Failed commercial farms


The Reporter | 10 August 2019

Failed commercial farms

By Birhanu Fikade

Atkyelesh G.M. Persson (PhD) is a multidisciplinary researcher who studied and wrote several articles and books on environmental policy and management, global public health and public administration. She did her PhD in Development Studies at the University of Cape Town and her MSc in global public health at Lund University’s Department of Health Sciences. As a published scholar, Atkyelesh has written several articles featured on many international scientific journals. She has managed to publish books mainstreaming environmental, poverty reduction and developmental issues. In addition to that, her studies elapsed further to areas of municipal solid waste management, waste-to-energy and road safety in which she highlights the importance of fastening seat belts and avoiding talking on cellphones while driving in 2008. With 20 years of experience in development matters Atkyelesh researched on large-scale investment projects in agriculture and wrote a new book that came out this past May entitled: Foreign Direct Investment in Large-scale Agriculture in Africa: Economic, Social and Environmental Suitability in Ethiopia”. The book was published by the renowned Routledge Contemporary Africa Series. In her book Atkyelesh investigates six failed foreign projects that have inflicted social, environmental and economic costs on the country and on the communities living in both Benishangul Gumuz and Gambella regional states. Birhanu Fikade of The Reporter sat down with Atkyelesh to learn about her findings on large scale FDI that failed to deliver the desired results in Ethiopia. Excerpts:

The Reporter: In your book you highlight Foreign Direct Investment (FDI) case studies focusing on large-scale farming in Ethiopia. Africa and Ethiopia in particular predominantly exercise smallholder agriculture, but you chose to focus on large scale farming. Why is that?

Atkyelesh G.M. Persson (PhD): If you remember in 2008 and 2009, after the global financial crisis and that resulted in food and economic crisis as well, a lot of FDIs had rushed to Africa looking for fertile lands and Ethiopia was one of the countries mapped in their targets. Immediately after they arrived, many critics suggested that the new large-scale farms were not environmentally friendly and sustainable. At that time there was no sufficient data to conclude whether these investments were environmentally, economically, and socially viable. I read some of your newspaper articles touching up on these areas. Then I decided to investigate and see how the investments are in line with the policies of Ethiopia. If that was right, then studying the way they practice it on the ground was my drive to conduct the research.

In your book, there are at least six major FDI companies which you have studied and investigated. You went to the farms to physically observe what they have been doing. But why did you choose just those six foreign firms?

In 2010, the Council of Ministers passed a law that restricted large-scale farms in expanse of above 5,000 hectares to be under the custody of the central government. Land of that size was previously under the administration of regional governments. But with lack of capacity within regional administrations, the federal government, I think, had decided to administer large chunks of land. For me, to choose the case studies, I needed to follow certain criteria. The firms should be foreign companies; they need to have acquired above 5,000 hectares; and they need to be engaged in food crops or biofuel corps production. I want to take you back to the notions of FDI. Normally,

FDI firms in Ethiopia are involved either in the manufacturing or in the service sectors. But the main drive of FDI in agriculture is food and energy production for the investing countries. Why? Because they are concerned about the population growth and the mismatch between such growth and shortages of food supply. This drives the countries to look for opportunities and when they looked at Africa, they found that the continent is endowed with fertile land, cheap labor and investment. Compared to mineral and other vital resources, land was the least sought-after resource by foreigners before the global food crisis hit many countries in 2009. Then land became a strategic asset and as a result some had moved here.

The investment policy also supports FDI in large-scale agriculture, especially in lowland areas where fertile land and water is available in abundance. The social and economic policies of the country also support large-scale FDI companies to invest in agriculture. There was policy coherence, no doubt. The policies were very sound. Then, for my research to have some value, the cases that I was looking at needed to be active at least for two years and more. That’s how I had to select those projects mentioned in the book.

Could you say these where the only companies that met your criteria?

At that time, yes. If you look at the concentration of FDIs in agriculture, most of them were located in Gambella and Benishangul Gumuz. For instance, I chose one company that was engaged in biofuel crop production. For me, that’s contradictory. We are talking about food security and some companies were working on biofuel in a place where surrounding communities are facing food shortages. There are ethical questions that should be raised here. The government might support the communities that are lacking food. The idea might be that biofuel production and export will generate income and will be distributed to communities to buy food and other essentials. Well, probably yes.

The companies not only came to produce and export biofuels; but food crops such as rice, wheat, soy beans and the like. Wouldn’t it be contradictory since that food insecure communities were hosting foreign agribusiness firms working to export food crops?

The FDI policy suggests the inflow of firms will bring in capital and technology. The host country will have the advantage of international market presence. With those ambitious assumptions, the government of Ethiopia was looking to have more hard currency. Unfortunately, the projects I have looked at hadn’t fulfilled any of those ambitions of the government. The reasons for the failures of the projects are elaborated in the book but one of the issues has to do with lack of experience and know-how from the side of the firms engaged in large-scale agriculture.

