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Africa: Questionable Land Investments

AfricaFocus Bulletin
Oct 28, 2010 (101028)
(Reposted from sources cited below)

Editor's Note

"Africa needs investment in agriculture--better seeds and inputs, improved extension services, education on conservation techniques, regional integration, and investment to build local capacity. It does not need policies that enable foreign investors to grow and export food for their own people to the detriment of the local population." - Howard G. Buffett

In his foreword to a report by the Oakland Institute on land grabs in Africa, farmer, investor, and photographer Howard G. Buffett notes that he is just the demographic to which such deals are being pitched. But, he cautions, even if they make the investors richer, promised benefits for Africans are dubious and the potential damage significant.

Nevertheless, institutional institutions such as the World Bank's International Finance Corporation and European encouragement of biofuel production on environmental grounds, provide systematic encouragement for this trend.

This AfricaFocus Bulletin contains:

(1) excerpts from the foreword by Howard G. Buffett to a report from the Oakland Institute on International Finance Corporation encouragement of questionable land deals in Africa. The full report, with case studies of Liberia, Sierra Leone, and Ethiopia, is available on the Oakland Institute website (http://oaklandinstitute.org).

(2) excerpts from a report by Friends of the Earth Africa and Friends of the Earth Europe, focusing on land deals encouraged by Western European demand for biofuels. The full report is available at http://www.foeeurope.org.

Two other AfricaFocus Bulletins released today have related information on this issue, as well as links to even more sources.

  • "Africa: Land, Take 2" (http://www.africafocus.org/docs10/ag1010a.php) features excerpts from the new World Bank report entitled "Rising Global Interest in Farmland," published in September (an earlier version leaked in July had the title "Global Land Rush.")
  • "Africa: Land Grab or Development" (http://www.africafocus.org/docs10/ag1010c.php), which contains excerpts from a report by the UN Special Rapporteur on the Right to Food, with suggested principles for large-scale agricultural investment, and from the executive summary of a 2009 study of recent land deals in Ethiopia, Ghana, Madagascar, Mali, Sudan, Mozambique, and Tanzania, by a team from the FAO, IFAD, and the International Institute for Environment and Development.

For previous AfricaFocus Bulletins on issues related to agriculture, see http://www.africafocus.org/agexp.php

++++++++++++++++++++++end editor's note++++++++++++++++++++

(Mis)investment in Agriculture: The Role of the International Finance Corporation in Global Land Grabs

The Oakland Institute

April, 2010

Foreword by Howard G. Buffett

[For the full report to which this is a foreword, with case studies of Liberia, Sierra Leone, and Ethiopia, visit http://oaklandinstitute.org/]

I have never considered myself an activist. I'm a father and a husband as well as a businessman, an author, a philanthropist, and a farmer. But when most people see me with my cameras, they quickly identify me as a photographer.

...

As a permanent resident of South Africa and someone privileged to do a great deal of traveling, I have visited 38 of Africa's 54 countries and made repeated trips to many of these nations. In the process, I've experienced countless cultures and traditions while exploring the continent's 17 major agroecological growing zones. ...

In Africa--where I usually spend half the year--I am also reminded of what I am not. I am not, nor have I ever been poor. I have never had to look at my five children and decide which of them will eat. I have never had to choose just one of them to attend school. I have never contemplated giving one of my daughters to a much older man who would pay me a handsome price for a child bride. And I have never worried that I will be forced off my farm, evicted so that a powerful corporation or foreign investor could lease or buy it for an absurdly low price in a deal brokered by my own government.

...

Proponents of land grabs do not like this moniker. They classify it as media hysteria. Activist jargon. And they claim it is deliberately inflammatory. I'm not a fan of sensational titles, but this time the title fits. There's no disguising what is happening right now, on our watch. It is estimated that 50 million hectares have already been leased to foreign entities with at least 20 African countries considering similar deals. Some of these leases--99 years at $1.00 per hectare--are unbelievable deals. But they are only available to a select few. Local farmers--people who struggle to feed their families, gain access to fertile land and secure water for both personal consumption and agricultural activity--are not eligible for the deals being promoted in countries where millions of people remain dependent on food aid.

It turns out I'm the demographic that the host countries are hoping to attract. Just a few months ago I was personally offered an equity stake in a land deal being brokered by a hedge fund. I was assured that the partners would receive cash up-front with no personal liability. I was also promised that the host government would provide 70 percent of the financing, all utilities, and a 98-year lease requiring no payments for four years. The cost? $2.91 per acre per year after four years. Another fund provided a prospectus that claimed it would generate returns of between 15 and 20 percent. U.S. agricultural land has averaged a return of about six percent over the past thirty years. Therefore, these deals are either that good for investors, or the managers of these funds are misrepresenting the facts. If I didn't know better, this would sound like a great opportunity! But here's what I'm sure of: these deals will make the rich richer and the poor poorer, creating clear winners who benefit while the losers are denied their livelihoods.

