Monday, April 20, 2009

Land, Cereals and Arabs

In the next 25 years, world demand for cereals will more likely increase by 50 percent. There are two ways in which this food can be found: by increasing yields in the currently cultivated land or by cultivating new areas. Of all the continents, only Africa has suitable and sizable tracts of uncultivated land. But then, since you want to protect the environment and its natural habitat, the ideal option would be to nominally increase the acreage cultivated (since we still have the areas) but massively increase the yield on the currently cultivated land. And there is no way you can do this without biotechnology, or, to put it bluntly, without genetically modified seeds. Anyway, that is a debate for another day.

Food is now a globalised commodity, meaning that its price and supply are dictated by dynamics independent of the whims of sovereignty (not least the weather!). And indeed taste and choices in food depends on many other things beyond necessity (increase in income by the Chinese, as a result of the Chinese economic boom of the last decade, has made the Chinese eat more meat, which has increased the global demand for feedstock for pork, chicken and cattle which in turn has increased demand and prices for cereals, leading other people to remain hungry). Consequently, its production for the global or "local" markets, just like cars and computer chips, follow where inputs are readily cheap.

We saw the Koreans striking a deal for 1.3 million acres with Madagascar to cultivate rice for Korean people. The structure of the deal and its consequences is another debate. We now see the Arabs moving into Africa to seek areas to cultivate food, not for the global market but for their own people.

Which brings me to the recent item in the news that the Saudis are seeking huge chunks of land in Tanzania to grow wheat and rice. There is a debate about our wisdom in accepting this (and I have been quoted somewhere saying something about this - the quote was unfortunate as the conversation was private and, although the sentiments are correct, it did not reflect the entirety of thought train).

If I am to say something public (which I am now), this is what I would say: In my personal opinion, it is very good indeed that something is being done to put into use at least an additional 0.5 percent of 100 million acres of arable land that we have (out of which only 7 percent is under use, of which 80 percent is under subsistence agriculture).

But, in my personal humble opinion, there should be some parameters under which these land-for-agriculture deals should stay within:

1. Our land ownership system should not change to accommodate these deals. Our system is not freehold but leasing. It is imperative that it remain so as we talk about large scale commercial farming by foreign entities.

2. There should be no dispossession of land from the locals.

3. There should be some local value addition processes (if it is wheat or rice, at least kukoboa and packaging should be done locally by locally-owned factories)

4. There should be development of infrastructure in and around the estates.

5. There should be some backward and forward linkages - some out-grower activity should exist or production of fertilizers and other inputs for these farms should be done here.

6. Agricultural research and transfer of technology and skills should be the main components of the deal.

7. Eventually, as a result of number 6, together with access to agricultural financing, locals ought be able to do large scale commercial farming;

8. Finally, the scenarios you do not want is the juxtaposition of photos of containers shipping rice abroad with the long lines of people waiting for food aid...like in some countries with oil rigs offshore but long queues at the petrol stations. Hahaha!

12 comments:

Iddi Mwanyoka said...

January,
I couldn’t agree more with your argument.
To my humble opinion there is a big chance that Foreign Direct Investment (FDI) will end to be like foreign aid. Instead of provides prosperous to Tanzanian it ended up to bring corruption and big government with big spending.

One should understand that I total support private sector investment, but I support the one which follows the principle of common sense. Tanzania today has a lot of undeveloped land which can be turned into national treasure through “Kilimo cha Kisasa”. I strong believe that the current way of farming will not empower a Tanzanian common man; this is due to the fact that we do not have enough tools for kilimo cha kisasa.

FDI in agriculture sector can be one of the ways which can help Tanzania to archive the goal of reducing poverty. However, we should understand that just giving out the land to Westerner or foreigner farmers will not solve the problem. What we need is a smart system which will link and share the technology between our farmers and foreigners investors. This will provides a competitive edge to our wakulima at the same time give the investor a huge benefit of our land.