The institutions that were mandated to support and facilitate FDIs in large-scale agriculture were not adequately structured and were found to be incapacitated and inefficient. The other contributing factor to the failure is lack of infrastructures. Roads, electricity, communications systems and many other things were not available. In the absence of these requirements, many FDI farms have failed to exist. My book has dealt with projected targets of productions and showed what the companies have actually achieved. The gaps were very huge.

I tried to look at some figures and the six companies had executed between seven to 28 percent of their entire plans over the years since launching operations on the farms. Hence, you are saying that these low results were registered because of the reasons you just mentioned?

Yes, but there were instabilities as well. Firms were unable to work as much as they wanted to due to recurring security challenges. Lack of electric power contributed a lot to their dragging performances forcing the firms to depend on diesel operated generators all the time and that’s costly. One firm obtained land that was not suitable for their crop types. Most importantly, my book highlighted the lack of community participation in the decision-making process.

The people in those areas where not consulted about the projects beforehand. Had the communities been involved initially, the terrible failure could have been retreated to some degrees. The communities have in-depth about the ecology and what will grow and what will not. Land use planning should have been participatory. In our case, that was not. The people were barraged with giant noisy machines that tilled the expanse farmlands and they only found out what was about to be happening after that. Constitutionally, they have the right to have their consents and to be consulted about any development projects coming to their areas. This was not considered.

The likes of Karuturi and Saudi Star were given large chunk of fertile farmlands with knockdown lease prices, tax holidays and grace periods. In addition to that, compensation and relocations were burning concerns. What did you find out about that?

Before I started my research, the Oakland Institute was claiming that communities were pushed out of their lands but I didn’t find that being the whole reality. Instead, most of these firms were given forest lands. In fact, the forest lands were owned by communities for generations. The community forestlands have both economic and sentimental values. They see the forest as a shrine and buried their ancestors in there. Hence, you can imagine what it means when such a revered place is overturned even before the communities knew what was happening.

Part of the Gambella National Park was also found to be given to the large-scale farms. Lots of letdowns could have been avoided had the communities were involved before the deals were struck. One particular community was relocated in relation to the impacts of Baro River although they were found living next to one of the projects and yet their relocation has got nothing to do with the project.

We have seen what went wrong with large-scale agriculture and do you think that Ethiopia can still entertain such investments. Do your findings suggest Ethiopia still being suitable for large-scale farming?

Well, in my recommendations, I suggested that if the government opts for large-scale agriculture, the institutions tasked to facilitate and promote such investments need to be well-equipped with human and financial resources. They have to limit or balance out the number of FDI projects with the capacities they have so that they can effectively oversee the projects. In addition to lack of capacity, the problem of government institutions is that they simply licensed whoever was coming. They didn’t crosscheck or analyzed the backgrounds of the foreign investors.

Both the government and the investors have claimed that they have conducted Environmental Impact Assessment (EIA), but the reality on the ground – as you have indicated in your book – is that water management systems and recycling at least were major issues against the environment.

There are sound policies in place but implementing those was a nightmare. The policy requires any project that might have impacts on the environment and society, need to assess those impacts before commencing the project. However, all the projects that I have studied had done their impact assessments after commencing the farming projects. They did the assessments merely to fulfill the requirements but not actually because they cared for the society or the environment. That’s why all the projects didn’t implement any of the suggested preventive measures.

The documents of the impact assessments were thrown away and you can’t find a single document at the farm sites so that they can refer to help them mitigate if something goes wrong. Public institutions neither checked on the projects seriously nor audit them for negative impacts inflicted both on the society or the environment. The nonentity is so sad. Generally, the projects didn’t do well in all fronts – economic, social and environmental.

How did you do the research and how were you received by the companies since you have mentioned in the book that one of the farms didn’t grant you access to their premises and observe their operations?

For me, my humble contribution to this country is to give what I can and that’s to take on research works and provide the findings like I did with my latest book. When I went out looking for data, I found myself in a difficult situation and it was a nightmare. I think the issue I was trying to study was politically sensitive at the time. Many people were not willing to receiving me. I had faced so many difficulties to have people interviewed. I don’t know how many times I had to visit offices to meet with unreachable officials.

The investors at first shut their doors and didn’t want to allow me to visit their farms either. I need to be honest here that Saudi Star gave full access. With some back and forth, Karuturi followed suit and a few more did the same. But it was all painful. I was received well by the Gambella Regional State and they had supported me a lot in my research activities. I have managed to conduct focus group discussions with all the communities involved.

Nerve rackingly, federal government offices and officers were so difficult to access. Research is necessary to advance and it’s for their own good they should have allowed such undertakings. I was trying to contribute my share with skills I have accumulated. We need to have a culture that supports and respects studies and researches. You can’t learn and devise a sound and well-learnt policy unless you don’t have qualified researchers at arm’s length. I’m happy that I fought for and did what must be done. Nelson Mandela once said ‘It always seems impossible until it is done’.

It took you some five years to come up with your book and to publish findings of large-scale farms in Ethiopia. Don’t you think that’s a relatively long time for these kinds of studies?