Africa needs investment in agriculture--better seeds and inputs, improved extension services, education on conservation techniques, regional integration, and investment to build local capacity. It does not need policies that enable foreign investors to grow and export food for their own people to the detriment of the local population. I'll be even bolder--such policies will hurt Africa, fueling conflict over land and water. Conflict is already the single largest cause of hunger on the continent; war, fighting, and repeated disputes destroy households, pitting families against each other, even children against parents. It results in horrific crimes--genocide, displacement, infectious disease, famine, sexual and gender based violence, human trafficking, and recruitment of children in armed activities.

We need agreements that outline principles and frameworks. However, these policies must be documented and enforceable. And, whether we like it or not, history proves that codes of conduct do not always transfer from paper to people; principles do not feed children. There are some simple questions to ask. When local people lack land rights in so many places, why should foreign interests take precedence? What assurances are in place to mitigate food insecurity risks for local populations? What evidence is there to suggest that the new land deals will be transparent when previous ones have been marked by secrecy? Why should we believe that communities will be fully incorporated into the negotiation process when it is in the investor's interest to exclude potential dissenters? How will best practices be replicated when there are no role models to follow? What type of enforcement will be established to ensure minimal environmental damage? What quantifiable social benefits will the local communities derive and what types of consequences will investors and facilitating governments face if these benefits do not come to fruition?

These questions must be answered and accountability must be insured. Unfortunately, mineral extraction in Africa has been less than stellar. Soil and water are the essence of life--far more valuable than oil or diamonds--so the stakes are even higher this time around.

Proponents of the land deals will dismiss my concerns and claim that this type of foreign investment will benefit the local people by providing jobs and creating infrastructure. They will also say that the land being offered is "unused." These are hollow arguments. Investors have been quoted as saying they will employ 10,000 people and use high-tech, high-production farming techniques. The two promises are completely incongruous. As a farmer, I can tell you that high-tech, high production devices are appealing precisely because they reduce labor. Investors will not hire significant numbers of people and simultaneously scale-up their production techniques. And if they choose the former, they are likely to create low-paying jobs and poor working conditions. I may be making assumptions, but they are based on history--a history dating back to colonialism and one that has exploited both natural resources and people.

Particularly disconcerting is the notion that the "available" land is "unused." This land is in countries with the highest rates of malnutrition on the only continent that produces less food per capita than it did a decade ago. In most cases, this land has a real purpose: it may support corridors for pastoralists; provide fallow space for soil regeneration; provide access to limited water sources; be reserved for future generations; or enable local farmers to increase production. The fact that rich and emerging economies do not have or do not respect pastoralists or use land for age-old customs does not mean we have a right to label this land unused.

...


Africa: up for grabs

The scale and impact of land grabbing for agrofuels

Friends of the Earth Africa | Friends of the Earth Europe

Full report available for download at http://www.foeeurope.org

Foreword

Proponents of agrofuels generally argue that agrofuel production will address the economic crisis facing many developing countries; they will create wealth and jobs and alleviate poverty. These arguments overlook the other side of the story and leave many questions unanswered. Is the push for agrofuel production in the interest of the developing countries or are the real beneficiaries Northern industrialised countries? Will the production of agrofuels actually provide more jobs and enhance economic development at the community level? Will it address the issue of food insecurity plaguing the developing world? What are the social and environmental costs of agrofuel production to host communities? Who stands to benefit from the entire process?

These issues need to be assessed objectively. We should not accept these arguments without subjecting them to empirical analysis. The rationale behind this research is anchored on this premise. It looks at the spread of agrofuel production across Africa and highlights the social, economic, health and environmental concerns found.

Executive summary and recommendations

Access to land provides food and livelihoods for billions of people around the world, but as the availability of fertile land and water is threatened by climate change, mismanagement and consumption patterns, demand for land has been increasing. "Land grabs" - where land traditionally used by local communities is leased or sold to outside investors (from corporations and from governments) are becoming increasingly common across Africa. Whilst many of these deals are for food cultivation, there is a growing interest in growing crops for fuel - agrofuels - particularly to supply the growing EU market.

These land grabs have been taking place against a backdrop of rising food prices which led to the food crisis in 2008. There were food riots in some developing countries and in Haiti and Madagascar the governments were overthrown as a result of the crisis. Crops being used for agrofuels was a major factor in the rising price of food.

