December 7th, 2009
Ethiopia. Now is harvest time
by Julie Zaugg
Fertile land. Indians and Saudis are preparing for their first harvest on Ethiopian soil. Ethiopia intends to make over 2.7 million hectares to foreigners.
The smell of curry pervades the house where his wife, dressed in a sari, is busy cooking the meal. “I never eat African”, declares Hanumantha Rao, swallowing a mouthful of dahl, the traditional Indian lentil-based dish. Despite this, the Madras-born manager today lives in Africa, at the heart of one of the most fertile regions in Ethiopia, a verdant plateau stretching west of Addis-Ababa towards Sudan.
Ethiopia. In June 2009, the Indian company Karuturi took up intensive farming here. The harvest will be exported to Asia and Europe.
Eleven months ago, Hanumantha Rao moved 4,800 km away from his home to supervise the growing of maize, rice and vegetables for the Indian company Karuturi. Karuturi, the world’s largest producer of cut roses, had decided to diversify its activities into agribusiness. The rise in global food prices, which peaked around mid-2008, makes it a very promising sector for investment. This is especially true for Ethiopia since it has privileged access to Europeans consumers: Ethiopian goods which fall under the Everything But Arms deal are exempt from taxes and quotas. Furthermore, the country has plenty of land and it is cheap. “The government leases it to us for 127 birr [11 francs] per hectare per year.” Moreover, for the first five years, the company does not pay anything. “In India, we could never have obtained such a large area. Trying to buy 10 hectares is difficult.”
The Bako farm, 250 km west of the Ethiopian capital, is the first piece of the jigsaw. Spanning 10,918 hectares, it is found at the end of a red-earthed, waterlogged path, stretching as far as the eye can see.
Men in fatigues, armed with AK-47s, are guarding the entrance. Right now, the “farm” amounts to a wooden awning over a few plastic chairs and three state-of-the-art tractors. The company has imported 30 tractors from the United States and brought in 10 water-pumps and 30 generators from India. This technological deployment is in stark contrast with the archaic tangle of small plots around the farm where Ethiopian farmers still use ploughs and scythes. On the right of the awning, maize covers a neat square of 1,000 hectares. The first harvest is due in October. Part of it is intended for export.
White gold. Karuturi, whose headquarters is in Bangalore, is actually mainly interested in rice. “We are conducting tests on 10 hectares, to check whether the soil is suited to this kind of crop, which practically does not exist in Ethiopia.” Eventually, the company is planning to produce five million tons of rice a year here. The rice will be exported to Asia — mainly India — and to a few African countries (Sudan, Tanzania, Kenya). Peppers ocupy an additional four hectares. Courgettes, beans and onions will also be grown here for the European and American markets.
“The locals do benefit from the fact that we are here,” Hanumantha Rao maintains. “We are bringing them both our agricultural know-how — with our machines, fertilisers and pesticides — and jobs: 98% of Bako’s employees are locals. Only the management, a dozen Indians, are not [local].” What’s more, he promises, “We are going to build a school and a clinic to get closer to the local community.”
This does not stop him from barking at his workers, in English, while his assistant throws small change to the children running after the tractors. In their rubber boots and their beige anoraks, the two Asians stand out next to the Ethiopian workers who are barefoot in the black mud. Three-quarters of them are day labourers and receive 20 to 25 birr per day [around 1.70 francs]. Some have complained to a local paper that they were only paid 7 to 8 birr [ 60 centimes].
What was growing here before, on the land now cultivated by Karuturi? “Not much,” according to the manager. In fact, the locals used to grow tef, the major cereal in the Ethiopian diet. They also used the land as pasture. This is not allowed any more. The company has installed a fence and dug a trench around the farm, in order to stop the cattle from trespassing. Seven months ago, the situation got very tricky: armed with machetes and sticks, the villagers attempted to attack the Karuturi employees. The police were called in.
Despite these setbacks, the Indian firm has no intention of stopping now. It has its eye on 300,000 hectares further west, in the region of Gambella. “The Ethiopian government have already provided 40,000. We should get the rest in four or five months. We will grow sugar, rice and palm oil for export,” explains Hanumantha Rao. He is due to go there the following day, together with a delegation from Cargill which came in specially from New York.
