Ethiopia Observatory | 24 June 2014
Rural land grab has unleashed mass dislocation, imposed financial risks on Ethiopia – while benefitting some investors: Case Karuturi
By Keffyalew Gebremedhin
The Ethiopia Observatory (TEO)
The cut off date in the foreclosure notice of June 3, 2014 by the Commercial Bank of Ethiopia (CBE) against Karuturi Global’s agribusinesses in Ethiopia was potent in doing what it was supposed to do. Not only that it had him pay the required $25 million in foreign exchange. But also it cut down to size an uncooperative client, who for years had been known to suck every dividend from the influences his half-thought through feeding the world promises and smooth talk had availed him.
Among sources of his encouragement were: Meles Zenawi’s favor for being an investor in agriculture. Therefore, at the height of intensified opposition to land grab in Ethiopia – Ramakrishina Karuturi’s name frequently mentioned – in 2012 the TPLF leader appointed him Ethiopia’s consul in Bangalore. The then prime minister’s chef de Cabinet Mukatr Kedir, now Oromia’s President, was dispatched to India as personal envoy to preside over the honor bestowed on the investor. Sadly, such response and the politic behind it only forced the country’s institutions to lean backwards for fear of Meles’s weight and his favoritism toward the investor. There is also India’s flexing its financial muscles, under the radar possibly putting across good words on behalf of its adventurous son.
It is still fresh in my mind what the former Indian ambassador to Ethiopia Gurjit Singh said, as an Indian official who assumed senior post in the India’s foreign ministry. In January 2012, he told The Economic Times of India regarding the delay in the loans, “[T]he political commitment is there, but we have to make sure the technical discussion goes through smoothly and they lead to practical implementation. That is what we are now focusing on.”
At the time, Indian investors were negotiating with federal and regional officials in Ethiopia what more and better favorable economic terms and conditions they could squeeze.
Not surprisingly, therefore, in his first report just a year after Meles’s demise and also his successor concluded his first year in office, the auditor-general accused the regime of responsibility for the “huge misappropriation of resources, substandard accounting and procurement practices, along with declining accountability of federal offices[,]” according to The Reporter.
It is against the backdrop of TPLF’s policies on land, land grab, foreign investors, investment attraction packages that I saw the CBE foreclosure notice. As mentioned above, it one story of an investor who, after years of refusal to honor his obligation, the struggling investor in commercial agriculture in Ethiopia was made to scurry by the foreclosure measures to stop the procedure by immediately raising $25 million in partial payment of his debt.
This article is thus a reflection the CBE measures and Karuturi’s response have triggered in me on what has happened after the entry into the country of foreign investors in commercial agriculture, especially in the years from 2009 – 2011. In my view, historians may in future classify these years as the era of the Meles Zenawi-TPLF-initiated total disfranchisement of citizens in the pursuit of land grab supported by law in urban areas after February 2012.
In Ethiopia, this is the womb of the poison that in both rural and urban areas has generated profound anger and frustration against the TPLF and its leaders, which keeps on building.
Those three years have thus constituted a period in which:
(a) Hundreds and thousands of Ethiopian farmers and settled communities have been uprooted, with many of them ending up homeless wretches in both rural towns, villages and urban centers around the country, and;
(b) The loans poor Ethiopia has made available to foreign investors in commercial agriculture as incentives have made good returns for the country. These is capital refused to most citizens, TPLF officials having made political connection and ethnicity as the major criteria of solvency and project success. On the contrary – unfortunately for the country – this has created a number of instances in which the country has been needlessly exposed to financial risks.
There are reported cases of the state being forced to absorb debts left behind by some, in the first place because of absence of due diligence. Accordingly, even when there are those who have succeeded in some other sectors; a few others in the agricultural sector could not even be found physically in the country to pay back what they owed the state, after their bankruptcies occurred. Moreover,Ethiopia’s bankruptcy law being what it has been, a few of them have left behind assets worth neither their value capable of paying the debts nor even to settle unpaid wages of workers.
