Development finance as agro-colonialism: European development bank funding of Feronia-PHC oil palm plantations in the Democratic Republic of Congo
RIAO-RDC (DR Congo), FIAN Belgium, Entraide et Fraternité (Belgium), CCFD-Terre Solidaire (France), FIAN Germany, urgewald (Germany), Milieudefensie (The Netherlands); The Corner House (UK), Global Justice Now (UK), World Rainforest Movement (International), GRAIN (International) | 28 January 2021
Development finance as agro-colonialism: European development bank funding of Feronia-PHC oil palm plantations in the Democratic Republic of Congo
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This publication provides an overview of European development bank financing of the palm oil company Plantations et Huileries du Congo (PHC) in the Democratic Republic of Congo.1 Communities affected by the company's plantations have been deprived of their ancestral land since 1911, when the founder of PHC and co-founder of the global food company Unilever, British industrialist Lord Leverhulme, turned their palm groves into industrial oil palm plantations. Communities never consented to their forests being turned into oil palm plantations. Throughout the decades of demanding justice, communities have faced repression and violence.2 In 2019 a company security guard was charged with killing a community member.3 The guard was later acquitted, with family members and civil society organisations having voiced concerns about the circumstances of the acquittal.4 In 2015, a villager died and his wife was killed by police following an accusation of theft of a few oil palm nuts.5 These deaths occurred at a time when several European development banks were invested in PHC, either directly or indirectly. PHC's operations today stand in direct line with the industrial plantation model - and the environmental damage, rights violations and exploitation of community land and labour that is inextricably linked with this model. This industrial plantation model played a crucial and cruel role in European colonization. The financing of PHC shows that (European) development bank support for the colonial plantation model continues to this day.
Until recently, the PHC operations were owned by a Canadian financial company called Feronia Inc. which had bought the company from Unilever in 2009. In June 2020, Feronia Inc. went bankrupt, despite having received funding support to the tune of more than US$ 150 million since 2013 from European development banks. At the time of Feronia's collapse, the development banks owned Feronia-PHC. They held the majority of shares in Feronia Inc., either directly (CDC Group of the UK) or via investment in a fund (France's Proparco, Spain's AECID and the US's DFC), and have loan repayments worth tens of millions of dollars outstanding (CDC - UK, DEG - Germany, FMO - Netherlands, BIO-Belgium and others via the EAIF). When Feronia Inc. collapsed, the development banks had a big opportunity to start making amends for the occupation of community land by PHC that dates back to European colonial occupation of the Congo. They could have explored ways to hand over concession rights or holdings in PHC to communities, they were not interested. Instead, the development banks handed the PHC assets over to a Mauritius-based private equity company called Straight KKM, and accepted a massive write-down of their debt to the benefit of the new private equity owner.6 Like Feronia Inc., Straight KKM does not have any reported experience in operating oil palm plantations prior to involvement in PHC.
The development bank investment in Feronia-PHC reveals structural aspects that explain why investments in industrial agriculture are contentious and conflict-ridden7, violate human rights, pollute and destroy the environment and undermine communities' food sovereignty, self-determination and well-being. These structural features include:
1) Continued investment in a colonial model of development
Continued investment in a colonial model of development that is built on the appropriation of community land and the resulting destruction of community resilience and the exploitation of villagers as labourers on short-term contracts.8 As in the case of the development bank investment in the sugar cane / bioenergy plantation company Addax in Sierra Leone,9 the development banks invested in Feronia-PHC at a time when communities have already been rejecting this plantation model and are demanding the return of their ancestral land so they can pursue a different path.10
2) Neoliberal dogmatism
Neoliberal dogmatism, where ideology often narrows down the development bank's horizon of ‘private sector’ to investment in private equity funds, no matter their record. For example, in April 2020, the BBC’s Africa Eye team reported on numerous allegations of fraud, bribery and misappropriation of funds against two British managers appointed by the CDC-backed private equity fund Emerging Capital Partners to run the Kenyan construction firm Spencon (which went bankrupt during their management). This is just one example of concerns being raised about the transparency and accountability of private equity funds using public investments for their own commercial ends.11
