Foreign investors buy up African farmland, sparking fears of a new colonialism

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Business Today Egypt | July 2010

On the Block

Foreign investors buy up African farmland, sparking fears of a new colonialism.

By  Robert Tashima

The global food crisis of 2008 may have been superseded by the global financial crisis of 2009, but the jump in basic commodity prices that it brought about bodes ill for the developing world.

In a bid to stave off a worst-case scenario of empty shelves and ration queues, many nations which rely on food imports have switched to a new strategy for food security — buying or leasing farmland overseas.

Offering the world’s lowest land and labor costs, Africa has received a substantial amount of foreign interest. Help from foreign investors could revolutionize agriculture on the continent, though some fear that this is the dawn of a new age of “agro-imperialism.”

According to the International Food Policy Research Institute (IFPRI), 15-20 million hectares of farmland have been sold to foreign investors since 2006.

In Africa, the most active investors have been oil-rich Gulf nations lacking their own water supplies and large Asian countries under acute demographic pressure, namely China and India. However, as sub-Saharan Africa suffers more than any other part of the world from hunger and extreme poverty, critics have accused land purchasers of exploitation. At a UN hunger summit in 2009, Libyan leader Mu’ammar Qadaffi called upon the international community to prevent the “new feudalism” of African land grabs.

While sub-Saharan African nations such as Ethiopia and Sudan, where land goes for as little as $3 (LE 17) per hectare, have received the bulk of foreign investment interest, North Africa has also proven attractive for its relative proximity and fertile coastal land.

To offset the bureaucratic challenges of doing business in the country, Morocco has offered inviting terms to foreign investors, including Abu Dhabi investment firm Tiris Euro Arab, which signed a contract to lease 700,000 hectares of farmland in November 2009.

“The investors can keep 100% of the produce and export it, all we are asking for is for them to invest in our sector and create employment for our people,” Ahmed al-Houti, head of Morocco’s Regional Investment Centre for Investment, told international press at the time. Saudi Arabia has also announced plans to invest $10 million (LE 56 million) in olive farming in Morocco within the year.

Algeria, on the other hand, has adopted a more cautious approach to renting its soil. The country announced in April 2010 it was opening its farmland in order to jump-start its flagging agricultural sector, which employs a quarter of the population while contributing less than 10% of GDP.

Foreign investors may form partnerships with local companies and bring technology and capital to help Algeria increase its agricultural production, but are not allowed to have a majority stake. “Regarding the farms intended for foreign investment, assets will remain national ones because land is not for sale,” said Mohamed Cherif Ould Hocine, head of the National Chamber of Agriculture.

While some North African countries are selling land, others struggling with dry climates are starting to buy land tracts overseas and in other African nations to feed their own growing populations. Despite ongoing efforts to transform desert land into fertile soil, Egypt suffers a dearth of arable land, estimated at only 3% of land mass. As a result, land prices are high and agriculture generally unprofitable.

“A major obstacle to the continual development of agriculture land in Egypt is pricing, as there is still a great deal of speculation involved in land available for farming in the Nile River Delta,” says Daniel Leroux, the CEO of Kingdom Agricultural Development Company, a subsidiary of Saudi Arabia-based Kingdom Holding.

Having already purchased 840,000 hectares in Uganda for growing wheat and corn in early 2010, Egypt is now said to be eyeing Ethiopian and Sudanese land.

Though an opponent of Western expansion into Africa, Libya, which depends on imports for approximately 75% of its domestic food requirements, has made overseas land acquisitions part of its long-term strategy for food security.

Previously, the country had followed the unsustainable strategy of using scarce water resources to produce wheat for domestic consumption and export. In 2007, Libya produced 104,000 metric tons of wheat totalling $14.7 million (LE 83 million) on the international market, yet still had to import 853,000 metric tons at a cost of $248.4 million (LE 1.4 billion).

In August 2009, the African nation made a $3 million (LE 17 million) investment for a 20 year concession on a 230-hectare coffee plantation on the island of Sao Tome and Principe in the Gulf of Guinea. Ukraine has also agreed to give Libya 100,000 hectares of farmland for wheat growing in exchange for an oil refinery on Libyan soil, among other concessions, though the deal has yet to be implemented. Finally, Libya has established a jointly-owned agricultural bank with Turkey with capital of $1 billion (LE 5.6 billion) to support its investments in Turkish farming.

Proponents argue that foreign investors are developing land which would otherwise have been unused. Ethiopia, for example, has 74 million hectares of potential farmland, 60 million of which is uncultivated, and is sorely in need of the capital provided by land leasing. Ethiopia allows for 100% ownership of land by foreigners, with no requirement that investors sell a percentage of produce on the local market.

“It is wrong to call them land grabs. These are investments in farmland like investments in oil exploration. We can have win-win situations,” Kanayo Nwanze, head of the UN International Fund for Agricultural Development, said in 2009, although the inherent disparity of the world’s hungriest nations selling off their farmland and future food security is striking.

However, some food-importing nations are voluntarily switching to leasing land in richer countries as there is less risk involved. Some Gulf investors have branched out to Australia and Eastern Europe, where a $2,000 (LE 11,350) per-hectare price tag is offset by the countries having established agricultural infrastructure and more stable political systems.

Also, rising opposition — both globally and domestically — to the practice of buying land in developing countries could very well decrease the long-term profitability of African land purchases as more red tape is set up.

The IFPRA, for one, is calling for an international code of conduct which would require “sharing of benefits” by foreign investors, as well as programs for environmental sustainability.

Whatever the means, securing the global food supply threatens to become one of the defining issues of the coming decades. The UN reported in June 2010 that while commodity prices had sunk from the highs of 2008, this was due in part to short-term over-stocking; the typical food basket still costs 70% more than it did in 2002-2004.

Global demand for food is expected to double in the next 20 years, pointing to a pressing need to increase global agricultural yield. Increased investment in African countries is a positive consequence, but steps need to be taken to ensure that they receive their fair share of the produce. bt

Robert Tashima is the Africa Regional editor with the Oxford Business Group, a leading provider of economic and political intelligence about the Middle East, Africa, Eastern Europe, Asia and the Caribbean.
Original source: bt Egypt
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1 Comments


  1. VirgilioLeyretana.
    21 Jan 2013

    Natural resources such as land including others above ground, underground, below the oceans and in the subterranean of seabeds, are not infinite patrimony of a nation. With the rapidly increasing population, it becomes imperative to rationalize the use of these resources for the use of present and for posterity.

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