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Foreign Investment in Tanzania: Impacts Past & Perceived

June 28, 2012
Cathartic Aggression

Fourth in a series. Begin at the Introduction, then Wants & Needs, then The Agrisol Proposal.

Chinese factory workers earn less than their American counterparts. People in the Cambodian garment industry or Indian call-centers will be paid less than the same functionaries in more developed nations. The standard and cost of living is lower in the third world. Opportunities are lacking. Consumer and producer relationships subsist on the gulf between richer and poorer.

Companies from the states or Europe can hire abroad and insist on strict labor guidelines. The fact that American corporations benefit from places which violate the standards protecting workers here is morally and ethically reprehensible. That a government would sign an agreement with a foreign company knowing that wealth will stem from misery is criminal.

The contracts crafted by Agrisol Energy and Tanzania are open to interpretation. Either the company develops a business model which generates profit without abusing the residents of its host country or the government safeguards its people from absolute exploitation. Already direct capital injection is stripped from the deal. The lease agreement raises little cash for Tanzania; relaxed tariffs and wealth repatriation will fail to benefit the people who are most impacted by large-scale agricultural projects. Local manufacturing firms, assuming there are some up to the task, will not profit from sales of tractors or combines– Agrisol already expects to bring in Monsanto, John Deere and Stine.1

Success will depend on Agrisol’s ability to pay workers, who will leave their own subsistence farms, enough to compensate the loss of food production. The company needs to sell some crops to local markets at local rates to protect against the price fluctuations which will result. If employees are trained in modern techniques which they could share with their families everyone benefits. If neighboring communities see an investment in infrastructure Agrisol could prove its detractors wrong. None of this is going to be easy to accomplish. Business demands will compel Agrisol to shift focus to the bottom line, and only the Tanzanian government can ensure that citizens are protected.

The Plantation Model

Regardless of where they are, large industrial farms wreak havoc on the environment. Constant cultivation leads to soil degradation. Chemical fertilizers can compensate for the depletion of nutrients but contribute to water pollution. Livestock farms accrue massive amounts of shit, often tainted by antibiotics and hormones, which flows into the water system and sickens people2. Row crops are easier to harvest but clearing fields leaves topsoil vulnerable to wind and rain. A no-till movement is growing, a farming method which sows new seed in the husks left behind, allowing last season’s spoils to keep the dirt rooted. It is a time-consuming and laborious process, ill-suited for the high-yield demands of modern agricultural enterprise.

In 2008, British company Sun Biofuels was awarded nearly eight thousand hectares to cultivate jatropha, a succulent which produces seeds used to make biodiesel. Eleven villages, comprised of over eleven thousand people, agreed to leave their farms for a one-time relocation payout. The stipend was less than half the independently assessed value of their land. Villages which refused to relocate or who were never part of the agreement saw surrounding land handed over by the government. This land had been used for the collection of resources such as firewood and charcoal, fruit and honey. The World Bank estimates that foraging can provide an additional $35-$50 per household per year. Less land also leaves less room for field rotation, accelerating soil degradation.

Land leased to Sun Biofuels also removed a common water source from public reach, against the advice of the company’s own environmental impact assessment (EIA). Locals were forced to travel greater distances for water or risk the repercussions of trespassing. Plantations always seem to have work for security guards.

Those who found work, a fraction of initial employment estimates, claimed to have been exposed to noxious chemicals without being given protective gear as well as having to buy their own water while in the fields. Back at home families struggled to maintain their own plots, complaining that the wages didn’t offset the cost of lost productivity.3

In the autumn of 2011 operations ceased. An unidentified company spokesperson blamed a spate of droughts, but even local government ministers have been kept mostly in the dark. Nearly three hundred employees and casual laborers were suddenly laid off and the property now sits in a legal limbo. Nearby villages still do not have the right to use the land. Relocated villagers do not have the right to return to the land. Water remains fenced off and the promised hospital and roads remain unbuilt.

Three years is not enough time to evaluate the true impact of Sun Biofuels on the region. Employment may have reached and broken the company’s original estimates. Construction on roads and a hospital may have begun once the initial investment was paid off. However the groundwork laid by both the firm and the government did not pave a path to shared wealth and prosperity. The decision to ignore the EIA restricted people’s access to water. Villagers who voluntarily relocated received less than what they deserved. Workers were exposed to harsh, if not dangerous conditions. Local councils and ministers had almost no communication with their supposed neighbors.

