Land Grabbing: All In the Name of Food Security?

March 29, 2012
Source
Indian Fusion

 

Gautam Prateek

 

Some call it “new colonialism”, while some others call it “land grab” and “land rush”. There are many who would not use such pejoratives and would restrict themselves to investments on land, agri-business, foreign direct investment etc. Well, whatever we call it, the issue remains the same. I am referring to the large scale land acquisitions, mainly in the countries of Sub-Saharan Africa, Latin America and South East Asia.

So, who all are investing in it? The Multinational companies are making investments on biofuels, extractive industries etc.; foreign governments looking for food supply assurance; commercial farmers and farmer associations – expanding into neighboring countries; domestic investors, sometimes in partnership with foreigners and financial institutions seeking to broaden their asset portfolio. There are reports which suggest that even big shot universities like the Harvard, Spelman and Vanderbilt are also indirectly investing in these deals.

The story becomes even more interesting when one gets to know that Indians are also a party in these large scale land acquisitions and are not much behind the leading players.

 

It’s time for Africa!

First things first, let us first discuss the figures taken from a report published by FAO (2004-2009) which give the scale of land acquisitions in 5 countries of Africa.

Country Total land allocated (in hectares) Number of projects approved (over 1000 hectares) Largest Land allocation Total investment commitments (US$)

  • Ethiopia 602,760 157 150,000 78,563,023
  • Ghana 452,000 3 400,000 30,000,000
  • Madagascar 803,414 6 452,500 79,829,524
  • Mali 162,850 7 100,000 291,988,688
  • Sudan 471,660 11 109,200 439,600,000
  • 2,492,684 184 919,981,235

Land grabbing in Africa

(Graphic: Bob Brooks)

The same report also mentions the scale of these land deals in terms of the figures expressing acquired/leased land as a percentage of the total arable land in the respective countries. Madagascar tops the list with 2.29%, followed by Ghana (2.12%), Ethiopia (1.39%), Mali (.60%) and Sudan (.46%). The time frame is also important as most of these land acquisitions have been reported between the year 2004 to 2009, although, some other reports suggest that this trend started early in the year 2000.

A recent World Bank report (2010) found that 45 million hectares of large scale farmland deals were announced in the two-year period between 2008 and 2009 and the majority (around two-third) of these took place in Sub-Saharan Africa. Two more facts, worth noting, in these acquisitions are that most of these deals are based on lease agreements which run into 25 years, 50 fifty years and even more than 50 years in some cases. And the private sector (including domestic and foreign) funding is to the tune of 90%.

 

Not Just Africa

It is not just Africa, and if the reports are to be believed, the figures are mind boggling: Laos, Mali and Cambodia – greater than 1.5 million hectares, Brazil – 4.3 million hectares, Kazakhstan, Ukraine and Russia greater than 3.5 million hectares. Overall, it is estimated that around 50-80 million hectares of land in middle and low income countries has been acquired in the recent years.

 

The price they pay

If one looks at the price at which some of these deals have been done, it would be a shock. The Oakland report (2011) suggests that land is given for free (in the case of Mali) or very cheap by all standards. In Sierra Leone official regulation requires investors to pay $5 per acre, or $12 per ha, per year. Even this low price is being defied, as Sierra Leone Agriculture (SLA) pays only $2 per ha per year, while for Quifel Agribusiness (SL) Ltd. payments start at $5 per ha per year. In Gambella, Ethiopia, a deal was initially settled at just $1.25 per ha, but the rate was later raised to $ 6.75 per ha. In comparison, rates for Brazil or Argentina are $5,000-6,000 per ha.

 

Purpose of these acquisitions

The recent spike in the acquisitions has been partly attributed to the rise in commodity prices and the issue of food security, especially since 2008 food crisis. Before that, it was majorly driven by the mad hunt for bio-fuels as a panacea for energy independence. Most of the European countries have been in search of bio-fuels, not to mention the impact of this quest on the food crisis of 2008.

