Land grabs update: (a lot) more hectares than we thought, and definitely bad for development

This week’s Economist has an excellent update on the recent spate of ‘land grabs’. It argues that the balance of evidence against them as a development tool has shifted decisively (and negatively) over the last couple of years. The overall conclusion is damning: ‘When land deals were first proposed, they were said to offer the host countries four main benefits: more jobs, new technology, better infrastructure and extra tax revenues. None of these promises has been fulfilled’.

Here’s the piece in full:

“The farmers of Makeni, in central Sierra Leone, signed the contract with their thumbs. In exchange for promises of 2,000 jobs, and reassurances that the bolis (swamps where rice is grown) would not be drained, they approved a deal granting a Swiss company a 50-year lease on 40,000 hectares of land to grow biofuels for Europe. Three years later 50 new jobs exist, irrigation has damaged the bolis and such development as there has been has come “at the social, environmental and economic expense of local communities”, says Elisa Da Vià of Cornell University.

When deals like this first came to international attention in 2009, it was unclear whether they were “land grabs or development opportunities”, to quote a study published that year. Supporters claimed they would bring seeds, technology and capital to some of the world’s poorest lands. Critics, such as the director of the UN’s Food and Agriculture Organisation, dubbed them “neo-colonialist”. But no one had hard evidence to back up their claims. Now they do. Two years on, a conference at the Institute of Development Studies (IDS) of the University of Sussex, the biggest of its kind so far, examined over 100 land deals (papers and presentations available here). Most judgments are damning.

Land grabs have been strikingly popular. Preliminary research by the International Land Coalition, a non-governmental organisation, reckons almost 80m hectares have been subject to some sort of negotiation with a foreign investor, more than half in Africa (see chart). This estimate is far higher than a previous one, by the World Bank, which last year said that foreign investors had expressed interest in 57m hectares. It is higher still than one by the International Food Policy Research Institute (IFPRI) which put the figure in a 2009 study at 15m-20m hectares. It would be wrong to draw a line between these numbers so as to conclude that land deals have grown fourfold. Since most are secret, knowing what to count is difficult, and the figures refer to different periods.

Yet each time someone has looked at the phenomenon, the result has been a figure roughly twice the earlier estimate. It is also clear that the overall scope is vast: 80m hectares is more than the area of farmland of Britain, France, Germany and Italy combined. And land deals are continuing, possibly even speeding up. Over a tenth of the farmland of South Sudan has been leased this year—even before the country has formally got its independence. GRAIN, an advocacy group, says it has seen proposals that would allow Saudi business groups to take control of 70% of the rice-growing area of Senegal.

It is not just the size of land deals that remains uncertain. Their contractual basis often is, too. Few contracts have been made public, so details are sketchy. But an investigation of 12 that have been, by Lorenzo Cotula of the International Institute for Environment and Development, declares many “not to be fit for purpose”. The rights and obligations of each side, Mr Cotula says, are usually extremely vague, while traditional land-use rights are frequently ignored. As one farmer asked when a British company acquired forestry rights in Tanzania: “How come others are selling our land?”

Even after the contract is signed, there is no guarantee a land deal will go ahead in accordance with it. A survey by the World Bank (Rising Global Interest in Farmland) showed that in the Amhara region of Ethiopia, only 16 of 46 projects were working as intended (the rest lay fallow or had been rented back to smallholders). In Mozambique only half the projects were working as planned.

Still, some conclusions seem warranted. When land deals were first proposed, they were said to offer the host countries four main benefits: more jobs, new technology, better infrastructure and extra tax revenues. None of these promises has been fulfilled.

Locals usually regard jobs as the most important of these. But so far they have been scarce, and only partly because many projects are not yet up and running. In Mozambique, the World Bank found, one project had promised 2,650 jobs and created a mere 35-40 full-time positions. A survey by Thea Hilhorst of 99 smaller projects in Benin, Burkina Faso and Niger reported “hardly any” rural job creation. Only one of the publicly available contracts studied by Mr Cotula even specifies a number of new jobs to be created. And when there are jobs, foreign investors often bring in outsiders to staff them, leading to “conflict or accusations of cheating”, according to the World Bank. The manager of one project was killed during an argument about jobs.