Here comes the sheikh. Ethiopia attracts a lot of investors. In 2008, Saudi Arabia was hit full force by the rise in world grain prices and got scared. What if it couldn’t feed its 25 million inhabitants, many of whom are poor immigrants? In order to ensure its food security, King Abdullah has decided to outsource Saudi food production and created a public fund of US$5.3 billion to provide loans at preferential rates to Saudi companies which wanted to invest in countries with strong agricultural potential.
In January 2009, the King received with great fanfare the first sacs of grain produced abroad: Ethiopian rice courtesy of Jenat, a joint venture between three Saudi companies (Tadco, Almarai and Al-Jouf). The project had been put in motion by a man as discreet as he is powerful: Sheikh Mohammed Al Amoudi.
Born to an Ethiopian mother and a Yemeni father, the sheikh got Saudi citizenship and made a fortune in construction and real estate. With US$9 billlion in personal assets, he ranks 43rd on Forbes’ list of the world’s richest people. In Ethiopia, he employs 40,000 people through Midroc, a consortium that runs factories, hotels, hospitals, malls, a gold mine and …Elfora. Elfora produces meat, poultry and agricultural goods for export to Saudi Arabia, Dubai, Yemen, Djibouti, Egypt, Ivory Coast and what used to be Congo Brazzaville. The company runs three farms in Ethiopia.
A land of vines and zebus. One of these farms is in Meki, a dusty town located 134 km from the capital, in the heart of the Rift Valley. Goats and zebus graze on yellowing pastures that stretch to the horizon. Not many crops around. Here and there, herdsmen with their plastic containers swarm around a community well bearing the logo of the NGO that built it. Water is a precious resource in Ethiopia, but this has not stopped Elfora from installing a sophisticated irrigation system on the hundreds of hectares under its control. “Water and fertiliser are automatically applied to each plant through a computerised dripfeed,” Getachew* explains. He is the person in charge of this operation set in the midst of vines gently sloping down toward the Arsi mountains. “We are experimenting with grapes on 15 hectares, but we also grow white haricot beans and maize, and we’re about to plant tomatoes and peppers.” Everything will go to the Middle East, Israel and the rest of Africa.
Further south, a barbed wire fence stands at the edge of the road on the outskirts of Awassa. A white sign marks the entrance to Elfora’s Melge/Shallo Farm. Five years ago, Al Amoudi was given 3,000 hectares by the Ethiopian government but he is only just starting to farm it. A sea of white tarpaulins stretch to the horizon. Those are the greenhouses. Suspended several metres off the ground, people are busy erecting the heavy metal frames. The Dutch horticulturist Jan Prins has been allocated 1,000 hectares on the farm to grow vegetables for the sheikh.
According to Gelata Bijiga, the manager of the farm, “The first vegetables will be ready in five months. They are intended primarily for Saudi Arabia, but also for Dubai, Bahrain and Europe.” In the Spanish-made greenhouses, seedlings are already sprouting in the little plastic containers sitting directly on the ground. The wooden tags tell you what they are: celery, broccoli, Brussel sprouts, radish, beetroot, fennel. All the employees are Ethiopian. “We have 300 workers right now. There will be 1,000 in due course,” the manager says. The Saudis don’t pay much better than the Indians. “But working conditions are good,” a worker says while watering the seedlings. “Farming in Ethiopia is hard work. Here, at least I learn about modern agriculture.”
Others are not so lucky. The local villagers who used to let their herds graze on this state property don’t have access any more. At first, this generated tensions. “They tried to force their way in,” Gelata Bijiga remembers. “So we threatened them with legal action and things calmed down.” A 2002 UN report indicates that on another farm at the edge of the desert area in the northeast, Elfora managed to get rid of the Afar nomads who used the area as pasture in the dry season, by making it mandatory to buy plots in “pasture zones”.
2.7 million hectares. In fact, the government is very pleased with the influx of foreign capital. “Ethiopia is a rural country: 80 per cent of our jobs and around 45 per cent of our GDP come from agriculture,” says Abeba Deressa, the Minister for Agriculture, sipping a cup of the strong local coffee at his desk in Addis Ababa. “However, out of the 74 million hectares of arable land, only 14 to 18 million hectares are exploited to date — predominantly (95 per cent) by small farmers growing subsistence crops. Foreign investment is therefore crucial.” The idea is to increase productivity, improve infrastructures, create jobs and get technology transfer.