In case of Saudi Arabia and China, apart from food security, a major reason cited has been the scarcity of water. In Saudi Arabia, the plan is to phase out wheat production by the year 2016, beginning from 2007. This has been done to save the non-renewable fossil water in the country.

 

Speculation, Hedge funds, carbon finance: recipe for disaster?

A very disturbing finding has come to light recently regarding the involvement of speculation in this whole picture. Oakland report shows a major role of western firms, wealthy US and European individuals, and investment funds with ties to major banks such as Goldman Sachs and JP Morgan.Investors include not only alternative investment firms like the London-based Emergent Asset Management but also universities such as Harvard, Spelman, and Vanderbilt – with a primary motivation of economic access to agricultural land that will have high returns for the endowment.

A report by the High Level Panel of experts headed by Dr. MS Swaminathan suggests that “many land deals have not been followed by productive investment, with only 20% of investments that have been announced actually being followed through with agricultural production happening on the ground. Speculation might be one of the reasons for that. It is however difficult to say how much international investment in land can be classed as speculative”. Anuradha Mittal, executive director of the Oakland Institute, said in a statement, “The same financial firms that drove us into a global recession by inflating the real estate bubble through risky financial maneuvers are now doing the same with the world’s food supply.”

Also, worrying is the presence of pointers which allude to a possible carbon finance linkage in these land acquisitions. “The CDM in Africa: marketing a new land grab”, prepared by the Gaia Foundation examines the threats posed by misuse of CDM markets via land grab in Africa. It unequivocally states that CDM methodologies that consider land use, agriculture and soil practices as “carbon sinks” could be threatening given the context of land acquisitions. Thus, it means that with no flight of imagination one could safely conclude that the already controversial REDD mechanism could be abused in this situation, especially in sub-Saharan Africa.

 

Curious case of India

The leading players, especially in the context of acquisitions in Africa, are China, Saudi Arabia, South Korea, United States of America, Kuwait, and India (not necessarily in order). The entry of India in this arena has been rather surprising because the FAO report (2004-2009) does not mention India anywhere in the scene. The case of India has been recent. Although, a few reports in the media, rather sporadic, came up in the year 2010 and early 2011 regarding Indian entrepreneurs and farmer associations venturing in this direction.

A report by Rick Rowden (2011), India’s Role in the New Global Farmland Grab, gives a comprehensive analysis of the Indian role. It says more than 80 Indian companies have invested about US$ 2.4 billion in buying or leasing huge plantations in countries in Africa, such as Ethiopia, Kenya, Madagascar, Senegal and Mozambique that will be used to grow food grains and other cash crops for the Indian market. Of the 12 contracts with foreign investors disclosed, five of the contracts are with Indian companies, including those for Karuturi Ago Products Plc. (100,000 hectares with option for 200,000 additional hectares), BHO Bio Products Plc. (27,000 hectares), Ruchi Agri Plc. (25,000 hectares), Sannati Agro Farm Enterprise Pvt. Ltd. (10,000 hectares) and Verdanta Harvests Plc. (3,012 hectares).

 

What they say

People in the industry as well as politicians have been buoyant about these Indian investments. Some of their remarks reflect the same: “The urgent need, of course, is to find countries where India can grow its pulses and its grain, because India’s farms may just not be enough,” – Pranav Adani, director of Adani Logistics Ltd. “We are encouraging more Indian companies to come into mainstream agriculture so they can contribute to local demand and food security.” -Indian ambassador Gurjit Singh, addressing an Ethiopian parliamentary panel. Even the agriculture minister when asked about the new land rush in Africa said, “Some companies are interested in buying agricultural land for sugar cane and then selling it on the international markets. It’s business, nothing more”.

This speaks volumes about the support that the industry and government would be lending to these acquisitions.

