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New scramble for Africa's land

Foreign investors criticized for leasing huge tracts of African land for commercial farming.

Typical of the kinds of deals that worry Ochalla is one that saw Addis Ababa sign over 740,000 acres of land to Karuturi Global, India’s largest exporter of roses, to grow cereals and vegetables.

Ethiopia’s government owns all the land in the country and offered Karuturi a six-year rent holiday, after which the company will pay just over $2.50 per acre.

Indian firms have been driven to invest in land in Africa because of the difficulties of acquiring large acreage in India, the prospect of cheap labor and economic incentives from the Indian government, said Anand Seth, deputy director general of the Federation of Indian Export Organizations.

A duty-free tariff preference scheme, for example, means that Ethiopian farm produce entering the Indian market is taxed less. "If somebody invests in North India, he may not get those tax benefits," Seth said.

Karuturi is just one of some 80 companies the Indian government has helped invest in agricultural land in Ethiopia. Others include Ruchi Soya which has leased 61,000 acres to grow soya beans, maize and lentils, and Shapoorji Pallonji & Co. leasing 123,000 acres to grow oil seeds and biofuels.

Karuturi boss Sai Ramakrishna Karuturi has argued that fears of “neo-colonialism” raised by activists such as Ochalla are misplaced.

It is not just community organizers and activists who are concerned by this emerging trend. In its report the World Bank notes, “investor interest is focused on countries with weak governance,” encouraging the perception that foreign companies and unscrupulous African leaders are striking deals that do not benefit citizens.

There is perhaps no clearer example of the danger these deals can pose if done badly than Madagascar, where South Korea’s Daewoo Logistics attempted to lease 3 million acres for 99 years, roughly half the island nation’s arable land, to grow corn and palm oil for export. Dismay at the 2008 deal helped spark a revolt that overthrew the government in Antananarivo.

Deals with foreign companies seeking to grow food for export in Africa are high-profile but Hobbelink warns that other, quieter arrangements are just as worrying.

“There is a bigger trend where the finance industry has become interested in land,” he said.

“It is a commodity which you can speculate on, selling for a higher price in five or 10 years time,” he said. Hobbelink warns that with the amount of arable land finite the combined pressure of climate change and dwindling water resources means it is a trend that will not go away.