15 April 2011

By Karolina Riedel and Klara Sommerstein,

The phenomenon of large scale land acquisition has increased in recent years. There is a current debate regarding the effects of large international investors buying or leasing land in poor countries. Ethiopia is heavily affected by this and the government is currently implementing a policy encouraging investors to lease land for commercial agricultural purposes. Ethiopia attracts investors with its cheap labor and fertile land.

This study is conducted in order to shed light on and investigate the welfare situation for people affected by these investments. The study is performed in the Oromia Region along the Central Rift Valley in Ethiopia. A quantitative approach is used to investigate three large international companies and their effect on the households’ welfare. Questionnaires and complementing qualitative interviews have been made with employees at the companies (treatment 1), people living in the area but not employed (treatment 2) and a control village.

The key findings of the study are that the companies create job opportunities, altogether the companies employ over 12,000 local inhabitants. There is also a great supply of labor meeting the companies, though many of the employees have applied for other jobs while employed. We find that wage has a positive impact on welfare. While the wage is the same for employees at the companies as outside, the household sizes for the employees are smaller and thus the income is distributed on fewer people. The result of the study also shows that water is important for welfare. As the companies use water abundantly and the region suffers from water shortage this could have negative implications on welfare in the future. The public opinion regarding the investments is strongly positive, something not completely reflected among the ones affected by the companies.

Our study finds the companies to have both positive and negative impacts on peoples’ welfare. This is due both to the complexity of measuring welfare and to the intricacy of the investments and their varying effects on different components of the society.

Full report : Land grabbing in Ethiopia - welfare or farewell