The Guardian | 15 January 2010
Addis Ababa sells vast fertile swaths to international companies in effort to introduce large-scale commercial agriculture
Xan Rice in Bako
This is a country of the bent back and the silver sickle, where virtually all the crops have felt the calloused fingers of the peasant farmer working his tiny parcel of state-owned land. The ox pulls the plough and the donkey the cart, and fertiliser counts as agricultural technology.
Chugging into this picture on a bright green John Deere tractor came Hanumantha Rao, a former sugarcane farmer from India who is at the forefront of a revolution sweeping through Ethiopian farming. He hurried up to a hilltop on his company's farm in Bako, four hours' drive from the capital, Addis Ababa, and swept out an arm to indicate the land he has leased from the government: 11,000 hectares to grow rice, maize and oil palms.
In the fields below, boreholes were being sunk and roads graded. An airstrip will soon allow for a crop-spraying plane. Besides the new tractor Rao had been riding on that morning, there were 30 more on site. That was not many, he insisted, and neither was the farm especially large.
Further west in Gambella, Karuturi Global, the listed Indian horticulture company that employs Rao, is bringing in 1,000 new tractors to work the 300,000 hectares it has leased – making it one of the biggest farms in the Horn of Africa, if not the continent. "It is 120 kilometres [75 miles] wide," Rao said proudly. "Three hours to cross by Jeep."
Ethiopia's great land lease project is moved swiftly ahead. In an effort to introduce large-scale commercial farming to the country, the government is offering up vast chunks of fertile farmland to local and foreign investors at almost giveaway rates. By 2013, 3m hectares of idle land is expected to have been allotted – equivalent to more than one fifth of the current land under cultivation in the country.
The move is part of a wider trend that has seen other African and Asian countries seek to take advantage of high global demand and the cost of crops by offering agricultural land to foreign companies, private equity funds and governments, particularly those of import-dependent Gulf countries.
If done properly, the investments have the potential to increase local food availability and create badly needed jobs. If not – as was the case with the attempt by the South Korean firm Daewoo to lease half of Madagascar's arable land to grow corn for export in 2008, a deal many saw as 21st- century colonialism – they could prove disastrous.
In a food-insecure country such as Ethiopia, where several million people rely on food aid, the idea of offering fertile land to outsiders has raised concerns. But government officials point out that Ethiopia has vast reserves of underused land – 60m hectares of the country's 74m hectares suitable for agriculture is not cultivated – and insist no local farmers will be adversely affected. Esayas Kebede, investment support co-ordinator at the agriculture ministry, said that foreign companies were essential for the move from subsistence to commercial farming, a key part of the country's development strategy.
"There is no crop that won't grow in Ethiopia but we cannot produce quantity and quality. Why? It's a vicious cycle of the lack of capital and technology," he said. "So leasing land is a real opportunity for us."
So too for Karuturi. The Bangalore-based company, which is the world's largest grower of roses, has negotiated an extraordinarily good deal with the government. For its farm in Bako, Karuturi is paying no rent for six years and then only 135 birr (£6.50) per hectare per year for the remainder of the 50-year lease. In Gambella, a remote and sparsely populated region close to Sudan, the rent is only 15 birr per hectare (73p).
The company believes the potential for large profits is so great that it plans to invest nearly $1bn in its Ethiopian agricultural operations, according to managing director Sai Ramakrishna Karuturi. Within eight years, he hopes to be producing 3m tonnes of cereals – mostly maize and rice – a year on the Gambella farm, as well as palm oil and sugar. Some of the produce will be sold in Sudan and Kenya – where the company is in talks with the US Agency for International Development to build grain silos at a border town. Like all the foreign land investors in Ethiopia, the company is free to export as much of its produce as it likes, but Sai Ramakrishna Karuturi said most would be sold domestically, where there is a ready market.
"Ethiopia is a food importer and will continue to be for some time. With the high cost of transportation in Africa, it does not make sense for us to try to export beyond the region."
As with land, labour is also extremely cheap. The minimum wage in Ethiopia is about 8 birr (39p) a day. Karuturi, which hopes eventually to employ 20,000 people on its two farms, says it pays 10 birr (49p) a day and provides meals to its workers.
Rao, general manager of the Bako farm, said there was no shortage of locals desperate for jobs. "People here are very poor. They would work for 1 birr, and no one else pays more than 5 birr. So we are paying double."
Outside the farm gates, the feeling about Karuturi among peasant farmers was mixed. The company's 11,000 hectares were fallow before it arrived – the black clay soil is rich in nutrients but difficult to work without a mechanical plough – but some locals had grazed their cattle there and used to cross the farm to the nearest river, which is no longer possible.
Teresa Agassa, a 38-year-old man in gumboots who works a one-hectare plot, said it was good that some local people now had jobs – even if the wage was too small. But he spoke enviously of Karuturi's tractors.
"They're only for the company's benefit. Maybe there can also be benefits for us – but we will only know in the future."