Evidence of the transfer of technology and skills is mixed. Ms Hilhorst found almost no impetus towards greater professionalism in farming, although she concedes that closer links with food processors and distributors might improve matters. The World Bank’s study argued that technological improvements in Ukraine and Mexico had helped reduce rural out-migration (though this was surprising: you might have expected new labour-saving technologies to encourage underemployed farmers to leave the land). Mr Cotula’s study of land-deal contracts found few examples in which the foreign investor was obliged to exchange materials or ideas with local farmers. At the moment, land-grabbing foreigners seem to be creating islands for themselves, cut off from the poverty-stricken countryside.

Some projects’ operators have done better in building new schools, clinics and other “social infrastructure”. Madagascar may be a surprising example as it witnessed what is perhaps the most notorious land grab of all: a South Korean company was offered half the country’s arable land—a proposal that fuelled protests which eventually toppled the government who approved the deal. Two years later Perrine Burnod of CIRAD, a French research organisation, found that the number of land deals on the island had fallen by two-thirds. And those that remained had begun to look more like aid projects, with investors committing themselves to building schools and clinics. Local mayors were welcoming them in to help finance projects no longer supported by the cash-strapped central government.

Yet this is atypical. Most land deals contribute little or nothing to the public purse. Because markets for land are so ill-developed in Africa and governments so weak, rents are piffling: $2 per hectare per year in Ethiopia; $5 in Liberia. Tax and rent holidays are common. Indeed, it is not unusual for foreign investors to pay less tax than local smallholders. And upfront compensation to local farmers for use of their land is derisory: often just a few months of income for agreeing to a 100-year lease.

“The risks associated with such investments are immense,” concludes the World Bank. “In many cases public institutions were unable to cope with the surge in demand…Land acquisitions often deprived local people, in particular the vulnerable, of their rights…Consultations, if conducted at all, were superficial…and environmental and social safeguards were widely neglected.”

So why are land deals popular? That is surprisingly easy to answer: strong demand and willing suppliers. The big investors tend to be capital-exporting countries with large worries about feeding their own people. Their confidence in world markets has been shaken by two food-price spikes in four years. So they have sought to guarantee food supplies by buying farmland abroad. China is by far the largest investor, buying or leasing twice as much as anyone else.

Local elites have also played a vital role in spreading land deals. In a Tanzanian project described by Martina Locher of the University of Zurich, “local people who refer to customary law have a very low level of knowledge [and cannot] defend their land rights.” In contrast, she writes, “state law is mainly represented by district officials, who…enjoy a high level of respect by local people.”

Then there is corruption. Many of the west African “land grabbers” described by Ms Hilhorst are local politicians, civil servants and other urban elites who bribe local chiefs with gifts of motorbikes. Madeleine Fairbairn of the University of Wisconsin, Madison, argues that in Mozambique, an informal division of the spoils has emerged. Local bigwigs use their influence to get “facilitation fees”, while national leaders manipulate the law and promote (or obstruct) projects to their own and their supporters’ advantage.

Many development projects work this way. What makes land grabs unusual is their combination of high levels of corruption with low levels of benefit. Ruth Meinzen-Dick, one of the authors of the IFPRI study, says that in 2009 the balance of costs and benefits was genuinely unclear. Now, she argues, the burden of evidence has shifted and it is up to the proponents of land deals to show that they work. At the moment, they have precious few examples to point to.”

Land grabs: what’s in the contracts? And an Indian land grab in Ethiopia

One of the problems with so-called ‘land grabs’ is secrecy. Most of the contracts that seal such deals are hidden from public scrutiny, which makes it very hard to establish what is really going on. The International Institute for Environment and Development, which is rapidly becoming the ‘go to’ thinktank on a whole range of resource and development issues, has managed to dig up 12 such contracts and sent in the lawyers to have a look. The result is ‘Land deals in Africa: What is in the Contracts?’ Here’s what IIED found:

“A number of the contracts reviewed appear not to be fit for purpose: some are short, unspecific documents that grant enforceable, long-term rights to extensive areas of land, and in some cases priority rights over water, in exchange for little public revenue and apparently vague and potentially unenforceable promises of investment and/or jobs. Also, a number of the deals are being negotiated in legal contexts where safeguards for local interests are weak, and some contracts do not properly address social and environmental issues.