Yes, it took years. Most of the policy documents I have used as sources needed serious reviews. I went to look into all the documents from agriculture and rural investment, education, health and land policies to the various laws and regulations of the country to help develop my studies. I needed to look into archives to study the nature the farmlands and their pre-investment conditions. It was claimed that the farms used to be wastelands. I needed to interview the investors, government officials and community members in three different groups.

I set out one-on-one interviews with investors and officials and then discussion groups with communities and finally triangulated the data. I needed to go to the farms not only to observe what they have cultivated but also to see how they manage their chemical and other inputs. Sadly, they have thrown numerous chemical and hazardous toxic containers anywhere in the open exposing the surface and ground water for pollution. All these took years to study and document. The gaps are hilarious. The law clearly says one thing and people assigned just to check on how the law is enforced have neglected the it and so did the investors.

One of the investment policy’s target in promoting FDI is to help create jobs. But in the case of large-scale farms, job creation is out of the equation. They are engaged in capital intensive agriculture and most of the work is done by machines. For the seasoned jobs, they even brought foreign nationals. When you ask why, they tell you they couldn’t find the needed expertise in the host country.

FDI policy says transfer of knowledge and technology is one of the benefits to be reaped. And yet when you look at the surrounding communities, where large-scale farms are operating, you see smallholder famers struggling to earn a living employing primitive tools. It’s vague to see how the transfer of technology and knowhow is really adept. According to the agricultural FDI policy, big farms were expected to create out-growers schemes. But they didn’t. There is none. That happened I think because of the inefficiencies and weaknesses of public agencies assigned to facilitate the FDIs.

Did you meet with officials to discuss about your findings before the book was published?

Unfortunately, I didn’t. I was more focused on my work. My thought was that once the book comes out it will reach policymakers and they could make use of it. It’s an interest for public agencies and the academia. If the government still opts to attract more FDIs in large-scale agriculture, there are recommendations which I have suggested for further studies. Apart from agriculture, I think there is a lot of opportunity for ecotourism in both Benishangul Gumuz and Gambella. However, further studies need to be conducted to decide viabilities of ecotourism in those areas.

Most of your studies focused on what was happening before 2014. How can your book critically advise the government who at this moment is contemplating on the development of more large-scale farms?

I think the book can serve policymakers and others for the coming 10 years because FDIs in large-scale agriculture will continue coming. The issues of how best we can use large scale farming in a sustainable and inclusive manner drive many to see what goes around these activities.

While studying the failed large-scale farms in Ethiopia, what was the most striking finding?

The poor capacity of those public institutions which were set up to facilitate FDIs in agriculture was one of the findings I think I can mention. They did little monitoring over the projects. When assigning land, they never considered having the consents of communities. They could have avoided giving out wetlands and parts of National Parks. The institutions need to be well-structured and well-manned.

When you analyzed large-scale agricultural projects, you put what you called pro poor investment criteria and rated the companies based on those measurements. Tell us a bit about that and how the companies failed in meeting the criteria?

The criteria are the principles related to the pro poor and environmental sustainability concerns while measuring large-scale farms. The criteria are set out to find out whether the investments are responsible ones. Not threatening food security, respecting indigenous communities and cultures, environmentally friendliness and the like are some of the ratings assigned to measure the projects.

What were some of the difficulties faced by the companies?

It varies from project to project. For instance, for one of the companies called Torren, their failure was related to the unsuitable plot of land they were assigned to cultivate. For Rooky, they couldn’t intensify their productions because of the lack of electricity and security. Lack of coherence between federal and district level authorities made work difficult for some companies. The central government gave tax holidays and exemptions while the authorities at the district demanded taxes to be paid.

If you take Saudi Star for example, because of the conflicts and lack security, they lost two of their employees and were forced to suspend operations for some time. If you take Karuturi, their fluid irrigation system caused flooding that wiped out three villages in Gambella. I recommend further studies to be considered around those villages since we didn’t know that flooding could cost the villagers their health or socio-economic wellbeing.

What should the government do in the short, medium and long-term in order to extract the best out of large-scale and commercial farms? 

We need to develop our agricultural sector. We need to transform it but how we do that is what we need to ask ourselves. Do we need commercial and large-scale farms? Yes, but we need certain viable mechanisms to adhere with the policies we have set out to implement. We need to capacitate those institutions. I really suggest ecotourism to be seriously looked into since our physical environment is suitable for that.

So far, one can notice the impacts on the society, environment and the ecological damages inflicted by the failed large-scale farms. But what was the monetary or the economic cost of these failed projects?

I didn’t put a specific number for that. But what they have been performing in those years speaks for itself. We didn’t export and generate hard currency. Failing to achieve what they were supposed to do can clearly suggest how that was costly. But I didn’t put any figure to those considerable costs. It’s obvious that there is huge cost and loss attached to the projects. Bear in mind that they have acquired 70 percent of the project capital through the financial facilities of the Development Bank of Ethiopia. The 30 percent equity financing I think was also fluid. In addition, they didn’t pay taxes or custom duties. The land was given to them almost for free; on average some 20 birr per hectare was the lease price. It’s really good to further study the pure economic loss or opportunity costs these projects have inflicted on the country.

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