World Bank cautions on land acquisition in Africa

By | July 29, 2010

I first read of land acquisition deals in Africa about two years ago.  It was between South Korea’s Daewoo and the Madagascar government, and the details included leasing the land for 99 years, mainly for farming. The produce was to be exported, but Daewoo promised to invest 6 billion dollars over a period of twenty years in port facilities etc etc. The deal eventually fell through, primarily because of a change in government in Madagascar. Other deals in other parts of Africa were subsequently finalised.

A report prepared by IFAD in 2009 says that there have been ‘significant levels of activities’. In the five study countries on which the report is based, the available data showed that ‘an overall total of 2,492,684 ha of approved land’ had been allocated between 2004 and 2009. For perspective, ‘that is almost half the arable land of the United Kingdom and three times the arable land of Norway.’ In Sudan and Ethiopia alone, over the same period, the figures are 3.9m and 1.2m ha respectively.

The main reasons given for land acquisition include food security (remember the high prices of food in 2008), and biofuel production (EU has biofuel consumption targets; plus oil prices were also crazy high in 2008). Now, it has turned out that there probably are other issues underlying the acquisition drives.

From a new report prepared by the World Bank and leaked to FT, it seems that speculation might be a reason for what has now been described as ‘land grabs’. Speculators acquire land at extremely low rates, hold it for a while and then sell it off later at a higher rate.

The more troubling issue is that investors are crowding out poor, local farmers and producers. From Guardian:

They [the report] argue that investors crowd out the poorest local producers and at the same time invest little in improving the agricultural processes needed to meet the huge jump in world food production required to feed a burgeoning population.

There are also issues concerning the targetting of countries with weak land governance. Still from Guardian:

“Investor interest is focused on countries with weak land governance,” the draft said. Although investment deals promised jobs and infrastructure “investors failed to follow through on their investment plans, in some cases after inflicting serious damage on the local resource base”.

I am actually not too surprised by this. Land issues are extremely difficult issues in much of Africa. I wrote a column for Business Day on this sometime last year.

My general reaction to this is that land deals do not necessarily have to be bad. If African governments could make deals that favour their countries there wouldn’t be much to worry about. Sadly, however, we know that it is often not the case. As a kind of solution, the World Bank report recommends a Land Transparency Initiative

modelled on the Extractive Industry Transparency Initiative, which commits governments, mainly in developing countries, to disclose revenues from oil and mining groups to improve transparency on the deals. Critics noted that eight years after its launch, only Liberia, Timor-Leste and Azerbaijan, were full members of the EITI. But the draft said: “By establishing a consistent format for reporting on land acquisition and monitoring [the] process over time, it could provide access to information sorely missing.

Although it is doubtful whether this will work, it seems to be the only suggestion on the table at the moment.

Another one to watch.

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