A few contracts feature better terms. A deal from Cameroon features higher and better distributed revenues, while a contract from Mali involves a sophisticated partnership with the host government and local farmers and applies international social and environmental standards. Three contracts from Liberia stand out for their more flexible duration, their clearer identification of the land being transacted, their more specific investor commitments on jobs, training, local procurement and local processing, their greater attention to local food security, and their tighter social and environmental safeguards. The Liberian contracts have been ratified by parliament and are available online.

In Liberia, determined political leadership, a strong government negotiating team, world-class legal assistance, effective use of financial analysis, and simultaneous (re)negotiation of agricultural and mining contracts (which led to productive cross-fertilisation) have made this outcome possible. Development agencies can play an important role in helping host governments access the capacity support they need.

But irrespective of contract terms, process is critical. In several of the contracts reviewed, local people appear to have been marginalised in decision-making – it is the government that usually calls the shots in contracting and land allocation procedures. So even in the better negotiated contracts, the gap between legality (whereby the government may formally own the land and freely allocate it to investors) and legitimacy (whereby local people feel the land they have used for generations is theirs) exposes local groups to the risk of dispossession and investors to that of contestation.

More generally, contracts are only part of the story. They only work if they are properly implemented. Wherever local rights are insecure or social and environmental safeguards are weak, there is a need for radical reform in national legislation, and for effective mechanisms to translate law reforms into real change. In this context, legal empowerment of local landholders is key. This means that people must have more secure rights to their land and greater control over decisions affecting it. It also means that legal rights alone are not enough – adequate capacity is needed to exercise them in practice, and collective action can help give real leverage to legal rights.

In addition, there is a need for inclusive debate in host countries. Much discussion about large-scale land acquisitions has so far been led by players and processes based in the global North. It is time for the people who are most directly concerned to have their say. The belief that large-scale plantations are needed to “modernise” agriculture is dominant in many government and investor circles, but there is no evidence to back it up. The literature suggests that many recent land-based investments are not economically viable, while family farmers have proved to be highly dynamic and competitive on global markets. It also shows that, where outside investment is required to improve productivity and livelihoods, productivity gains and commercial profitability can be achieved through working with local farmers.”

To see why this matters, read the Guardian’s John Vidal’s account of one such land grab in Ethiopia, by Bangalore-based food company Karuturi Global.

“It’s very good land. It’s quite cheap. In fact it is very cheap. We have no land like this in India,” says Karmjeet Sekhon, project manager for what is expected to be one of Africa’s largest farms. “There you are lucky to get 1% of organic matter in the soil. Here it is more than 5%. We don’t need fertiliser or herbicides. There is absolutely nothing that will not grow on it. To start with there will be 20,000 hectares of oil palm, 15,000 hectares of sugar cane and 40,000 hectares of rice, edible oils and maize and cotton. We are building reservoirs, dykes, roads, towns of 15,000 people. This is phase one. In three years time we will have 300,000 hectares cultivated and maybe 60,000 workers. We could feed a nation here.”

So does it create jobs or displace local farmers? Improve poor people’s food security or undermine it? Pay taxes or pocket a load of incentives? All depends what’s in the contract. John Vidal’s 11 minute video here.

Update: Ethiopia’s UK ambassador defends the deal here

A good new update on land grabs

Two very good summaries of the state of play on the spate of ‘land grabs’ which came to prominence last year with Daewoo’s attempts to acquire half of Madagascar (for free) on a 99 year lease (see previous overview and Daewoo blogs ).

A July paper from the International Land Coalition argues that the problem goes beyond food: ‘not only food, but also fuel, fibre, tourism, mining and ecosystem services such as carbon sequestration. Expected long-term trends in all of these sectors are promoting investor interest in land that was previously marginal to economic interest… [but] investors are more and more coming into direct competition with local populations.’

The paper summarizes the different publications, initiatives etc on land grabs (the ILC even runs a ‘commercial pressures on land’ blog). Some of its main points:

Virtually no large-scale land allocations can take place without displacing or affecting local populations. In particular, local populations who use the land for non-arable uses such as pastoralism or hunting and gathering are liable to be ignored.

“Land grabbing” implies accumulation of landholdings through illegal and/or illegitimate means. In most cases, however, land allocations do not violate domestic legal systems. Most large-scale land leases are of state land. In addition, significant land purchases by agribusiness companies from small and medium-scale landowners are occurring on privately held land, particularly in transitional countries and in Latin America. Widespread processes of concentration through market mechanisms are resulting in high inequalities of land ownership.

