Development or Exploitation? Foreign Investment in Ethiopia’s Agriculture

Mar 04, 2011

(MoFA, Mar 04, 2011)- Ethiopia’s development strategy and policies have resulted in double digit economic growth for the past seven years. Last year it also launched the ambitious but achievable Growth and Transformation Plan (GTP) to sustain the momentum of this growth through the next five years. A major element in the plan is agriculture and agro-processing. Agriculture remains one of the mainstays of the economy and the main source of employment and foreign exchange, and the government has committed itself to promote and attract potential investors to participate in agricultural investment with a variety of incentive packages as well as transparent policies, laws, regulations and procedures. Ethiopia is of course politically, socially and macro-economically stable; it has significant market opportunities, an abundant and trainable labor force, and diversified agro-ecological zones.

The recent trend in agricultural foreign investments has tended towards large scale farming, and the government has launched a number of transparent procedures to encourage investors to utilize uncultivated, under-utilized or remote areas. The intent is to create employment opportunities, build up the economic and social infrastructure and the livelihood of local farmers as well as improve the country’s economic growth and poverty alleviation strategy, and generate foreign exchange by producing agricultural products for export. As Ministry of Agriculture officials have made clear, less than a quarter of the potentially suitable land for agriculture is currently farmed. A significant element is used by pastoralists and others, but there is plenty of under-used or unused land that could be available to those attracted by reasonably long leases and tax holidays, and prepared to provide jobs, infrastructure for local development and other benefits.

The trend for leasing such land to investors from outside for farming, in Ethiopia as well as a number of other African states, is partly driven by the recent global food price rises, but it is also encouraged by the need for countries to develop their agricultural resources and create the kind of agri-businesses which can help feed their populations. As the FAO representative in Ethiopia pointed out some time ago if the deals are negotiated properly, they will change the dynamics of Ethiopia’s food economy. Foreign investors can provide technical expertise in water development and standardization of food production, training in techniques and the provision of the necessary technology and financial backing to utilize areas productively. Investment creates jobs in any given region, sometimes on commercial plantations but also on small farms. It involves basic infrastructural development as well as more extensive advantages for the region in the provision of administration and medical and educational facilities. It will in fact help transform the country's rural economy.

Although these deals generate jobs and provide skills as well as increase tax revenues and food production on a significant scale, it has not prevented deliberate distortion of the facts. Human rights and advocacy groups and opposition media alike have portrayed deals as ‘land-grabbing” or “neo-colonialism” and in some cases even claiming the projects threaten the ability to feed the population, using histrionic claims of selling the land of ancestors or similar exaggerations. Accusations of environmental disaster are also used to generate headlines in the international and national media. Much of the criticism appears politically motivated, based on allegations which are simply not true: land is not being given away to other countries – leases, not sales, are being granted to foreign companies, not countries, and under strict conditions. “Farmland invasion in Africa” has made headlines in the press, and the use of such phrases as “neo-colonial”, “agro-imperialism” or “land-grabbing” encourage emotive responses. The process is however investment; it is not “land grabbing”.

Certainly, the Ethiopian government has been taking considerable care over environmental and social considerations when allocating land for investors, and done everything to try to avoid creating conflict between investors and local communities. In a recent interview, the prominent investor Sheikh Mohamed Al-Amoudi who currently leases 10,000 hectares for a pilot project for rice production in Gambella Regional State, detailed the value the project will provide in terms of jobs, foreign currency and increased food production. Under the agreement his company will be allowed to export no more than 60% of its production; 40% will be for local consumption. He is currently looking to increase the investment to US $450 million and significantly expand the area to be cultivated.

It is of course important to keep a balance between protection of the environment, the needs and livelihood of local populations, and agricultural or other developments. It is symptomatic of this concern that issues have been raised over the Gilgel Gibe III dam or the development of tea plantations in Gambella Regional State. This is where the work of the Environmental Protection Authority becomes of importance in evaluating the environmental sustainability and essence of the deals, the need for commercial farms to use best practice for soil and water conservation and development, and to be carbon-neutral. Investors are expected to bring in sustainable technology and provide facilities for local farmers to acquire and use such developments; in other words, provide facilities to improve general productivity in the region and benefit Ethiopia.

Ethiopia, like other countries in Africa, is well placed to capitalize on the growing world demand for bio-fuels and food self-sufficiency. Foreign investment in agriculture in Africa will clearly help Africa to become food self-sufficient. Indeed, large-scale foreign agricultural investment is a process by which countries, like Ethiopia, can help offset the effects of global warming. There are obvious and major advantages both for the countries concerned and for companies from food-importing countries, marrying available resources and suitable opportunities. It offers developing countries a way to reverse long-term under-investment in agriculture, obtain the use of new seeds and techniques, improve marketing, increase employment and provide related infrastructural developments, including schools, clinics and roads. It is worth emphasizing that the developments will not disappear when the leases end. The developments and improvements will, of course, remain. Implementation of such a land and agricultural investment policy is in fact a valuable addition to development policies and practices, and offers the possibility of real progress in the eradication of poverty