World Mission (Manila) | September 2009
To secure their food supplies and the production of biofuels, several countries are buying or leasing huge amounts of farmland in poor nations, in Asia, Latin America and mainly in Africa. Some say that the investment could aid to develop the local economies, but the phenomenon – that has already a name: the land grab – can be also a menace to small farmers and local communities. Some denounce it as just a form of new colonialism and say that will worsen poverty and malnutrition.
More than 20 million hectares of farmland in Africa, Latin America and Asia are now in the hands of foreign governments and companies, a sign of a global "land grab" that got a boost from last year's food crisis. Rich countries that are short on land or water at home are looking to secure food-producing lands elsewhere as a way to ensure food security for their populations, said Joachim von Braun, director of the International Food Policy Research Institute (IFPRI). "There is a major lack of transparency in these land deals," von Braun added.
The IFPRI study, "'Land Grabbing' by Foreign Investors in Developing Countries," by von Braun and Ruth Meinzen-Dick, estimates that 15 to 20 million hectares have been acquired or are in the process of being sold. Von Braun pointed out that this is equivalent to about 25% of all the farmland in Europe. Because hard data is difficult to come by – the study was based primarily on information from press reports – IFPRI conservatively estimates that the deals represent 20 to 30 billion dollars being invested by China, South Korea, India and the Gulf States, mainly in Africa. "About one-quarter of these investments are for biofuel plantations," von Braun said.
THE NEW AGRO-EMPIRES
China started leasing land for food production in Cuba and Mexico 10 years ago and has extensive holdings in Africa, including pending or attempted deals for millions of hectares in the Democratic Republic of Congo, Zambia, Zimbabwe, Uganda, and Tanzania, with many thousands of Chinese workers brought in to work on these lands, according to the report. The largest foreign ownership or control of African farmland is in Sudan – in this case a group of Gulf States, including Saudi Arabia. Last year, the United Arab Emirates negotiated several farmland deals with Pakistan. Qatar has agricultural land in Indonesia, the Philippines, Bahrain, Kuwait and Burma.
The huge Korean company, Daewoo Logistics Corporation, signed a deal to lease 1.3 million hectares in Madagascar to grow maize and oil palm, which reportedly played a role in the political conflicts that led to the overthrow of the government early this year, the report noted. "The number of land deals is much higher than the IFPRI numbers. No one is monitoring all the private land deals," says Devlin Kuyek, a researcher at GRAIN, a Barcelona-based non-governmental organization dedicated to global agricultural issues. GRAIN published its own "Land Grab" report some months ago, concluding that rich countries are buying poor countries' soil fertility, water and sun to ship food and fuel back home, in a kind of neocolonial dynamic.
THE LAND AS A COMMODITY
Kuyek affirmed that this 21st-century land rush is driven in part by countries that no longer want to be held hostage by the big, multinational food trading companies. But, increasingly, the private capital is coming from pension funds, which are staking their bets on farmland as the next profitable commodity to invest in after the collapse of the global stocks and financial sector and continuing weak prices for oil and metals.
"A huge chunk of the Australian cattle industry is now owned by a private equity firm. The two biggest pork producers in China are owned by Goldman Sachs (a private investment firm)," Kuyek said. As a result, he noted, ranchers and farmers have turned into employees. But it could be far worse than that for hundreds of millions of small landholders, pastoralists and indigenous people who do not hold formal land titles, because they are at risk of being driven off their land, he said. Most of African farmland is under local customary land holding, without formal land title, acknowledges IFPRI researcher Meinzen-Dick. "When outsiders come they don't recognize those customary land rights. Such rights must be respected," she warned.
FORGETTING EXISTING RIGHTS
IFPRI is calling on the international community to develop a code of conduct that would uphold local peoples' rights to their land, guarantee transparency, share benefits, foment environmentally sustainable production and ensure local food security. Von Braun sees great potential in such land deals because they bring badly needed capital to the agricultural sectors of poor countries, contributing to infrastructure and research. "China is creating several research stations in Africa to boost yields in rice and grain," he said. Kuyek disagrees: "These investments are not about agricultural development. This is all about making money and shipping food back to home markets.”