Although foreign investments in land are not a new phenomenon, the current wave can be characterised by:
· The size of land acquisitions, in many cases over 100,000Ha;
· Food and energy security as a key driver, and not necessarily economies of scale from largescale production;
· A severe lack of transparency and low levels of public consultation; and
· The increasing involvement of governments, or government-related agencies, in negotiations.

Foreign investors often act in partnership with domestic investors, in a relationship where the land acquisition aspect of the investment may be led by the domestic partners. Speculative land acquisition by domestic investors acting alone is commonly for smaller land parcels, but the scale at which it is occurring makes it significant.

The ILC argues that given neglect by governments and aid donors, private or foreign investment in agriculture is necessary, and suggests five ways to curb risks and seize opportunities:

Ensuring the fair sharing of benefits, particularly opportunities to benefit from growing economic rents
Ensuring that foreign investment in land does not adversely impact on host country food security
Recognising the land rights of the poor as a starting point when considering land-based investments
Ensuring more inclusive and transparent processes for decision-making
Developing and promoting alternative models for agricultural investments

It’s a good paper, but if you just want a good two page overview, the FAO have an excellent policy brief, called ‘From Land Grab to Win-Win’.

What’s different about the current spate of land grabs in poor countries?

This week’s Economist has an excellent overview of the issues surrounding what it calls ‘outsourcing’s third wave’ (the first two were manufacturing and services) – deals in which foreign investors are buying up huge tracts of land in poor countries to produce food to ship back home (see map). Some highlights:

Saudi investors are spending $100m to lease land from the Ethiopian government to produce wheat, barley and rice. From 2007-11, the World Food Programme is spending $116m on food aid for 4.6m Ethiopians threatened by hunger and malnutrition. (Shades of Ireland exporting food to England during the great famine of the 19th century).

Compared with previous styles of foreign investment in agriculture (think banana companies in Central America), the current deals are different because of:

1. Scale: Sudan is setting aside about a fifth of its agricultural land for Arab governments. In total, between 15m and 20m hectares of farmland in poor countries have been subject to transactions or talks involving foreigners since 2006. That is equal to France’s total agricultural land. These deals are worth an estimated $20 billion-30 billion—at least ten times as much as an emergency package for agriculture recently announced by the World Bank and 15 times more than the American administration’s new fund for food security. The food produced could account for almost a fifth of world cereal trade.

2. Most of the deals focus on food and biofuels, whereas foreign investors previously focussed on cash crops (coffee, tea, sugar, bananas).

3. In the past, most foreign investment was private. Although some of today’s big deals involve multinationals (Morgan Stanley bought 40,000 hectares of the Ukraine in March), many more of the current crop involve government-government deals or parastatals like Sovereign Wealth Funds.

The obvious motives for the deals are the spike in food prices and the subsequent decision of governments in several key producer countries to restrict their exports, threatening the food security of food importing countries such as the Gulf states, China and South Korea (the main participants in the deals). However, water shortages are another, hidden driver. Peter Brabeck-Letmathe, the chairman of Nestlé, claims: “The purchases weren’t about land, but water. For with the land comes the right to withdraw the water linked to it, in most countries essentially a freebie that increasingly could be the most valuable part of the deal.” He calls it “the great water grab”.

Governments are promising would-be investors that the land is ‘empty’, but it often supports herders who graze animals on it. Land may be formally owned by the state but contain people who have farmed it for generations. Their customary rights are recognised locally, but often not accepted in law, or in the terms of a foreign-investment deal.

Various bodies, including the FAO, IFPRI and the African Union are developing codes of conduct to improve the terms of the deals, covering issues such as respecting customary rights; sharing benefits among locals (ie, not just bringing in your own workers), increasing transparency (current deals are shrouded in secrecy) and abiding by national trade policies (which means not exporting if the host country is suffering a famine). According to the Financial Times, Japan also intends to raise the issue at the forthcoming G8 summit in Italy.

Fine, but it’s going to be extremely hard to enforce such promises between players of such disparate power.

For a much more detailed (110 page) report on land grabs in Africa, check out the new report ‘Land Grab or Development Opportunity?’, jointly published by IIED, FAO and IFAD.

For previous posts on land grabs in Madagascar, see here. Global Dashboard and Javier Blas at the FT have also regularly covered the issue.

Update 11 June: The UN Special Rapporteur on Food issued a set of 11 principles that should govern land grabs.