This report looks at the extent of these deals for agrofuels and questions the impacts on local communities and the environment. It finds that although information is limited, there is growing evidence that significant levels of farmland are being acquired for fuel crops, in some cases without the consent of local communities and often without a full assessment of the impact on the local environment.

Extent of the problem

Studies suggest that a third of the land sold or acquired in Africa is intended for fuel crops - some 5 million hectares. Friends of the Earth has looked at cases of land grabbing in 11 countries across Africa, from Ethiopia to Mozambique (see appendix). While some of this land is sold outright - to private companies, state companies or investment funds - most is leased and some is obtained through contracting with the farmer to grow specific crops (known as "out growing").

A number of, often small, EU companies are involved, sometimes with support or involvement from their national government. Many are keen to vaunt the social and environmental benefits of their business, offering employment and the promise of development to rural areas.

Green OPEC

Many of the host countries have encouraged this investment, keen to develop a potentially lucrative export crop. Fifteen African nations joined forces to set up what has been described as a "Green OPEC" and a number of national governments have also introduced domestic targets and strategies for agrofuel use at home.

But there is also a growing awareness of the downsides of this agrofuel boom. As scientists and international institutions challenge the climate benefits of this alternative fuel source, local communities and in some cases national governments are waking up to the impact of land grabs on the environment and on local livelihoods.

Local protest

In Tanzania, Madagascar and Ghana there have been protests following land grabs by foreign companies. Companies have been accused of providing misleading information to local farmers, of obtaining land from fraudulent community land owners and of bypassing environmental protection laws.

Agrofuels are competing with food crops for farmland, and agrofuel development companies are competing with farmers for access to that land. And this appears to be as much the case for jatropha, as for other crops, despite the claim that it grows on non-agricultural land. When losing their access to traditional land, local communities face growing food insecurity and hunger - their human right to food is threatened.

Environmental damage

Pressure on farmland has led to forest being cleared to make way for agrofuel plantations, destroying valuable natural resources and increasing greenhouse gas emissions. In Ethiopia, land inside an elephant sanctuary was cleared to make way for agrofuels.

Farmers have found that the much vaunted wonder crop jatropha, rather than bringing a guaranteed income, in fact takes valuable water resources and needs expensive pesticides. In some cases, food crops have been cleared to plant jatropha, leaving farmers with no income and no source of food.

Threat from genetically modified crops

What is more, there are concerns that biotech companies, keen to find new outlets for their products, will see agrofuels as a way into the African market. Research is on-going into genetically modified (GM) varieties which might be suitable for agrofuels, and biotech companies are eager to claim that their products can help tackle climate change.

Resource exploitation

Growing European and international demand for agrofuels as a transport fuel is creating market demand for agrofuels. While African politicians may promise that agrofuels will bring locally sourced energy supplies to their countries, the reality is that most of the foreign companies are developing agrofuels to sell on the international market. The EU's mandatory target for increasing agrofuels is a clear driver to the land grabbing in Africa.

Is the tide turning?

Concerns about the social and environmental impacts have caused a backlash in a number of countries such as in Tanzania and Swaziland. Some companies have also withdrawn their investments. But elsewhere the enthusiasm for agrofuels continues unchecked.

Just as African countries have seen fossil fuels and other natural resources exploited for the benefit of richer countries, there is a risk that agrofuels, and with them, Africa's agricultural land and natural resources, will be exported abroad with minimal benefit for local communities and national economies.

Recommendations for action

1. Put a brake on land grabbing

  • Stopping the drivers - political targets that increase demand for agrofuels should be scrapped, in particular the EU's mandatory target.
  • African states should immediately suspend further land acquisitions and investments in agrofuels.
2. The real political priorities

Farming revolution - Investments and priorities given to develop food sovereignty- the right of people to adequate, healthy, locally produced and controlled food.

Energy revolution - the reduction of energy use in transport through the rapid development of more efficient vehicles and investment in sustainable societies through the use of public transport, walking and cycling.

3. Dealing with land grabbers

Full environmental and social impact assessments of land use changes before any land sale or lease takes place must be carried out with the participation of local communities. These need to take into account the impacts on biodiversity, natural resources, genetic erosion, food sovereignty, gender, access to productive resources of the local communities (including pastoralists or itinerant farmers) and impacts of new technologies and investments in infrastructure.

Full legal liability of companies and investors: Any land deals should include clear, legally-binding and enforceable obligations on the investor. Investors should pay into an obligatory liability fund to cover for cases of non-compliance. Independent and participatory ex post impact assessments should be made at pre-defined intervals.