Private equity funds have been pushing into agriculture investments since the 2008 financial crisis, and development investment in these funds has seen a dramatic increase, including into private equity funds investing in agriculture companies.12 This dogmatism is also revealed in the resistance by development banks to investing in community-controlled operations instead of private equity funds, no matter whether these private equity companies have experience in plantation management or not.13 Neither Feronia Inc. nor Straight KKM have any record of such experience prior to their involvement with PHC while communities have produced and traded palm oil and other oil palm goods for generations before the land was violently taken from them. This development bank dogmatism keeps communities in and around the PHC plantations in the DR Congo (or around the Addax sugar cane plantations in Sierra Leone) in poverty, toiling as day labourers on their ancestral land and exposed to regular harassment and violence from company security guards.14
By contrast, it is already evident in the experience of several communities at one of the PHC plantation sites how much potential alternative paths hold for communities with control over their ancestral lands. In early 2020, communities took over some 420 hectares of plantation abandoned by PHC and started their own palm oil processing. They have regained an autonomy and income levels never seen as day labourers on the PHC plantations. “With access to these lands, we are able to resume our palm oil production, which was violently interrupted with colonisation”, a member of the operation's management team said.15
3) Troubling shift away from mandatory legal requirements
A troubling shift away from mandatory legal requirements and adherence to the few binding human rights norms that exist to voluntary grievance and arbitration mechanisms. Effective due diligence procedures would simply prevent development bank financing if a client was embroiled in land legacy issues or human rights violations. Currently, development banks routinely finance companies with such unresolved (land) conflicts, as long as the client commits to set up a grievance mechanism, implement social action plans and / or engage in third-party certification as a way of showing commitment to resolving conflicts. Many development banks have also set up their own grievance mechanisms and require their clients to do so. The reality, however, is that these mechanisms are not preventing conflict-ridden investments and are generally proving unsuitable for resolving land legacy conflicts.16 In fact, these mechanisms are running the risk of exacerbating conflict, leading to human rights violations and undermining community organizing for restitution of their ancestral land. In the case of Feronia-PHC, for example, several of the development banks require the company to achieve compliance with the Round Table on Sustainable Palm Oil (RSPO) certification standard or equivalent certification schemes.17 Company representatives claim that RSPO rules prevent restitution of forested land inside the concession area to communities, because of a deforestation risk. It is remarkable that a certification standard such as RSPO should stand in the way of the company beginning to resolve its colonial land legacy by returning the forested land back to communities.
Grievance mechanisms, while growing increasingly popular with development banks, have been a huge frustration to communities and civil society. A mediation process triggered by a complaint under the World Bank International Finance Corporation's (IFC) grievance mechanism, for example, addressed the eviction of around 1,000 families in Uganda that were evicted to make room for timber plantations by a company called New Forests Company.18 The mediation left nearly half the community of 1,000 families without any compensation, yet the company and development banks cite this mediation process as a model and evidence that conflicts have been resolved.19 In the case of Feronia-PHC, communities who submitted a complaint to the German development bank DEG20 in November 2018 have now been waiting over two years for the requested mediation to even start.21 Meanwhile, and with the development banks looking on, the company has been expanding its plantations onto land immediately adjacent to the village of Yalifombo,22 even though the contested legality of the company's land concession contracts is at the heart of the community complaint submitted in 2018.
1 This report focuses on European development bank funding of Feronia-PHC. However, through the African Agriculture Fund, the U.S. International Development Finance Corporation (DFC, formerly OPIC) has also provided funding to Feronia Inc.
2 See, for example, Analyse réponse CDC et Feronia. Statement signed by 13 community leaders from Feronia’s three plantation areas (Lokutu, Yaligimba, Boteka). October 2016. Kampala, Uganda. Available at https://www.grain
. org/e/5560. See also the Telesur report, Congo: continúa lucha comunitaria contra multinacional Feronia. 2016. https:// www.youtube.com/watch?v=xaZ_DellZug&feature=emb_title
Accessed 21 December 2020.
3 Update on the Independent Investigation commissioned by CDC to examine the circumstances surrounding the death of Joel Imbangola Lokwa. CDC Group News. 22 November 2019. https://www.cdcgroup.com/en/news-insight/news/update-
5 Unpublished statement by community dignitaries and community leaders from Boteka. Dated 16 December 2017. Signed at the town of Bempumba.