The ongoing criticism about giving Saudi’s land is because of lacking of confidence among Tanzanian toward their government. I total support the whole thing, but if and only if it will provides a mutual benefit between our wakulima (directly) with the investors. Our government needs to use a “bottom up” approach when it comes leasing the land. The government needs to work hand in hand with local farmers, in order to find the best approach of the issue. Other than that it will be like building the double storage house by using mad, it will stand but who knows when it will collapse.

Anonymous said...

Finally we are start seing a common sense prevailing.

salama said...

There must be some opportunities lie hidden in this whole thing, important thing for us to do is get smart and expoit them.
Many, have a voracious appetite for our rich natural resources and it's up to us to be creative and find ways in which we can profit out of it.

"We now see the Arabs moving into Africa to seek areas to cultivate food, not for the global market but for their own people"

Well, hopefully it'll be for our people too. Brilliant points January, but, I need to be more persuaded. I'm very incredulous about # 8. And what about uwiano, hopefully it will be a fair game on both sides by the end of the day. No doubt that, the people are hardworking and enterprising but, the last thing we(don't want) is the 'J' of photos.

If we can make this a success story, real one this time, and win over "business-as-usual African development policy"

Smart move and... smart aid!

Anonymous said...

Good point Salama,
I think we need more debate on everything. The good thing about debate ni kwamba kuna possibility kubwa ya kuchagua good ideas.

Anonymous said...

6. Agricultural research and transfer of technology and skills should be the main components of the deal. ABSOLUTELY!!

It is my very hope one thing lead to another,

if those agreement include the 'know how' as a technical investment to our farmers that will be super great...but one thing for sure, the government need to match it up, with some sort of SUPPORT by injection of Funds to our agricultural sectors, particularly on FARMING TOOLS, to our farmers as the years progressing. Whether that comes from private bankings or government subsidies, that another point of discussion.

I have no doubt in mind once that is achieved in time, that would create a new market for our agricultural products, that will lined up with the Saudi Farming products in terms of quality, and resources. Then hopefully we will take leadership on agricultural sector in years to come ONCE AGAIN!(Mtoto mleavyo, ndivyo akuavyo) as a result, the last 8th point will be diminished.

If we failed on this, rest assured, we will starve our way out of farming for others!

By Mchangiaji

GAME THEORY said...

If it were m I would be on the phone with the Blackstone Group, Deutsche Bank, Goldman & Sachs and Dexion Capital bila kuwasahau Cru Investment Management wa UK ili waje wa explore the available opportunities that will benefit us both.

the question is would it be better to leave all the lands unused for another 200 years and hope the local population develops the knowledge, drive and finance to put those lands under crops or would it be better if the foreign investors would appear only as the credit facility or the donor to local authorities for them to kickstart the "green revolution" themselves and show once more how committed they are to improve the lives of their peoples?

Mbona hakuna aliyelalamika wakati wanavijiji wa Kilolo walipowapatia kwa lease mashamba NEWFOREST (t) LTD? au kwa sababu ni waarabu ishakuwa Nongwa?

Badala ya kulalamika we should be negotiating with HADCO na wale AL QUDRA waje...
If we could -only for a few moments- stop feeling sorry for ourselves we might even get something underway ourselves.

misokasick said...

I agree with all that have said we should proceed with caution. I just ran into this article, I hope it would be an interest to some. It is by Julio Gordoy.Good discussion friends.

Africa: The Second Scramble for Africa Starts
Julio Godoy

20 April 2009


--------------------------------------------------------------------------------

analysis

Berlin — Sub-Saharan African countries have of late become the target of a new form of investment that is strongly reminiscent of colonialism: investors from both industrialised and emerging economies buy or lease large tracts of farm land 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 organisations (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 news letter Weltwirtschaft und Entwicklung (World Economy and Development), called these investments "a new form of agrarian colonialism".

In an interview with IPS, Hoering said that the land grab in Africa became evident in 2008 as a consequence of the recent run to so-called bio fuels 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 Agricultural Organisation, only about 14 percent 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.

