Adonis Diaries

Posts Tagged ‘Joint-ventures

The world’s food basket: Africa is heaven for agribusiness investments.

( Part 2, Nov. 12, 2009)

You may read part 1: https://adonis49.wordpress.com/2009/11/11/africa-is-targeted-to-be-exclusively-the-worlds-food-basket/

Let us plan for the year 2050; most probably earth will be inhabited by 10 billions humans.  We are barely feeding the current world population and millions are dying of famine related malnutrition.  Many under-developed States with vast “fertile” lands are leased or acquired by foreign agribusinesses. 

So far, 30 millions hectares (the size of 30 Lebanon or the size of the Philippines) are already in use for mass agricultural production.  Even China, rich in water and fertile lands, is leading this policy of “getting out of the borders”. 

There are two main reasons for China investing in agriculture overseas:

First, more water is diverted to the thousands of giga-urban centers;

Second, water is so heavily polluted by heavy industrialization that agriculture is suffering,

Third, climatic changes are transforming main wheat fields in the north into semi-desert lands,

Fourth, while the US and Britain are fighting their preemptive wars in Iraq and Afghanistan, China takes the great opportunity to sureptitiously invest in infrastructures in Africa that lead to the raw material fields

Africa is the target continent because it has four large and long rivers such as the Nile, the Congo, and the Niger Rivers.  The Sudan, Mozambique, and the Democratic Congo are prime targets in the medium-term. Vast fertile lands are left unproductive for lack of investment and manpower.

  Theoretically, we should have win-win situations, but the facts are that the contracts of the multinational agribusinesses are not transparent:

1. There are no clauses on specificities that might benefit the population either in technology or land development.

2. Most of the contracts are barely three pages long and contain no precisions on investors’ obligations toward investing in infrastructures, durable management of the natural resources, or the training of the local peasants for developing small parcels of land and applying the technology. 

The President of Earth Policy Institute, Lester Brown,  said:

“Essentially, the technologies used by these agro-investments are meant for massive commercial production and not adaptable to the concerned small local farmers.  There is basically no transfer of technology or training. Thus, what the foreign investors are acquiring in lands is not going to feed the local population as we might hope.”

Let us consider the case of the oil rich Arab Gulf States: rice is their main staple and it has to be imported in totality. These States imported a third from India and then India had to curtail its exportation of rice due to climatic problems in order to feed its citizens.  These Emirate Gulf States imported 10% from Thailand (the first exporter of rice in the world) but then Thailand doubled the price of its rice to $1,000 the ton. 

How the Arab Gulf States were to counter this difficulty?  Their Sovereign Funds could be invested in rice fields in Thailand and that what they started to do. You could have a win-win situation: there are vast lands in Thailand that are not cultivated; increasing rice production should not hurt Thailand since rice prices are increasing and Thailand needs to secure oil provision. 

Instead of purchasing 10% of its need in rice from Thailand, the Arab Gulf States might increase it to 40%. One happier story: Thailand needs to establish a rice warehouse in the Arab Gulf to distribute rice at affordable prices.  Things should look pretty promising.  Joint-ventures in agribusinesses where Sovereign Funds invest the money and the Thai peasants got to work in jobs they are proficient in should not raise so much fuss: should it?

The problem is that internal politics in Thailand want a scapegoat: Arabs buying lands in Thailand; or rice production is a strictly national occupation and should be 100% reserved for citizens (as if the Arab is going to relocate to plant rice in Thailand!); or Thailand is not Africa and we are a developed nation.

Another case is Madagascar, a vast Island in East Africa. 

The standard of living in Madagascar has fallen below the one in 1960.  Why Independence pride has to be highly correlated with miseries in the former colonial States?  Major deforestation is the norm in Madagascar: people need to cook their meals! The South Korean Daewoo wanted to lease 1.3 million hectares for 99 years.

What it is with this taboo of 99 years lease of lands? Does every investor has in the back of his head to let his grand child witness his greatness and pray for his great spirit? The deal fell apart after the President of Madagascar, Marc Ravalomanana, fell out of power.

Apparently, not much transparency and communication were accompanied to that deal. In the meanwhile cattle thieves “dahalo” are on rampage. Even the tiny Maurice Island acquired lands (10,000 ha) in Mozambique for the island food sufficiency. Ramakrishna Karuturi (the king of rose production in 4 millions hectares) is leasing the hectare for two dollars a year in Ethiopia! Now, there can be no doubt that the Ethiopian government had received a fat bribe for such a lousy deal.

The Congo with Capital Brazzaville is half the size of France with barely 4 million citizens concentrated in the Capital and the other city Pointe-Noire on the coast. This African States was a French colony and is rich in minerals and uranium.  It cultivates potatoes.  

South Afrikaners who lost 30% of their agricultural lands for redistribution programs to the black citizens want to acquire or lease lands in this Congo; the Agri SA (South Africa) has 1,700 agribusinesses interested in producing soja, sugar cane, and corn. Ten million hectares were literally offered to the Afrikaners (a land stretching 500 by 200 km, twice the size of Switzerland) and its location is not yet decided upon; maybe entire virgin forests might be burned for agriculture. The Agri SA is promising to build agro-villages with ready-made houses contracted to Israeli firms.  What if the deal demanded that thousands of Congolese be trained to develop and grow lands after two years of working in the Afrikaners’ lands?  This deal is a striking political and ecological scandal because the terms of the deal are fishy and not communicated to the citizens.

Kazakhstan is practically a continent in size and barely 1% of the land is privately owned.  This rich and newly independent State imports 40% of milk, 30% of meat, and 45% of fruits and vegetables. The population is mostly rural. The States lease lands for 49 years. 

The State of Kazakhstan has set aside 35,000 square-kilometers to lease to foreign investors but only China is interested. Europe is not interested in leasing lands in Kazakhstan but China is.  China has already leased 40,000 hectares and planning on increasing its agribusinesses.

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