Full agreement of communities and the protection of indigenous people: Any land sales or leases can only take place with the free, prior and informed consent of the local communities concerned. The customary rights of communities and the protection of indigenous people are fundamental.

Farmer and environment friendly farming: Priority also needs to be given to investing and developing farming in Africa that supports small farmers and small-scale ecological agriculture. The farming system developed shall respect ecological limits, not lead to climate changing emissions, depletion of the soil and prevent the exhaustion of water supplies. Such systems naturally forbid the use of genetically modified crops or trees.

Farming for the local community: Due to the historic negative impacts created by instable international markets, and to reduce reliance on food aid, any new uses of land should be focused on supplying the local market. One suggestion put forward recently is to ensure that all land deals include a legal obligation that a certain minimum percentage of crops produced should be sold on the local market.

Food is a natural right and agricultural products should not be treated as commodities whose ultimate purpose is the generation of business profits rather than meeting needs of the people. Family and small-scale farmers should be encouraged and strengthened in a deliberate push to sustain the populations in urban and rural areas.

Protection of farm workers: Agricultural waged workers should be provided with adequate protection and their fundamental human and labour rights should be stipulated in legislation and enforced in practice, consistent with the applicable ILO instruments. Increasing protection would contribute to enhancing their ability and that of their families to procure access to sufficient and adequate food.

...

chapter 2 What is really happening?

While assessing the full extent of land grabs across Africa is impossible, given the limited available public information, there are countless reports of land grabs across the continent, particularly in sub-Saharan Africa.

A UN FAO study in 2009 looked at land allocations in five subSaharan countries: Ethiopia, Ghana, Madagascar, Mali and Sudan. It found documented evidence that 2.4 million hectares of land had been transferred in land deals (of more than 1,000 ha) since 2004. [Cotula, L., Vermeulen, S., Leonard, R. and Keeley, J., 2009, Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa, IIED/FAO/IFAD, London/Rome.] This land was destined for food and fuel production, with considerable areas designated for fuel crops in Ethiopia, Madagascar and Ghana.

A separate study by the International Food Policy Research Institute estimated that 20 million hectares of land have been sold since 2006 in land deals, with 9 million hectares acquired in Africa. [http://www.ifpri.org/publication/navigating-perfect-storm]

Of this, almost 5 million hectares - an area bigger than the Netherlands - are reportedly intended for agrofuel, including jatropha, oil palm and sweet sorghum.

In Mozambique, government officials report that biofuel investors had applied for the rights to use some 12 million acres of land (4.8 million ha) - nearly one-seventh the country's available arable land.

In Congo-Brazzaville, President Sassou-Nguesso has ceded 10 million hectares of fertile land to South-African farmers to grow staple food crops for export without any percentage to remain in Congo, alongside 70,000 hectares granted to the Italian oil company ENI to plant oil palm monoculture plantations for agrofuel production, threatening Africa's last precious tropical primary forest.

A comprehensive list of examples of land grabs for agrofuels is found in the appendix.

...

Evidence suggests that while private companies are behind most of the land deals in Africa, land is also being acquired by national governments, often via state-owned companies and by private investment companies.

These land grabs take a number of forms, depending on the local situation and law. Although some land has been purchased outright, more often it is leased, with long-term leases, in some cases up to 99 years. There are also cases of "out growing" - where local farmers are contracted to grow a particular crop, such as jatropha.

3.1. Food security

The sudden interest in land appears to be driven by a combination of factors, but concerns about food security and fuel supplies dominate. The sharp rise in food prices in 2007 and 2008 and the volatile oil price appear to have led a number of countries to question the security of supply, with fears exacerbated by expectations of how climate change will affect agriculture in years to come.

Saudi Arabia, for example, is moving away from water-intensive wheat cultivation because of concerns over future water supplies - having been self sufficient in wheat until 2007. Instead, the Saudi government is leasing land and, for example, a Saudi agricultural consortium has announced plans to invest in food production in Ethiopia, Sudan and Egypt.

3.2. Energy supply

Concerns about energy supply appear to be a key driver behind the demand for agrofuel crops - with the EU aiming for 10% of transport fuel to come from "renewable" sources by 2010. These EU targets have established a clear market - which given land prices and the lack of available land within the EU will inevitably be met by imports.

While national governments and state-owned companies are behind some of the investment in land for food, most of the "land grabs" for agrofuels appear to be dominated by private companies, with many of these coming from the EU.

China is the exception to this rule, with state-owned companies securing more than 2.8 million ha of land in the Democratic Republic of Congo to grow palm plantations.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org


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