THE NEW COLONIALISM (Part 2): THE INVESTOR NEEDS A WEAK STATE

COMMENTARY ARCHIVES, 30 Jul 2009

Horand Knaup and Juliane von Mittelstaedt

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 being 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 permits 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 western 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 €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 €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 work, says Erastas, Dominion sends in bulldozers, thugs and sometimes even the police.

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 livestock. 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 minute, 9,240 per hour or 221,760 per day. And each one of them wants to eat.

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Translated from the German by Christopher Sultan

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