The Outgrower Model

An alternative to large, centralized farms is the outgrower scheme. Seed is given to farmers for use in fallow portions of their land and the company buys what is harvested. It’s hard to imagine a collection of subsistence farmers competing with hectares of corn or jatropha but the overhead is virtually nothing, allowing a patient company to glean a small profit over time.

Despite the lower starter costs the outgrower scheme is a less attractive investment as yields are dictated by outside farms. A plantation operated by a single entity should provide consistent output, particularly when it uses the most modern equipment and most scientifically advanced seeds. Developing yields also takes time. The near guarantee of hectares of mechanized production seems safe in comparison, regardless of set-up costs.

There are also localized risks. Farmers have to resist the temptation of concentrating on cash crops to the detriment of food. If several farms in one region are producing less food for higher yields of cash crops the region suffers a food shortage. There’s also the matter of what seed is being provided. At present there are no reports of genetically modified seed overrunning a family farm, nor have any lawsuits been filed by bio-tech companies claiming that patented seeds are being used outside the limitations of a contract. At present time there are no laws on the books in Tanzania regarding GMO, but as more foreign companies become legally involved with the country problems seem inevitable.

One of the most prominent names invested in outgrower schemes is the Dutch biofuels firmDiligent. Farmers in the Arusha district of northern Tanzania had been using jatropha or similar plants as fences or to combat hillside erosion. The company encouraged people to expand their previous use, offering to purchase harvested and peeled seeds. According to Diligent, 720 properly spaced jatropha plants can grow in a 40m x 80m plot which, if unmarred by drought or blight, yields approximately 300g of seed per plant. The expected income from the first harvest would be $34, and the second harvest should be double.

More importantly, or perhaps more necessarily, Diligent representatives met and worked directly with farmers. They recommended planting methods, warned against displacing food crops with jatropha and signed individual three year contracts. Farmers found that the jatropha plant handles dry spells better, which enabled families to buy food when their own crops failed. Thus far the biggest complaint has been that Diligent doesn’t pay enough for the harvest.

An Agrisol Model

Slideshow presentations for the Prime Minister of Tanzania pay lip service to exploring outgrower schemes in addition to Agrisol’s plantation ambitions. Whether this is business savvy or placation remains to be seen. According to Anuradha Mittal, Executive Director of The Oakland Institute, in an interview with Dan Rather Reports, the company is pressing for a rider in its contract to legally export food during periods of shortage. If persistent drought afflicts a region outgrowers can refuse to sell crops back to the company. In the most nightmarish scenario a controlled and fenced plantation can be fortified, with crops escorted to harbor by security guards.4

Official government records have already shown a correlation between the existence of plantations and localized food shortages. In theory the shortages occur when farmers leave their own plots for work, drawn by broken promises or their own short-sightedness. In one instance, when the Dutch firm BioShape began a jatropha plantation the surrounding district fell into a food deficit, a regional hardship which only improved after the company ceased operations.

Ignoring the nebulous international politics of Burundi refugees Agrisol has been leased land which will not directly displace anyone. This allows for a controlled experiment. Plantations may be built, crops sown and harvested, profits prove too low and the company can bail without the obvious hardships affecting villagers in the shadow of Sun Biofuels’ operations. At worst Agrisol might leave degraded soil, polluted water and restricted land access in their wake. Or they could work to strike a balance between a large scale plantation and an outgrower scheme. They could meet with community leaders and decide what works best for everyone. They could contribute to the local food market, pay fair wages and guarantee safe working conditions. In their relative isolation the most significant impact Agrisol’s efforts may produce is in paving a path for future agreements between foreign firms and the government of Tanzania.

According to 2009 figures compiled by the World Bank, approximately 70 million acres were up for lease negotiation on the continent. Population growth, the demand for alternative energy sources and the rise of developing nations such as China and India have made the fertile fields of Africa one of the most sought after resources on Earth.


Photo taken from The Oakland Institute’s Country Report: Tanzania. No photographer is credited. The original caption reads “Masai women’s group on their land in Arusha”. I call it fair use.

1 General information from a PDF of Agrisol’s report to the Prime Minister of Tanzania, available from The Oakland Institute (back)
2 Frontlines produced a wonderful primer on the effects of industrial pollution on waterways in their episode Poisoned Waters (back)
3 General information on previous agricultural projects in Tanzania, as well as Agrisol’s steps towards becoming one, can be found in The Oakland Institute’s Country Report: Tanzania (back)
4 The transcript for the Dan Rather Reports episode Trouble on the Land is available for download (back)