6 GRAIN, Development banks must be held accountable for their disastrous oil palm plantation investments in the Congo, 2020. https://www.farmlandgrab.org/post/view/29868-development-banks-must-be-held-accountable-for-their-
7 See among others, Saturnino M. BORRAS et al., Land grabbing and human rights: The involvement of European corporate and financial entities in land grabbing outside the European Union. Paper requested by the European Parliament’s Subcommittee on Human Rights. May 2016. ; Fern, Financing landgrabs and deforestation. 2016. https://www.fern
. org/fileadmin/uploads/fern/Documents/Financing%20land%20grabs%20final.pdf ; Hands off the Land, Fast track agribusiness, land grabs and the role of European private and public financing in Zambia. 2013. https://www.fian.org/
8 As enshrined in the Universal Declaration on Human Rights (UDHR), International Covenant on Economic, Social and Cultural Rights (ICESCR; ratified by all involved states in Europa as well as DR Congo) and the Declaration on the Rights of Peasants and other People living in Rural Areas (UNDROP).
11 BBC Africa Eye, Spencon: Inside the collapse of an African construction giant. 2020. https://www.bbc.co.uk/news/
12 GRAIN, Barbarians at the barn: private equity sinks its teeth into agriculture. 2020. https://www.grain.org/en/
13 See for example GRAIN, Barbarians at the barn: private equity sinks its teeth into agriculture. 2020. https://www.grain
14 See, among others, the following statement from community members: Plainte contre la Société PHC/Feronia à Lokutu. Letter addressed to the Prime Minister of the DRC by the indigenous communities of the territories of Basoko, Yahuma and Isangi. September 2016. Available at https://www.grain.org/e/5560
. Community members from villages at the Lokutu plantation site reported incidents of harassment and violence during meetings. Recordings of these meetings are available to the organisations co-publishing this report.
15 Communities take control of plantations abandoned by Feronia PHC. 2020. https://www.farmlandgrab.org/post/
17 See, for example the requirements of KfW Group: https://www.kfw.de/PDF/Download-Center/Konzernthemen/
Nachhaltigkeit/Ausschlussliste_EN.pdf . In October 2016, Feronia Inc. stated in response to a press request that “We registered on April 14th, 2016, to initiate the RSPO certification process. [...].We are targeting Q4 2017 for our first site, although a lot of work remains to be done. We have in place a tracking system to record key milestones as they are achieved.” As of December 2020, no information has been released by Feronia –PHC to suggest that the company has obtained RSPO certification.
18 See, for example, Mubende evictees yet to get own homes 10 years later. 11 August 2020. Daily Monitor. https://www
. monitor.co.ug/uganda/news/national/mubende-evictees-yet-to-get-own-homes-10-years-later-1918644; Sophia Greene, Uganda land evictions row. Financial Times. 9 October 2011. https://www.ft.com/content/f49c5686-f0d7-
11e0-aec8-00144feab49a and Oxfam report New Forests Company and its Uganda Plantations. 2011. https://www
. oxfam.org/en/research/new-forests-company-and-its-uganda-plantations-oxfam-case-study. Last accessed 21 December 2020.
19 Witness Radio, The Agony of a Tree-Planting Project on Communities’ Land in Uganda. WRM Bulletin 251. 2020. https:// wrm.org.uy/articles-from-the-wrm-bulletin/section1/the-agony-of-a-tree-planting-project-on-communities- land-in-uganda/ In a section on its website referring to the IFC CAO complaint, the company notes that “We signed agreements with community co-operatives and fulfilled all our commitments. Both disputes were officially closed and recognised internationally as role models of successful resolution between private companies and communities.” https:// newforests.net/sustainability-reports/. Accessed 12 January 2021.
20 The development banks DEG, FMO and Proparco operate a joint complaints mechanism, where complaints submitted to any one of the three banks is assessed by a joint Expert Panel, and where complaints are processed using joint procedures.
21 RIAO-RDC, DRC communities file complaint with German development bank to resolve century-old land conflict with palm oil company. 2018. https://www.farmlandgrab.org/post/view/28543-drc-communities-file-complaint-with-
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