Fortunately, Meles Zenawi is gone for good, sadly without paying for his crimes against citizens and the nation however. No matter how much cover-up efforts are now being made on his behalf and to justify the actions of his successors, the negative effects of their many evil deeds are still lingering – land grab continuing in full public view, as a national experience and public knowledge.
They have been harmfully taunting the people and bleeding Ethiopia in many respects, including their very existence. That is the reason, why its initial salvo has begun to be heard in huge ways in Oromia Universities since April 2014. I hope I am wrong, but is more likely than not for it to continue to combust, possibly more violently in most parts of the country – when the humiliations arising from disenfranchisement become unbearable.
Of course, had Meles still been still breathing and in power, as usual, he would have still shamelessly continued to justify all his evil deeds in full throttle, as he shamelessly lied to Vickram Bahl, an Indian television personality:
No land grab in Ethiopia – Not today, not tomorrow!… We have a constitutional order here. The constitution clearly states you do not disempower you do not grab property from anybody. There is a rule of law here and it is firmly entrenched in our system.
I have no doubt, there would come a moment in the lives of our children and grandchildren, when they would read and ask how and why this has been allowed to take that long – i.e., what historians will have classified 2009-2011 as the height of Ethiopia’s shameful era of rural land robbery in this proud nation – with the connivance of by none other than its supposed leaders. Ethiopia’s fertile lands have been doled out, thrown to any willing taker with few coins, labeling himself/herself as foreign investor in agriculture – some of them coming as agents of venture capital and others as fortune hunters.
Not a venture capitalist in the real sense – weighed by his capital base – but Mr. Karuturi has been entertaining the grand idea of realizing someday a dream of becoming rich in Africa. More particularly, he wanted to be that person, whose agricultural businesses would feed the world from his farms in Ethiopia. Not a bad idea. Actually, it was a very bold dream, daring an act and a miracle as it is, if he succeeds.
Nevertheless, the only concern is that the entire edifice of his enterprise, especially the Gambella 300,000 ha, is allegedly founded on corruption (bribery) and too many lies, including promising the administration to produce wheat on 300 thousand ha.
Karuturi’s is one of the few names often associated with land grab in Ethiopia. This is because he is being accused of allegedly defrauding regional officials; it is also mainly because his acquisition of 300,000 ha of land, which has earned him the nickname of the Indian landlord in Ethiopia has lead to deprivation of ordinary Ethiopians and communities in Gameballa of their livelihoods.
The other problem is that this 300,000 ha farmland that newspapers with their exaggerated claim often compared with Belgium (actual size 3.1 mil ha) from which he wanted to feed the world he clenched – by the terms of the agreement – with annual land rent fee of ETB 30 – 35 per hectare – at any rate and the ends of the calculation still less than $2 per year.
The land grab policy TPLF officials have been implementing was inspired by greedy ambition and calculations they have had in mind from the get go in 1991. Their objective was to turn Gambella into major financial and economic source of their enrichment.
They targeted rich agricultural lands, which Karuturi dubbed as “green gold”; they also had plans for its subterranean wealths – gas and minerals. No doubt, the Meles-TPLF mind was set on this wealth as means to their uninterrupted overall control of Ethiopia and its people.
The assignment for this rested on the lap of the then TPLF Interior Ministry State Minister Dr. Barnabas Gebreab. Already in 1994, he publicly spoke abouthis party’s dream in an interview on the NPR. The interview took place on the eve of the massacre by TPLF forces, over 400 hundred plus Gambellans within a few hours. Today, the TPLF has the temerity to attribute those killings to inter-ethnic conflicts amongst Gambellans. As usual, the TPLF forgot that Meles was forced by internal and external pressure to set up in inquiry commission regarding the matter.
This latest distortion of facts is needed in an attempt to escape international criminal charges on mass massacre and ethnic cleansing, since they know provisions of the Statute has no expiry date.
Generous incentives for for foreign investors
For a poor country, the TPLF regime has made available huge package of incentives to foreign investors – 70 percent bank loans from public banks and five-year tax holidays to individual investors such as Karuturi for the mere fact of their investing in the country – especially in commercial agriculture, horticulture, mining, and manufacturing, etc. Foreign investment could be necessary, when it is found beneficial for the receiving country. Unfortunately, in Ethiopia feasibility of their investment plans were hardly adequately reviewed, especially against the country’s benefits medium- and long-term gains and interests.
