Agricultural Investment Support is
understandably cautious. In response to the question how much food production
by foreign companies would contribute to the domestic economy, his response
was, “The contribution to the country’s economy of those companies that began
work is yet to be quantified.” One thing that is not clear is also how the
government intends to reconcile its expressed interests with its contractual
agreements, where it is seen leaning backwards to the breaking point. Most of the
contracts do not specify what percentage of production would be slated for export
and to the domestic market, not to speak of government’s capacity to benefit in
foreign exchange from the farmland lessees’ export revenues.
A different perception
Nevertheless, those that may go along with the government’s actions say they
keep an open mind about its deals, despite their acceptance of the enormous future
problems that many foresee. For instance, VOX (June 2009), a publisher of
research-based analysis, writes, “The agricultural sector in developing countries is
in urgent need of capital. Decades of low investment have meant stagnating
productivity and production levels. In order to halve the world’s hungry by 2015,
as targeted by Millennium Development Goals, FAO calculations show that at least
$30 billion of additional funds are required annually…Developing countries’
capacity to fill these gaps is limited and official development assistance is no real
alternative… The question is not whether international investments should provide
a supplement to other capital inflows, but how their impact can be optimised.”
Unfortunately, VO/X’s sympathy has an obvious blind spot. It ignores the plight of
millions of small-scale farmers that are beyond the reach of domestic and foreign
capital and technology and cannot compete with international firms with rich
backstopping and years of experience. This is more so at a time when those little
domestic resources are beginning to ignore them, as shown in the case of Ethiopia’
s national budget for 2010. Foreign aid has been known for its lack of sympathy
and provision of real investments for agriculture in developing countries.
On the other hand, a comparison of data by the international report between FDI
and domestic investment in Ethiopia, Ghana, Madagascar and Mali suggests the
majority of the investment involves higher shares of FDI. However, what
surprised the authors of the report is the extent to which national entrepreneurs
and companies are also acquiring land in some of those five African countries,
which it says its mention is virtually ignored in the international media reporting.
In Ethiopia, domestic investors account for the large majority of commercial
agricultural projects. The sum of their land deals add up to 362,000 ha and an
investment of $54 million, compared with 240,000 ha and $24 million for FDI.
Given recent developments on the matter, there is no doubt that the data may have
already been outdated in both Ethiopia and the other countries where case studies
were undertaken. Details not known clearly have also been the sizes of farms held
by Ethiopians in partnership with foreign individuals and companies.
Why is the outside world so concerned about international land leases
in Africa?
The simple answer could be the fact of it being a new practice in a region whose
institutions have terribly failed citizens and many African governmental practices
are linked to corruption. Therefore, the various concerns discussed in the
international report and in the news media could be summarized as lack of
experience by government agencies in land deals, environmental considerations,
corruption, the inability of the voiceless to defend their interests and possibility of
opening up the host countries to speculator-investors.
The report has found out that the terms and conditions of investment on
agricultural lands display a huge diversity among countries and even individual
projects. It indicates that its main findings, which are based on a small number of
international land deals, include the need to take account of:
- Land deals must be assessed in the light of the often complex overall
package they are part of, including commitments on investment,
infrastructure development and employment – the “land grab” emphasized
by some media is only part of the equation; - Land leases, rather than purchases, are predominant in Africa, and host
country governments tend to play a key role in allocating them; - Land fees and other monetary transfers are not the main host country
benefit, not least due to the difficulty of setting land prices in the absence
of well-established formal land markets; - Host country benefits are mainly seen in the form of investor
commitments on investment levels, employment creation and
infrastructure development – though these commitments tend to lack
teeth in the overall structure of documented land deals.
The report candidly states, “Although on paper some countries have progressive
laws and procedures that seek to increase local voice and benefit, big gaps
between theory and practice, between statute books and reality on the ground
result in major costs being internalized by local people – but also in difficulties
for investor companies. Many countries do not have in place legal or procedural
mechanisms to protect local rights and take account of local interests,
livelihoods and welfare. Even in the minority of countries where legal
requirements for community consultation are in place, processes to negotiate
land access with communities remain unsatisfactory. Lack of transparency and
of checks and balances in contract negotiations creates a breeding ground for
corruption and deals that do not maximize the public interest. Insecure use
rights on state-owned land, inaccessible registration procedures, vaguely defined
productive use requirements, legislative gaps, and compensation limited to loss
of improvements like crops and trees (thus excluding loss of land) all
undermine the position of local people.