A list of the land grab investments of 2008 have been put together by the Barcelona-based NGO GRAIN, based on corporate reports.

It confirms that several industrialised 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 is an international NGO committed to promoting sustainable management and use of agricultural biodiversity based on people's control over genetic resources and local knowledge.

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.

Even private industrial conglomerates, such as the South Korean Daewoo, are also investing in land in Africa.

"In July 2008, Daewoo leased 1.3 million hectare in Madagascar, about the half of the island's territory, to cultivate maize and palm oil," Hoering said. "Daewoo paid a symbolic price for the land. Allegedly, as compensation for the land lease, it is going to invest in public infrastructure."

Unsurprisingly, the investors include the International Finance Corporation (IFC), the commercial investment arm of the World Bank.

In Sept 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-utilised" 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 tot control production and secure food imports."

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 percent 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 kilometres," 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 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.

misokasick said...

I guess my biggest worry is the current policies in existence. I think it would be imperative to review our current Land laws so that we really do not victimize local land owners. Current our land policies are not very clear and have already caused tensions with local land owners. Sometimes there has been land grabbing from the locals to benefit investors. Yes Investment is beneficial for the entire country, but we should avoid any investments that would marginalize our communities. Before any serious investment talks, a plan has to be in place to allow local communities to voice their concerns. Sometimes we bypass the local communities with the assumption they do not know what’s good for them, which is so unfair and disrespectful. I know the government is to represent the people, but the people of Tanzania have a right to participate in any critical investment plan.
In recent years, we have observed some feud between local and foreign investors; a good example is the Mara region. This reveals that without the participation of local communities, investment initiatives can neither be effective nor successful. Also a negative attitude of local communities toward foreign investors will continue to prevail. The government of Tanzania should not expect communities to happily accept any investments directed to their communities and give access to foreign investors without communities fully understanding the benefits of this investment to their communities.
The mistakes of NAFCO should not be repeated. Customary land rights and all other land rights that are critical for the survival of our communities are should be given serious consideration, respected and recognized. I guess any lease agreement should be locally utilized as January suggested. I would propose a contract between the locals and the investors. I think the government should not shy away from using some of the bright minds who have worked on land issues and see how old policies could be reformed and come up with an investment plan that would be of economic value for the country. I will say at all costs lets avoid dubious investments that are not of any economic value to the Tanzania people.

Ps: Botswana is a good example of how FDI could be beneficial if there is transparency in all dealings. As stated by Mwanyoka, it should not be a way for our leaders to get a cut in any dealings. There has to come a time that we could all collectively stand against corrupt leaders and fight for our core values that built this nation. If the women in Afghanistan were able to condemn the law against rape, is it really that impossible for us as a nation to stand up and fight these corrupt and good for nothing leaders.

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Faustine said...

Brilliant piece! I agree with what you have said. I am also glad that you have clarified the quote you made to the Saudi media.
The land deal has to have a win-win situation for the country and the investor.
If the main points you have outlined are to be followed, I am sure many Tanzanians would not have a problem with the deal.

Faustine
http://drfaustine.blogspot.com/

Anonymous said...

JY,

I guess what we need is to learn from our past adventures of allowing foreign investments. It is not a bad idea to lease out to foreign investors, however lessons learned from mining and fishing through foreign investment should be our guide when we are trying to expand our horizon into agriculture.

I recall when Mugabe decided to throw away Walowezi, we had same opportunity to invite these Walowezi who are investors just like the Saudis, but we turned the Walowezi away. One may wonder why then we denied the Walowezi the same opportunity to invest in commercial farming.

Rev.

Anonymous said...

January,

I am glad you 'fessed up about that unfortunate and unnecessary comment.I totally agree with the rationale and actually feel more comfortable seeing people have these concerns (I hope you are in sync with mkulu) but the PR of it was rather tricky, just a reminder to be extra careful when making such comments, which carry the potential of being explosive.

It's a good thing people do not split atoms in Africa like they do in the US, otherwise a public apology was called for, for political correctness at that.