Food processing companies and even food retailers are involved in this because they are anxious to ensure "security of supply" as efficiently as possible, says Janice Jiggins, of the International Institute for the Environment and Development, in London. One of the world's biggest banks, the Netherlands' Rabobank, is one of the main financiers for these kinds of deals, Jiggins noted.
The 2009 report from the United Nations Special Rapporteur on Food Sovereignty, Olivier de Scutter, detailed the legal implications of the farmland deals, warning that they completely override existing rights, enshrined in laws, constitutions, and customs, Jiggins wrote.
A KIND OF COLONIALISM
Especially sub-Saharan African countries have become the target of this new form of investment that is strongly reminiscent of colonialism: investors from both industrialized and emerging economies buy or lease large tracts of farmland across the continent, either to guarantee their own food provisions or simply as yet another business. In doing so, investors even deal with warlords who claim property rights, as in Sudan.
Non-governmental organizations (NGOs) and activists in Europe are denouncing this land grab in Egypt, Sudan, Cameroon, Senegal, Mozambique and elsewhere in Africa as a new form of colonialism. Uwe Hoering, a German researcher on development policy for several European NGOs, including the newsletter Weltwirtschaft und Entwicklung (World Economy and Development), called these investments “a new form of agrarian colonialism.” Hoering said that the land grab in Africa became evident in 2008 as a consequence of the recent run to so-called biofuels and the price inflation and scarcity of food. Although the investments are also targeting fertile land in other areas of the world, sub-Saharan Africa appears to be these investors’ main destination. The reasons are multiple. On the one hand, “Africa possesses enormous land reserves,” Hoering stated. “According to the United Nations’ Food and Agriculture Organization, only about 14% of the suited land in the continent is presently cultivated.” In addition, he said, many African governments are willing to allow this land grab to happen in their territories.
PROFITING FROM THE FOOD CRISIS
A list of the land grab investments of 2008 has been put together by the NGO GRAIN, based on corporate reports. It confirms that several industrialized countries, like Japan and Sweden, rapidly growing developing nations, like China and India, and oil-rich countries, especially from the Arab Gulf, and even Libya, are buying large estates in Africa. GRAIN also lists multinational private investors, like the Blackstone Group, Deutsche Bank, Goldman & Sachs and Dexion Capital, as participating in the creation of these new agrarian enclaves in the heartlands of Africa.
Unsurprisingly, the investors include the International Finance Corporation (IFC), the commercial investment arm of the World Bank. In September 2008, the IFC announced that it would greatly increase investments in “agribusiness development” in Africa, and South American states and in Russia because of new private sector interest in generating profits from the food crisis. Part of its spending will be to bring “under-utilized” lands into production. In 2008, the IFC spent 1.4 billion dollars in the agribusiness supply chain, of which 900 million dollars went directly to agribusiness firms.
GRAIN also reports that the Blackstone Group, one of the world’s largest private equity firms in which China has recently bought a stake, “has already invested several hundred million dollars in the agricultural sector, mainly in buying farmland in areas like south of the Sahara.” For Hoering, the land grab in Africa by countries such as Japan, South Korea, China, and Libya serve to guarantee their own national food security. “After the recent speculation on the cereal and other food markets and the spectacular price hikes, these countries have lost confidence in the world market,” Hoering explained. “They now want to be independent from speculators and be able to control production and secure food imports.”
THE SUDAN’S WARLORD DEAL
The recent spike in global commodity food prices has also encouraged foreign investors to scramble for control of arable land in Africa. Obviously, private investors see in the land grab a business with likely high returns. For instance, the Cru Investment Management, a British, Cardiff-based private investor, forecasts earnings of 30% for its agricultural fund investing in Malawi. Duncan Parker, a Cru spokesperson, has said that Africa offers many incentives to investments, such as a strong workforce and the potential to be a top world food producer, thanks to its fertile soil and abundant water and sunshine. However, whether Africans will profit from these investments is another matter altogether. The wave of investments in foreign agricultural enclaves has led to new abuses.
