While Africans continue to hold their own people hostage in various ways, here is the real future of Africa.
THE NEW COLONIALISM
Foreign Investors Snap Up African Farmland
By Horand Knaup and Juliane von Mittelstaedt
SPIEGEL
ONLINE
07/30/2009 04:12 PM
http://www.spiegel.de/international/world/0,1518,639224,00.html
Governments and investment funds are buying up farmland
in Africa and Asia to grow food -- a profitable
business, with a growing global population and rapidly
rising prices. The high-stakes game of real-life
Monopoly is leading to a modern colonialism to which
many poor countries submit out of necessity.
Every crisis has its winners. A group of them is
sitting in the Stuyvesant Room at the Marriott Hotel in
New York. The conference room, where the shades are
drawn and the lights are dimmed, is filled with men
from Iowa, Sao Paulo and Sydney -- corn farmers, big
landowners and fund managers. Each of them has paid
$1,995 (L 1,395) to attend Global AgInvesting 2009, the
first investors' conference on the emerging worldwide
market in farmland.
A man from the Organization for Economic Cooperation
and Development (OECD) gives the first presentation.
Colorful graphs travel up and down his PowerPoint
charts. Some are headed downward as the year 2050
approaches. They represent the farmland that is
disappearing as a result of climate change, soil
desolation, urbanization and the shortage of water. The
other lines, which point sharply upward, represent
demand for meat and biofuel, food prices and population
growth. There is a growing gap between these two sets
of lines. It
represents hunger.
According to most prognoses, there could be 9.1 billion
people living on earth in 2050, about two billion more
than today. In the coming 20 years alone, worldwide
demand for food is expected to rise by 50 percent.
"These are pessimistic prospects," says the OECD man.
He looks serious and even a little sad, as he describes
the future of the world.
But for the audience in the Stuyvesant Room, mostly men
and a handful of women, all of this is good news and
the mood is buoyant. How could it be any different?
After all, hunger is their business. The combination of
more people and less land makes food a safe investment,
with annual returns of 20 to 30 percent, rare in the
current economic climate.
These are not Wall Street experts, nor are they people
who shoot money across the continents like billiard
balls. On the contrary, these are extremely
conservative investors who buy or lease land to grow
wheat or raise cattle. But land is scarce and expensive
in Europe and the United States. Solving the problem
means developing new land, which is only available in
Africa, Asia and South America. This combination of
factors has triggered a high-stakes game of real-life
Monopoly, in which investment funds, banks and
governments are engaged in a race for access to the
world's arable land.
'The Final Frontier for Finding Alpha'
Susan Payne, a red-haired British woman, is the CEO of
the largest land fund in southern Africa, which
currently includes 150,000 hectares (370,000 acres),
mainly in South Africa, Zambia and Mozambique. Payne
hopes to raise half a billion euros from investors. She
talks about fighting hunger, but the headings on her
PowerPoint slides, embellished with photos of soybean
fields at sunset, tell a different story. One such
heading refers to "Africa -- the last frontier for
finding alpha." The word alpha signifies an investment
for which the return is greater than the risk. Africa
is alpha country.
That's because land, which is extremely fertile in some
regions, is inexpensive on the impoverished continent.
Payne's land fund pays $350-500 per hectare ($140-200
per acre) in Zambia, about a tenth the price of land in
Argentina or the United States. For a small farmer in
Africa, the average yield per hectare has remained
unchanged in 40 years. With a little fertilizer and
additional irrigation, yields could quadruple -- and so
could profits.
These are perfect conditions for investors. Susan Payne
sees it that way, and so do her investors. In fact,
there has been so much demand for this type of
investment that Payne recently had to establish a new
sub-fund.
A great deal of capital is currently available. It is
the second year of the global economic crisis, and
investors are seeking sound and safe investments, which
is why the audience in New York includes not only hedge
fund20managers and agriculture industry executives, but
also the representatives of large pension funds and the
chief financial officers of five universities,
including Harvard.
Thousands of investment funds, from small to large,
have recently begun applying the most basic formula in
the world: Man must eat.