Data show that Ethiopia has hardly succeeded in attracting the high volume of investors it had expected in the agricultural sector, despite generosity of the incentives. This is evident from the little over 400 agricultural investors and around 500-600 thousand hectares rented out – against the four million the TPLF has allotted. From the 400 plus hectares, there has come down trickling little technology transfer, or agricultural productivity, or no markets seen teeming with food products, or jobs created and life sustaining incomes for workers. In short, most of the foreign investors were never successful in the agricultural sector.
That is why every time there is farm equipment for ‘sale’ or land to be returned to ‘government’, because they have decided to pull the plug. In almost all instances, they do so having destroyed natural forests or natural habitats disturbed.
As of September 2013, also the Ministry of Agriculture has revamped the notorious agricultural Support Services, formerly ran by Isaias Kebede; now what is left of that office has been brought under Minister Tefera Derbew’s office to be known as special Regions Support Directorate – not that this would make any difference or improve its services.
Therefore, instead of the fruits of foreign investments mainly in commercial agriculture, the TPLF policy has made Ethiopia absorb almost all of foreign investors’ risks, including consequences of the bad financial decisions of some of them, for which the top Indian Gambella landlord – Karuturi – stands out as prime example.
Karuturi offends Ethiopians with his bad behavior
For several years, Karuturi has been known to have refused to pay the loans and with no penalty imposed on him.
At a personal level, Karuturi began behaving like a newly-minted ‘movie star in backward Africa’, exposing much of the arrogance that comes with it. Bad for him, his offensive language and acts became intolerable to those working for him for a few cents a day. There were occasions, when he set up video camera in Gambella to boast of his poorly planned vision of how his agricultural produces would be exported through the Baro, South Sudan, Sudan, then East Africa and then continental African markets, and then, etc.
In August 2011, in Meles Zenawi says: No land grab in Ethiopia – Not today, not tomorrow, I quote the CEO of Karuturi Global stating on a video:
All of it is our land [showing with stretched out hand some Indian visitor]. Come here; you will get a lovely shot from here! Look at that river taking a gentle turn. What we need to export we would put on a small boat to South Sudan, North Sudan, and go to port Sudan … We are creating history here! This is what is happening here! This is land that has never been tilled from the time God made us! This is virgin land! It is green gold, if you know what green gold is! This is green gold!
Karuturi’s financial and business troubles do not evoke any sympathies in most Ethiopians. The person’s name has been tainted with many negatives – especially his lying to his workers regarding their wages, the accommodation for them and schools for their children he promised to build. Not only that nothing has come of it. But also he began mistreating his workers; eventually failing even to pay them their meagre wages. Some of them were individuals he took as tractor and farm machinery operators in 2009 from around Ambo and Addis Abeba, 700 kms away, according to Addis Fortune.
Also the Indian landlord he has become in Ethiopia – as the international media dubbed him – how he was authorized in the first place, for instance, to possess that much land and the free use of the waters of the Baro River as much as he needed remains shrouded in mysteries of sorts. Together these became added factors to make Karuturi as much target of the anger as against the TPLF and hatred Ethiopians entertain towards the regime.
Why is the policy of the TPLF wrong?
As stated above, first and foremost, the opposition is due to the state becoming facilitator of land grab by foreign investors and locals affiliated with the regime through ethnicity and politics.
The reason Ethiopians were/are opposed to it then and now is due to their fear of forced dislocation of our citizens. Moreover there was certainty that this would improve agricultural productivity, land use and volume of production.
Contrary to that claim, our nation’s experience has been land grab being the source of Ethiopia’s destitution and their exploitation as daily laborers.
We learned this starting from 2004, when Karuturi entered the country as producer and exporter of tea, the situation further intensified by many more entrants as commercial farmers began trickling in late 2008. Since then, several hundred thousand Ethiopians have been reduced into landless and homeless people by the consequent dislocations.