The state owns all the land in the country, a remnant from the socialist Derg regime of 1974-1991, and has done a quick survey to establish an inventory. It will provide foreign investors with 2.7 million hectares — 1.6 million of them before October — at very favourable conditions.
“We are offering leases between 50 and 99 years at minimal rent (US$10 to 12 to the hectare), five to seven years of land tax exemptions, and zero tax on imported machinery,” the Minister boasts. The government is trying very hard to help foreign firms set up shop. If an investor brings in 30 per cent of the capital, the Development Bank of Ethiopia will provide the remaining 70 per cent.
“Demand is so strong that we can hardly respond to it,” Abera Deressa beams. The country has already registered 1,311 projects, the largest being the 300,000 hectares leased to Karuturi. Among other beneficiaries, Djibouti has received 7,000 hectares to grow wheat, while the German Flora Eco Power (with 13,000 hectares), the Italian Fri-El Green Power (30,000 hectares), the American Ardent Energy Group (15,000 hectares) and the British Sun Biofuels will produce biofuels.
Mohammed Al Amoudi has several projects up and running. He wants to “plant sugar” with Syngenta on 30,000 hectares in the Northwest. He is trying to get another 100,000 hectares in the province of Benishangul Gumuz to produce biofuels together with the Malaysian firm Agri Nexus. He also grows coffee, tea and cereals on 19,200 hectares under the aegis of his certified label Ethio Agri-CEFT, which supplies Starbucks. Abeba Deressa reckons that within three to five years, there won’t be any more land to lease in Ethiopia.
River diversion. However, the situation is not exactly rosy. From the investors’ point of view, Ethiopian government offices are often quite uncoordinated. They sometimes allocate the same land to two different buyers. They may also promise land which turns out not to exist. Flora Eco Power almost abandoned its Ethiopian project when the local management of its biofuel factory simply disappeared, leaving behind a US$10 million debt and 150 unpaid workers .
For the farmers who are deprived of their land, there’s nothing to celebrate either. They get no compensation for the land itself. If they are lucky, they get some minimal recompense: the equivalent of ten years of harvest and a little something for the improvements they made on the land. As to the herders, who previously used the land for grazing, they get nothing. As the Minister puts it, “They can just go somewhere else.”
The environment itself is degrading, through the destruction of forests and the intensive farming which requires so much water and pesticides. In order to irrigate its 30,000 hectares, Fri-El Green Power is going to divert part of the Omo river, on which an entire region depends.
Questions are put to the Minister. Does it make sense to let foreigners have all this land, while five million Ethiopians depend on emergency food aid for their survival? Aberra Deressa evades the point with a smile: “Good question, but we cannot afford to close our doors to the global economy.”
In the offices of the United Nations Food and Agriculture Organisation, filled with leaflets describing the humanitarian work carried out in Ethiopia, people cautiously observe the game being played out on the continent. Mafa Chipeta, the Coordinator for the East Africa region, refuses to put any blame on Ethiopia. “For years,” he says, “we have been shouting in the dark trying to get investors interested in the Ethiopian farm sector. Now that they are coming in, we can’t very well start dissuading them.”
This is particularly the case if Ethiopia wants to eventually break out from the yoke of humanitarian aid. “Small farmers will never be capable of feeding the whole population of Ethiopia. Only intensive farming and technologies imported from abroad can make this happen.”
The process must indeed be supervised, but one should not be too zealous, the international civil servant warns. One should avoid repeating the mistakes of the World Commission on Dams. They established such stringent rules to protect local communities and the environment that foreign investment completely dried up. “Countries that could afford to do so, like China and India, have carried on building dams. But others, the poorer countries, had to give up. When this happened, the international community lost all influence overnight.”
Mafa Chipeta, pensive, looks through the window of his office overlooking the Bole district where skyscrapers and Chinese factories are sprouting like mushrooms. “How can a country develop if it never takes any risks? Let us give Ethiopia a chance to try the adventure.”