US investment management company BlackRock, for
example, has established a $200 million agriculture
fund, and has earmarked $30 million for the acquisition
of farmland. Renaissance Capital, a Russian investment
company, has acquired more than 100,000 hectares in
Ukraine. Deutsche Bank and Goldman Sachs have invested
their money in pig breeding operations and chicken
farms in China, investments that include the legal
rights to farmland.
Food is becoming the new oil. Worldwide grain reserves
dropped to a historic low at the beginning of 2008, and
the ensuing price explosion marked a turning point,
just as the oil crisis did in the 1970s. There were
bread riots around the world, and 25 countries,
including some of the biggest grain exporters, imposed
restrictions on food exports.
Then came the second crisis of 2008, the economic
crisis. Two fears -- the fear of hunger and the fear of
uncertainty -- converged, triggering what some are
already calling a second generation of colonialism.
A Win-Win Situation?
What is different about this colonialism is that
countries are readily allowing themselves to be
conquered. The Eth
iopian prime minister said that his
government is "eager" to provide access to hundreds of
thousands of hectares of farmland. The Turkish
agriculture minister announced: "Choose and take what
you want." In the midst of a war against the Taliban,
the Pakistani government staged a road show in Dubai,
seeking to entice sheikhs with tax breaks and
exemptions from labor laws.
All these efforts have two hopes in common. One is the
hope of poor nations to achieve the development and
modernization of their ailing agricultural sectors. The
other is the world's hope that foreign investors in
Africa and Asia will be able to produce enough food for
a planet soon to be populated by 9.1 billion people;
that they will bring along all the things that poor
countries have lacked until now, including technology,
capital and knowledge, modern seed and fertilizer; and
that these investors will be able to not only double
crop yields but, in many parts of Africa, increase them
tenfold. Previous estimates had in fact forecast a
decline in production capacity by 3 to 4 percent in
2080, as compared with the year 2000.
If the investors are successful, they could achieve
what development agencies have been unable to do in the
past few decades: reduce the hunger that now afflicts
more people than ever, namely one billion worldwide. In
the best case scenario this could be a win-win
situation with profit for the investors and development
for th
e poor.
It is not just bankers and speculators, but also
governments that are acquiring land in other countries,
seeking to reduce their dependence on the world market
and imports. China is home to 20 percent of the world's
population, but it has only 9 percent of the world's
arable land. Japan is the world's largest corn
importer, and South Korea is the second-largest. The
Persian Gulf States import 60 percent of their food,
while their natural water reserves are sufficient to
support only another 30 years of agriculture.
Modern-Day Land Grab
But what happens in a globalized world when colonies
arise once again? What if, for example, Saudi Arabia
acquires parts of Pakistan's Punjab region or Russian
investors buy up half of Ukraine? And what happens when
famine strikes these countries? Will the wealthy
foreigners install electric fences around their fields
and will armed guards escort crop shipments out of the
country? Pakistan has already announced plans to deploy
100,000 members of its security forces to protect
foreign-owned fields.
Trading Land
Because of the political sensitivity of the modern-day
land grab, it is often only the country's head of state
who knows the details. In some cases, however,
provincial governors have already auctioned off land to
the highest bidder, as in the case of Laos and
Cambodia, where even the governments no longer know how
much of their territory they still own.
No one is sure exactly how much land is at stake. The
number cited by the International Food Policy Research
Institute (IFPRI) is 30 million hectares, but this
estimate is impossible to verify. Even United Nations
organizations has to resort to citing newspaper
reports, while the World Bank is trying to convince
countries to pay closer attention to the fine print on
agreements.
Klaus Deininger, an economist specializing in land
policy at the World Bank, estimates that 10 to 30
percent of available arable land could be up for grabs,
although only a fraction of the potential number of
lease and sale agreements have been signed. "There was
a huge jump in 2008, when plans and applications in
many countries more than doubled, in some cases
tripled." In Mozambique, says Deininger, foreign demand
is more than double the existing cultivated farmland,
and the government has already allocated four million
hectares to investors, half of them from abroad.
The most spectacular deals are not being made by
private investors, however, but by governments and the
funds and conglomerates they promote:
* The Sudanese government has leased 1.5 million
hectares of prime farmland to the Gulf States,
Egypt and South Korea for 99 years. Paradoxically,
Sudan is also the world's largest recipient of
foreign aid, with 5.6 million of its citizens
&nbs
p; dependent on food deliveries.