Perhaps the only person who believed in the twisted logic of land grab was Meles Zenawi, who constantly gave the impression of being overwhelmed by the level of poverty and poor state of our nation in every sense. Truly speaking, however, this happened not because Meles was driven by zeal for the country’s faster development; but simply because of political reasons.
Think of it, why should foreign borrower/investors, some of them bankrupt in ideas, be preferred clients? Ethiopians could as well get bankrupt; but they are ours and should be preferred as first choice for state support. At least, they could acquire lessons from their mistakes and experiences to do better next time. One cannot blame the foreign investors, when they leave the country seeing that nothing works out for them in Ethiopia.
Leaving land grab aside, what logic would inform any policymaker and national leader that becoming doormat for anyone masquerading as foreign investor is insurance for our country’s improved future? If indeed true, why has the miracle of TPLF policies in the agricultural sector not occurred at any time during these past 23 years? Furthermore, what logic informs a government that throwing a poor country’s scarce resources to get foreign investors started is a good policy and key to the nation’s development?
Meles defends land grab, firmly denying its possibility in Ethiopia
In June 2011, when the Indian television personality Vickram Bahl raised the concerns about Ethiopians opposing land grab, with his usual arrogance Meles Zenawi replied that the fears of those critics were misplaced and that the so-called ‘land grab’, “stalked by people who should know better,” could not happen in Ethiopia where there are firm constitutional safeguards!
I would never forget how Meles’s arrogant posture and contorted face looked, when he disdainfully added to make further point:
Once people begin to see the results of the investments in terms of job creation, availability of foreign exchange, availability of various agricultural products in our markets and so on, they will see the benefits [of land grab] for themselves and it will be completely irrational for them to try to shoot themselves on the foot.
Karuturi is now deep in loans; he is like a person left to stand on one foot, given the impossible situation he finds himself in. What critics have forewarned the TPLF regime not to go via the policy of land grab have proved right. Why then is Ethiopia still continuing to burn its finger because of the misguided policies and leadership first by Meles Zenawi and now his many pretending to be successors could not find the alternative route?
When the financial drains, the foreign exchange squeeze and deceits became harder pinching, CBE said no more waiting. It forced foreclosure upon Karuturi that resulted in his immediate settlement of the minimum 25 percent of the debt outstanding. What in the end would happen to Karuturi’s Gambella empire depends entirely on his ability to settle his debts and also demonstrating improved performance on the land still under his disposal.
In the meantime, crafty as the Bangalore man has been, he certainly may do deals with some of the senior officials. Against Ethiopia’s interests, they may succeed in stymying CBE’s further actions.
But the reality of the land he now controls speaks against the agricultural investor. After the authorities reduced his farmland size to 100,000 from 300,000 hectares, he has only managed to do 5,000 ha in five years!
Karuturi’s project in Ethiopia has been very destructive to the huge natural resources of the country; I recall it was something that made John Vidal, The Guardian‘s environment editor, lament for Ethiopia, the sufferings of its people and destruction of its natural endowments.
It goes without saying that, the above story is adequate evidence that land grab is not the route for Ethiopia’s development – in any form – no matter how much development is used as its pretext – or the presumed beneficiary is foreigner or ethnically-linked citizen or state official.
Another evil of land grab is that it has in the meantime turned Western Ethiopia in the like of Eastern Ethiopia – the Ogaden. The once peaceful and sleepy region has been turned into a garrison – with massive build-up of armaments and military presence. In these nearly three years, the TPLF regime’s objective has been to try to destroy those individuals and/or groups that have arisen in defense of their lands and their human rights and dignity as human beings – against the state’s policy of land grab.
Ethiopia has also been absorbing financial risks, that is being doled out as loans to foreign investors, some – if not most – especially those in commercial agriculture not being successful.
The only question now is, when will the TPLF regime ever learn the appropriate lessons about listening to citizens? When would it say this does not work, when it does not? Why is it becoming a lump in the throat to make a turnaround when policy mistake is caught in time – i.e., before it entails more disasters the longer it remains in effect?