Virtually all the contracts analyzed by this study tend to be short and simple
compared to the economic reality of the transaction. Key issues like
strengthening mechanisms to monitor or enforce compliance with investor
commitments, maximizing government revenues and clarifying their
distribution, promoting business models that maximize local benefit (such as
employment creation and infrastructure development), as well as balancing food
security concerns in both home and host countries are dealt with by vague
provisions if at all.”
Why should Ethiopians be concerned about international land lease
agreements?
The terms of farmland deals are hardly made public. Although a theoretical
possibility exists in a few cases for some transfer of technology for agricultural
development, risk also exists to peasant farmers who cannot compete with well-
resourced commercial farms. Take, for instance, the case of barley and oilseeds
producers in Ethiopia. China is given an unknown size of farmland to produce
oilseeds, sesame especially. Saudi Arabia is also given unquantified land to produce
barley and wheat. In the case of China, if our country’s experience to date were of
any relevance, they would definitely bring Chinese workers to do the job. This not
only would deny the country employment possibilities but also the transfer of
experience and technology would be minimal, which otherwise FDI has been
credited for.
At the same time, for the last several years China has been Ethiopia’s important
destination for sesame export. China uses sesame for chocolates, biscuits, and
extraction of oil for both its external and domestic markets. If China were to
satisfy its enormous needs for oilseeds and its export revenues through its own
production in Ethiopia, the marketing disadvantage would surely be to Ethiopia.
There is also the possibility that this may drive prices down on two accounts.
First, the major importer, china, may not need its share of Ethiopian exports.
Secondly, Chinese possibility of overproduction could drive prices down. On top
of that, Ethiopia’s weak export capacities are likely to be depressed during this
competition with China. It is obvious that the competition would hurt millions of
small-scale farmers in Ethiopia.
For instance, land under oilseeds in 2008 fell to 707 thousand ha from its high of
797 thousand ha, because of price discouragements to small-scale farmers. With it
also declined the export volume and foreign exchange earnings, at a time when
international prices were much higher than the previous years and more countries
were interested in Ethiopian production. Surprisingly, over the years small-scale
farmers’ production of sesame has shown consistent but limited productivity
growth.
Perhaps, decline in international prices was one of the factors affecting decline of
sesame farmland sizes in 2008, compared to 2005/06. Land under sesame by small-
scale framers in 2008 was 186 thousand ha, which is 26.3 percent of the total land
devoted to oilseeds, down from 211.3 ha in 2005/06, according to the CSA.
Therefore, the emergence of a highly competitive partner now in sesame
production may end up being another discouragement to million of small-scale
farmers.
Strengthening such concerns is also the Chinese business model itself, about
which Prof. Desta, Asayeghn has written extensively under the title China’s South-
South Cooperative Investments. He says, “Unless corrected, the Sino-African
investment is likely to fatten the pockets of state elites and marginalize the
African masses. In line with the objectives of the South-South Cooperation, the
degree of control must be reversed if there is going to be technological transfers
from China to Africa. Also, China has done little to integrate Africa into the
global value chains. It is claimed that Chinese-capital investments in Africa are
new (Greenfield) rather than takeover investments. Chinese investments in
Africa are constrained by not being environmentally friendly. Though an
essential part of the technology transfer package, it is worth mentioning that a
review of the literature shows that the Sino-African investments, similar to the
Euro-African, have failed to handle Africa’s negative environmental
externalities.”
What is said about sesame production by China is also true about the future of
barley farmers. There has been slight improvement in barley productivity growth.
In 2005/06, lands under barley were 998 thousand ha, which picked up in 2006/07
to one million ha. However, by 2007/08, like sesame, it plummeted to 985
thousand ha, an indication of the price factor in 2006/07. In the light of this, any
possible prospect for small-scale holder agriculture in Ethiopian may face its worst
nightmare. Alternatively, would the competition by foreign commercial farms
become a positive force to the millions of small-scale farmers producing cereals,
pulses, oilseeds or would they be compelled to shift to producing something else?
The trigger for this article, i.e., the above-mentioned international report, warns,
“Decisions taken today will have major repercussions for the livelihoods and food
security of many, for decades to come. This means that choices made now must
be based on strategic thinking rather than piecemeal and opportunistic
negotiations.” In the best interests of her country and her fellow citizens, this
writer fully concurs with that assessment and conclusion.
| All rights reserved. |
| Ethio Quest News Together We Can Make It! |
 | |  | |  | |  | |  | |  | |  |
| Ethiopia's History of National Resistance for African Unity & Dignity PART - ONE PART - TWO PART - THREE |
| Ethio Quest News: For latest Ethiopian News, views, Reviews and More |
| Ethiopian Perspective Articles by Category Ethiopian Diversity Ethiopian Economy Ethiopian Politics Ethiopian Women |
| Previous Articles by Genet Mersha |