* Kuwait has leased 130,000 hectares of rice fields
in Cambodia.
* Egypt plans to grow wheat and corn on 840,000
hectares in Uganda.
* The president of the Democratic Republic of Congo
has offered to lease 10 million hectares to the
South Africans.
Saudi Arabia is one of the biggest and most aggressive
buyers of land. This spring, the king attended a
ceremony where he took delivery of the first export
rice harvest, produced exclusively for the kingdom in
hunger-stricken Ethiopia. Saudi Arabia spends $800
million a year promoting foreign companies that
cultivate "strategic field crops" like rice, wheat,
barley and corn, which it then imports. Ironically, the
country was the world's sixth-largest wheat exporter in
the 1990s. But water is scarce and the desert nation
aims to preserve its reserves. Exporting food also
means exporting water.
'The Investor Needs a Weak State'
Rich nations are exchanging money, oil and
infrastructure for food, water and animal feed. At
first glance, this seems to present a solution for many
problems, says Jean-Philippe Audinet of the
International Fund for Agricultural Development (IFAD).
In principle, he is pleased about the agricultural
investments, and says he fought for them for years.
"What was bad was the period when markets were bei
ng
flooded with cheap food products."
But many of the countries where land is being snapped
up -- Kazakhstan and Pakistan, for example -- suffer
from water shortages. Sub-Saharan Africa has adequate
natural water reserves, but the only country in the
region currently producing a food surplus is South
Africa. Most countries, on the other hand, are
importers and, with rapidly growing populations, will
likely be even more dependent on food imports in the
future. Can such countries truly become important food
producers?
Audinet, the IFAD expert, knows the risks. "The way
these agreements are structured can harm the country
and the farmers in the long term, robbing them of their
most important asset: land." Olivier De Schutter, the
UN Special Rapporteur on the right to food, warns:
"Because the countries in Africa are competing for
investors, they are undercutting each other." Some
contracts, says De Schutter, are barely three pages
long -- for hundreds of thousands of hectares of land.
These types of agreements stipulate what products are
to be cultivated, the location and the purchase or
lease price, but they include no environmental
standards. They also lack the necessary investment
regulations and the stipulation that jobs must be
created, says De Schutter.
Some agree to build schools and pave roads, but even
when investors live up to their promises, the benefits
to the host governments and local farmers are often
short
-lived. In the long term, however, they must
suffer the consequences of over-fertilizing,
deforestation, over-consumption of water, reduction of
ecological diversity and the loss of local species. To
boost harvests and achieve annual returns of 20 percent
or more, the foreign large landowners must operate
their farms on an industrial scale. And when the soil
becomes depleted after a few years, many investors
simply move on. Land is so cheap that they are not
forced to value sustainable farming practices.
Rejecting the Old Model
Because of these risks Audinet and De Schutter, like
most experts, favor contract farming instead of land
acquisition. In other words, the foreign investors
provide the technology and capital, while the local
farmers own or lease the land and supply rice or wheat
at fixed prices. This is the classic, tried-and-tested
model, but it is not what the new investors want. They
want control, ownership, high returns and, most of all,
security -- objectives rarely compatible with the
interests of thousands of small farmers.
Senegal has decided in favor of contract farming and
against large-scale land sales, but it happens to be a
stable democracy. This cannot be said of many of the
countries where land acquisition is taking place.
"When food becomes scarce, the investor needs a weak
state that does not force him to abide by any rules,"
says Philippe Heilberg, an American businessman. A
state that permit
s grain exports despite famines at
home, that is consumed by corruption or deeply in debt,
ruled by a dictatorship, racked by civil war, or sends
millions of workers abroad and is dependent on these
workers receiving visas and jobs.
Heilberg has found such a nation: South Sudan, which is
in fact a pre-nation, autonomous but not independent.
The 44-year-old American, son of a coffee merchant and
the founder of the investment firm Jarch Capital, is
now the largest land leaseholder in South Sudan, where
he leases 400,000 hectares of prime farmland in Mayom
County.