 

Job creation and labor issues

Now let us take stock of the situation as in what is so rosy about these deals as expressed in the reactions put under quotations. Money has already been discussed and the situation in the Indian context is no different. When it comes to jobs, the following reports suggest that there is no reason to believe that these investments are going to create a sustainable job market. A few studies on job creation in such big farms point towards disturbing realities. In Democratic Republic of Congo, it was found that an out-grower based sugar cane plantation was expected to generate 0.351 jobs/ha and a 10,000 ha maize plantation less than 0.01 jobs/ha. In Ethiopia, the average was even worse at 0.005 jobs/ha.

Similarly, a large project in Madagascar was going to create just 0.006 jobs/ha, as against per hectare supporting approximately 1.25 farm households before the project came into existence.

A very interesting illustration of the effect of such land deals and job creation is given in the following observations made in the Oakland report. “The average farm size in Mali is just 4.7 ha and one third of the 805,000 farm households cultivate less than 1 hectare. The area covered by recent large land deals they cover could easily sustain 112,537 farm families, well over half a million people (686,478). Instead, that land is now concentrated in the hands of 22 investors, and will create at best a few thousand jobs.”

About Labor issues, the observations of Ethiopian review (many other similar media reports) on the cruel treatment of African laborers, employment of children and payment of extremely low wages (as low as 70 cents per day) at the hands of Indian supervisors are well known.

 

Nature of Contracts

A quick look at the contracts, as mentioned in Rick’s report, that have been reportedly signed by the Indian companies makes things amply clear as to their obligations to the local people who have been affected by the deals. In the majority of the 21 projects analyzed, the following two points are common. First is, Exemptions from taxes on imports of capital goods and from paying taxes on repatriated profits. And the second, Company has the “right” to provide power health clinics, schools, etc.
There is no need to explain what the first clause would mean to the local economy, people and the government. The second clause makes a mockery of any so called obligation. It claims that the company has a right to build schools, health clinics etc. I think the lexicon of these so called agro-preneurs is devoid of anything called as obligation.

 

Environmental concern: mono cropping, water exploitation

Similarly, conspicuous by its absence is the word “obligation” with regards to the environmental concerns of the project. It is a well known fact that these big land deals would be involved in large scale intensive agriculture production. Such practices definitely threaten the bio-diversity, carbon stocks, and the availability of land and water resources. At this juncture, it would be apt to mention the fact that most of these land deals have been defended by the local governments as being done on wasteland, marginal land or un-used land. But, if the land is already marginal, more cultivation may lead to further degradation. Moreover, irrigating these large plantations may divert water from local users or from environmental flows. One of the most significant concerns about the trend of Indian overseas agricultural investors relates to the environmental impacts of establishing increasing numbers of large-scale, mechanized mono-cropping farms that are dependent on high levels of water usage, involve heavy doses of pesticides and herbicides that can pollute nearby groundwater, and which can rapidly deplete soil quality.

The reports on various aspects of the land deals, in general as well as in context of India, like technology spillovers to domestic farmers, consultation with the indigenous population, resettlement and rehabilitation package etc, paint a not-so-good picture. The media in Africa has started coming up with reports on the negative repercussions of such land deals. The worst part is that even Indian companies are not following an ethical business policy in a continent already marred by disease, poverty, corruption and what not. Recently, in an open letter, Mr. Obang Metho, Director of the Solidarity movement of New Ethiopia, to the citizens of India made the following remarks:

“I come to you first and foremost as a fellow human as I call you to join our effort to stop the plundering of Ethiopia and Africa by African dictators, their cronies and their foreign partners— some of whom are Indian—…Will you help work within India to bring greater transparency and compliance with whatever protective laws and safeguards are in place in India? Will Indian individuals, social justice groups, the media, policy making groups, religious groups and all other stakeholders join us in our struggle for freedom from a dictatorial regime robbing us of our future? “

This calls for a serious rethinking on our part if we truly stand by the high morals that India stood for centuries even in the face of adversities. Anuradha Mittal of the Oakland Institute sums it up the best way. She asks, “What does India want to be remembered as having achieved in the 21st century: exploitative colonization of less powerful nations and peoples, or leadership in the welfare of all humans in peace with the earth?”