Guardian | 14 October 2011
John Vidal
For a few thousands dollars a year, an Indian agribusiness, Karuturi, rents 2,500 sq km of land in Ethiopia's Gambela province. Government ministers in Addis Ababa claim it is marginal, unused land, and its situation at the far western border with Sudan suggests this is so.
In fact, the black soil is extremely fertile, the vast landholding is accessible by a good road, and, above all, the land borders the mighty river Baro, a tributary of the Nile. It is prime land in one Africa's least exploited regions. Karuturi's owners, who are planning to grow palm oil, cotton, vegetables and maize there, only had to look at a good map to understand its real value.
But, say Oxfam researchers, it is one of the four great myths built up by governments and companies that most of the 100m hectares of land allocated in the last few years by governments in Africa and Asia to foreign agribusinesses, pension funds or speculators is "marginal" or little used.
"Despite claims to the contrary, investors target the best lands," say the researchers. "They seek land with access to water resources, fertile soil, infrastructure and proximity to markets to facilitate the profitability and viability of their ventures. The large-scale projects tend to be located where most people live. Further analysis shows that these are also the places where poverty rates are relatively lower and where land was already in use for food production – rather than it being empty, unused, marginal land in poor regions."
The second myth is that the projects will help bring food security and energy security. Research in Ethiopia, Ghana, Mali, Mozambique, Senegal and Tanzania has found that most of the deals being struck are for export commodities, including biofuels and cut flowers. In Mozambique, where about 35% of households are chronically food insecure, a mere 32,000 hectares out of the 433,000 approved for agriculture investment between 2007 and 2009 were for food crops.
"Unrestricted export clauses in contracts, together with small-scale food producers losing their key productive asset, may well worsen rather than improve food security," says the report. "Moreover, investors' short time scales may tempt them into unsustainable cultivation practices, undermining agricultural production in the long-term. The research also shows that current costs of producing biofuels are prohibitive for African countries, meaning that raw materials must be exported to US or European markets to be economically viable."
The third myth being encouraged by host governments is that the projects will create jobs. In fact, analysis of the contracts, shows that local employment generation requirements are absent from contracts and rarely materialise in practice. "Jobs appear to be few, short-lived, seasonal and low-paid.
Surveys and analysis of agro-investment in west Africa show that very few jobs were created for local people, while pastoralists and women – who rely upon the land, trees and water in common areas for economic activities – were suffering as a result of reduced access.
The fourth myth is that the projects will bring tax revenues. What really happens, says Oxfam, is that governments "actually forfeit benefits by offering tax incentives in the race for investment finance. In 2008, the government of Pakistan offered 'tax exemptions, duty-free equipment imports, and 100% land ownership in special free zones in its agriculture, livestock and dairy sectors', in a bid to attract foreign investors.
"Income tax is usually only payable once the investment project becomes profitable. Even if the host government has not forfeited benefits through tax incentives, it often lacks the capacity or the political will to regulate and monitor the investment, enforce the terms of the contract, or collect taxes."
The World Bank, the International Institute for Environment and Development, and Oxfam's research in Africa all found that taxes were rarely collected.
Farm workers tend young plants at the palm oil plantation owned by the Indian company Karuturi near the town of Bako in Ethiopia. (Photo: Jose Cendon/Getty)
John Vidal
For a few thousands dollars a year, an Indian agribusiness, Karuturi, rents 2,500 sq km of land in Ethiopia's Gambela province. Government ministers in Addis Ababa claim it is marginal, unused land, and its situation at the far western border with Sudan suggests this is so.
In fact, the black soil is extremely fertile, the vast landholding is accessible by a good road, and, above all, the land borders the mighty river Baro, a tributary of the Nile. It is prime land in one Africa's least exploited regions. Karuturi's owners, who are planning to grow palm oil, cotton, vegetables and maize there, only had to look at a good map to understand its real value.
But, say Oxfam researchers, it is one of the four great myths built up by governments and companies that most of the 100m hectares of land allocated in the last few years by governments in Africa and Asia to foreign agribusinesses, pension funds or speculators is "marginal" or little used.
"Despite claims to the contrary, investors target the best lands," say the researchers. "They seek land with access to water resources, fertile soil, infrastructure and proximity to markets to facilitate the profitability and viability of their ventures. The large-scale projects tend to be located where most people live. Further analysis shows that these are also the places where poverty rates are relatively lower and where land was already in use for food production – rather than it being empty, unused, marginal land in poor regions."
The second myth is that the projects will help bring food security and energy security. Research in Ethiopia, Ghana, Mali, Mozambique, Senegal and Tanzania has found that most of the deals being struck are for export commodities, including biofuels and cut flowers. In Mozambique, where about 35% of households are chronically food insecure, a mere 32,000 hectares out of the 433,000 approved for agriculture investment between 2007 and 2009 were for food crops.
"Unrestricted export clauses in contracts, together with small-scale food producers losing their key productive asset, may well worsen rather than improve food security," says the report. "Moreover, investors' short time scales may tempt them into unsustainable cultivation practices, undermining agricultural production in the long-term. The research also shows that current costs of producing biofuels are prohibitive for African countries, meaning that raw materials must be exported to US or European markets to be economically viable."
The third myth being encouraged by host governments is that the projects will create jobs. In fact, analysis of the contracts, shows that local employment generation requirements are absent from contracts and rarely materialise in practice. "Jobs appear to be few, short-lived, seasonal and low-paid.
Surveys and analysis of agro-investment in west Africa show that very few jobs were created for local people, while pastoralists and women – who rely upon the land, trees and water in common areas for economic activities – were suffering as a result of reduced access.
The fourth myth is that the projects will bring tax revenues. What really happens, says Oxfam, is that governments "actually forfeit benefits by offering tax incentives in the race for investment finance. In 2008, the government of Pakistan offered 'tax exemptions, duty-free equipment imports, and 100% land ownership in special free zones in its agriculture, livestock and dairy sectors', in a bid to attract foreign investors.
"Income tax is usually only payable once the investment project becomes profitable. Even if the host government has not forfeited benefits through tax incentives, it often lacks the capacity or the political will to regulate and monitor the investment, enforce the terms of the contract, or collect taxes."
The World Bank, the International Institute for Environment and Development, and Oxfam's research in Africa all found that taxes were rarely collected.
