Foreign acquisitions: some opportunities, but many see threats

By Roy Laishley

An apparent surge in the purchase of African land by foreign companies and governments to grow food and other crops for export has set alarm bells ringing on and off the continent. The headlines have been strident: “The Second Scramble for Africa Starts,” “Quest for Food Security Breeds Neo-Colonists,” “Food Security or Economic Slavery?”

The outcries reflect the continuing impact of the continent's history, when as recently as the last century colonial powers and foreign settler populations arbitrarily seized African land and displaced those who lived on it, lending considerable emotion to the current volatile issue. Jacques Diouf, the Senegalese director-general of the UN's Food and Agriculture Organization (FAO), wonders whether such land deals could lead to a form of “neo-colonialism.”

But immediate, practical concerns are also prominent. “This is a worrisome trend,” Akinwumi Adesina, of the advocacy group Alliance for a Green Revolution in Africa (AGRA), told a science forum in the Netherlands in June. Such foreign land acquisitions, he argued, have the potential to hurt domestic efforts to raise food production and could limit broad-based economic growth. Many deals have little oversight, transparency or regulation, have no environmental safeguards and fail to protect smallholder farmers from losing their customary rights to use land, Mr. Adesina said.

The sheer size of some of the land agreements has added to the alarm. A deal to allow South Korea's Daewoo Corporation to lease 1.3 mn hectares was a key factor in building support for the ouster of Madagascar's President Marc Ravalomanana in March. In Kenya the government is struggling to overcome local opposition to a proposal to give Qatar rights over some 40,000 hectares in the Tana River Valley in return for building a deep-sea port.

A number of international organizations have reacted. The FAO and the World Bank commissioned studies into so-called “land grabs.” At this year's summit of the Group of Eight (G-8) industrialized countries in Italy in July, Japan pushed for a code of conduct to govern such schemes. The G-8 limited itself to a promise to work with partner countries and international organizations to develop proposals on principles and best practices for foreign investment in agricultural land.

Any code of conduct is going to be difficult to negotiate, and it will be even more difficult for industrialized countries to apply to deals that are primarily worked out between countries in the South, the UN's Special Rapporteur on the Right to Food Olivier De Schutter told Africa Renewal.

In a June report, Large-scale Land Acquisitions and Leases, Mr. De Schutter wrote that while such investments provide certain development opportunities, they also represent a threat to food security and other core human rights. “The stakes are huge,” he told Africa Renewal. Unfortunately, “the deals as they have been concluded up to now are very meagre as far as the obligations of the investors are concerned.” He also notes that agreements concerning thousands of hectares of farmland are sometimes just three or four pages long.

Yet for African countries agreeing to such deals, the possible advantages are also attractive. While African agriculture rarely attracts significant investments or external aid — and the current global economic downturn has made external financing even more scarce — leasing unused land to foreign governments and companies for large-scale cultivation can seem like a way to boost an underdeveloped sector and create new job opportunities.

Unprecedented scale
A recent study by the International Institute for Environment and Development (IIED), a research group based in the UK, estimated that nearly 2.5 mn hectares of African farmland had been allocated to foreign-owned entities since 2004 in just the five countries (Ethiopia, Ghana, Madagascar, Mali and Sudan) it studied in depth. The sheer scale of many leases is unprecedented, said the IIED report, Land Grab or Development Opportunity?, which was prepared for the FAO and the UN's International Fund for Agricultural Development.

The data on even these cases is incomplete, IIED cautioned, and do not include some of the largest deals. Chinese enterprises are reportedly negotiating to lease 2.8 mn hectares in the Democratic Republic of the Congo to grow oil palm and a further 2 mn hectares in Zambia to grow jatropha (a crop used for biofuels). Sudan has agreed to lease 690,000 hectares to South Korea to grow wheat.

A study of the media reports on recent land acquisitions put together by the non-governmental organization GRAIN and other sources suggests that close to 6 mn hectares of farmland has been or is being earmarked for possible development by foreign entities. That tally does not include the Republic of Congo's proposal to a South African farmers union to lease 10 mn hectares for a variety of food crops and livestock.

Demand for food and biofuels
The surge in interest in African land has been driven by a number of factors. On the side of investors, those include a desire for food security back home and to a lesser extent rising demand for biofuels. Behind both is the expectation of rising costs of land and water as world demand for food and other crops continues to expand.

Many of the government-to-government deals are aimed at meeting food needs, especially in the states of the Arab Gulf and in South Korea. Indian companies, backed in part by their government, have invested some $1.5 bn in Ethiopia to meet rising domestic food and animal feed demand. Commercial enterprises, many of them European, as well as Chinese companies, have been in the lead in cultivating jatropha, sorghum and other biofuels in countries such as Madagascar, Mozambique and Tanzania.

Africa is a particular focus for this investment explosion because of the perception that there is plenty of cheap land and labour available, as well as a favourable climate, Mr. De Schutter points out. In Mozambique, Tanzania and Zambia, for example, only some 12 per cent of arable land is actually cultivated.

Africa so far has been able to mobilize only limited financing to develop its arable land. Despite persistent calls for increased domestic investment, agriculture has lagged well behind other sectors. The African Union (AU) has urged governments to devote 10 per cent of their spending to agriculture, but only four or five countries have actually met that target. Donor countries and institutions have also failed to play their part, with agriculture's share of aid tending to fall, currently at less than 5 per cent of total aid.

With land apparently in abundance, but money not, the offer by foreign investors to develop agricultural land appears very attractive. But with much of the land not as unused as it might seem and with actual returns on agricultural investment far lower than presented in initial feasibility studies, the political and economic reality for African governments can be very sobering.

“Governments are sitting on a box of dynamite,” Namanga Ngoni, president of AGRA, initiated by former UN Secretary-General Kofi Annan, told the media.

Towards a strategic approach
Recent assessments by IIED, FAO, the World Bank and the Washington-based International Food Policy Research Institute (IFPRI) all confirm the shortcomings and potential dangers. These include the risks of undermining domestic efforts to increase food production, the danger that agricultural projects aimed exclusively at foreign markets may do little to stimulate domestic economic activities, and the potential loss of land rights for local farmers. The Economic Report on Africa 2009, published jointly by the AU and the UN's Economic Commission for Africa (ECA), cautions that rapid expansion of cultivated land should not be a priority, given the environmental degradation that Africa already faces. Continued    Source: United Nations Africa Renewal, www.un.orgAR