“The most scandalous case yet is that of the U.S. investment banker Philippe Heilberg, who closed a deal with Paulino Matip, a warlord in South Sudan, to lease 4,000 square kilometers,” Hoering argued. Matip is a notorious warlord who fought on both sides in Sudan's lengthy civil war. He is one of the profiteers of a dubious 2005 peace agreement, after which he became deputy commander of the army in the autonomous southern region. Heilberg, now CEO of the New York-based investment fund, Jarch Capital, previously worked for the now battered insurance company American International Group (AIG). Heilberg has been quoted as saying that, in his view, several African states are likely to break apart in the coming years, and that the political and legal risks he is taking will be amply rewarded. “If you bet right on the shifting of sovereignty, then you are on the ground floor. I am constantly looking at the map and looking if there is any value,” he told U.S. media.
While denouncing the scramble for land, human rights groups have called attention to the vagueness and imprecision of laws on land ownership in South Sudan. They cast doubt on foreign investors such as Heilberg being able to claim legal rights over such estates. The deal, which became public last January but was closed in last July, has prompted human rights groups to denounce Heilberg's venture in South Sudan as a cynical, neocolonial enterprise. “This is a case that recalls the worse colonial land grabs in Africa,” Hoering added.
GRANT BENEFITS FOR THE POOR
Some respected sources point the land rush opportunities, as well as the dangers and the needed cautions. According to a report by three international agencies, African countries whose farmland is being bought by foreign investors must defend local people's rights to avoid eviction, while investors should beware being tainted as human rights abusers or “land grabbers." The agencies' first detailed report on the trend, published last May, estimated that nearly 2.5 million hectares (6.2 million acres) of farmland in five sub-Saharan African countries have been bought or leased since 2004 – an investment of $919.98 million.
"Lands that only a short time ago seemed of little outside interest are now being sought by international investors to the tune of hundreds of thousands of hectares," said the agencies, calling the huge deals reported so far "the tip of the iceberg." The report was co-authored by the International Fund for Agricultural Development (IFAD) and U.N. Food and Agriculture Organization (FAO), both based in Rome, and the London-based International Institute for Environment and Development (IIED).
Fears about food security and rising returns in agriculture mean the trend will continue, bringing benefits in terms of infrastructure and jobs, the agencies said, but also meaning risks for recipient countries, local people and investors. The report focuses on large-scale deals of more than 1,000 hectares in Ethiopia, Ghana, Madagascar, Mali and Sudan, as well as case studies carried out in Mozambique and Tanzania, while warning that data on land deals is "scarce and of limited reliability."
The authors shy away from the term "land grab," used by the media to denote the trend towards large-scale farmland purchases by China and oil-rich nations like Saudi Arabia and Qatar in poor countries, which often struggle to feed themselves. IFAD said the deals could "bring benefits for all parties and be a tool for development" if done the right way. “Africa has been crying out for investment for decades, so let's not shoot ourselves in the foot now," Harold Liversage, a land rights expert for IFAD with about 20 years' experience in Africa and elsewhere, told Reuters. "Let's make sure that Africans, particularly small-scale producers and poor rural women and men, are going to benefit from this," said Liversage.
SOME MINIMUM REQUIREMENTS
The report says farmland purchases are being driven by food security concerns, rising demand and changing dietary habits, expanded biofuel production and interest in what is, on paper at least, an improved investment climate in some African countries. For recipient nations, on a macro level, the investment can boost GDP and government tax revenues, while rural areas can see improvements in their livelihood, said the report. But "large-scale land acquisition may result in local people losing access to the resources they depend on for their food security – particularly as some key recipient countries are themselves faced with food security challenges."
It recommended that recipient governments set minimum requirements for such investments in terms of job creation and community benefits as well as the environmental impact on soil and water and the risk of pests from monocultural production. They should discourage speculative deals and use collective land registration to bolster rights that are often customary to "help local people avoid being arbitrarily dispossessed of their land, and obtain better deals from incoming investors."
While pointing out that "land grabbers" in Africa are by no means only foreign, the agencies had advice for investors who risk their money in purchases or long leases in countries where land rights are unclear and corruption may be rife. "Investors can be seen as dealing with or propping up corrupt regimes and human rights violators," they said. "They may also be perceived as land grabbers in food-insecure countries."
(Credits: Tierramérica, Stephen Leahy; Inter Press Service, Julio Godoy; FAO report)