The mere mention of the words South Sudan conjures up
images of civil war, refugees and famine, not of a
place where one would consider growing tomatoes. But
Heilberg raves that his project will be more beneficial
to people than the UN, and that he will create jobs and
produce food. And he is adamant that Paulino Matip,
from whom he has leased the land for 50 years, not be
referred to as a warlord, but as a "former warlord" or
"deputy army chief." Heilberg neglects to mention that
the rebels led by Matip are suspected of having
committed war crimes.
Instead of buying stocks, the former banker is now
speculating on the political future of South Sudan,
which he insists will be an independent country in 10
years, at which point land will be far more expensive
than it is today.
Land acquisition is already a step further along in
wester
n Kenya, home to Erastas Dildo, 33, the kind of
person the New York investors would probably
characterize as a risk factor: a small farmer who owns
three hectares of land. It is fertile land, where the
corn turns bright green and grows two meters (6.5 feet)
tall, where the cattle are as fat as hippos and the
tomato plants bend under the weight of their tomatoes.
The nearby Yala River flows into Lake Victoria. There
are three small brick houses on the property. Erastas
harvests his corn twice a year, and vegetables and
tomatoes grow year-round. One hectare produces L 3,600
worth of corn a year, a lot of money by Kenyan
standards.
'They Drove Out 400 Families'
But things changed when Erastas was contacted by
Dominion Farms, a US agricultural producer that
established a colony in the Yala delta, where it has
leased 3,600 hectares of land for 45 years, at the
ludicrous rate of L 12,000 a year. Dominion, which
plans to grow rice, vegetables and corn on the land,
wants to include Erastas Dildo's three hectares in its
venture.
The Dominion representatives offered to pay him about
10 cents per square meter. Erastas turned them down,
and now they are making life difficult for the farmer.
Their most effective weapon is a dam they have built.
When Erastas tried to harvest his corn last year, it
was under water. "They are playing with the water level
to get rid of us," he says. And when that doesn't w
ork,
says Erastas, Dominion sends in bulldozers, thugs and
sometimes even the police.
Scarcity of Land
Under its contract, Dominion has agreed to renovate "at
least one school and one medical facility" in each of
the two local districts. "They drove out 400 families
instead," says Gondi Olima of the organization Friends
of the Yala Swamp. According to Olima, at first the
Dominion venture created new jobs, as day laborers were
hired to clear the site with machetes, but then the
company brought in more and more equipment. "Now they
have so many machines that workers are no longer
needed," says Olima.
Dominion Farms denies the farmers' accusations and
points out that it has already built eight classrooms,
donated gateposts and awarded educational scholarships
to 16 children, as well as providing beds and
electricity for a hospital ward.
Perhaps Erastas and his family will be forced to make
way for the development soon, as is already happening
in many other places. The World Bank estimates that
only 2 to 10 percent of the land in Africa is formally
owned or leased, and most of that is in cities. A
family may have lived on or occupied a piece of land
for decades, but it often has no proof of ownership.
Hunt for Land Continues
Nevertheless, the land is almost never left unused. The
poor, in particular, live off the land, where they
collect fruits, herbs or firewood and graze their
livesto
ck. According to a joint study by several UN
organizations, land grabs are often justified by
defining the land as "fallow." As a result, according
to the report, land grabs have the potential to
dispossess farmers on a large scale. In many countries,
there may be enough arable land available for everyone,
but the quality is not uniform -- and the investors
want the best land. That, as it happens, is the land
where farmers usually live.
Because more than 50 percent of Africans are small
farmers, large-scale land acquisition could be
disastrous for the population. Those who lose their
fields lose everything. The fact that the large
investors can substantially improve harvests with their
modern agricultural technology is of little use to
Africans who, once they have lost their land and
livelihoods, cannot afford to buy the new farms'
products.
The World Bank and others are now developing a code of
conduct for investors. A declaration of intent had been
planned for the July G-8 summit in L'Aquila, Italy, but
the heads of state in attendance could not agree on
binding standards.
And so the hunt for land continues. Dominion has
secured another 3,200 hectares, and Philippe Heilberg
is in the process of leasing an additional 600,000
hectares in South Sudan. Back in New York, in the
Stuyvesant Room, one of the speakers is reciting
numbers to illustrate how fast the global population is
growing: By 154 people per mi
nute, 9,240 per hour or
221,760 per day. And each one of them wants to eat.
Translated from the German by Christopher Sultan
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