Tuesday, November 26, 2013

Ethiopia’s foreign land leases fail to deliver food for export

Addis Ababa - Gleaming tractors and harvesters are sitting idle five years after Karuturi Global opened a farm in Ethiopia that was hailed as the poster child of the country’s plan to triple food exports by 2015.

About 80 percent of the Indian-based company’s land in the southwestern Gambella region is in a flood plain, meaning its 100 000 hectare concession is flooded for up to seven months of the year, according to managing director Ramakrishna Karuturi.

The company was unaware of the extent of the flooding when it leased the land, he said.

“Karuturi, like many other large-scale investors, underestimated the complexity of opening land for large-scale commercial agriculture,” Philipp Baumgartner, a researcher at the Centre for Development Research, said.


“The land leased out wasn’t properly assessed by either of the contracting parties,” said Baumgartner, who has written a doctoral thesis on agriculture in Gambella.

Karuturi, the biggest rose grower in the world, was one of the first to take advantage of a government plan to lease 3.3 million hectares of farmland to private investors.

The Ethiopian programme got off to a poor start because of transport and electricity problems, a lack of security, and a shortage of funds and farming expertise, said James Keeley, a consultant for the International Institute for Environment and Development.

The plots are located mainly in sparsely populated, heavily forested areas such as the states of Benishangul-Gumuz and Gambella, which border South Sudan and Sudan.

Leases in some regions were given out without checks on investors, environmental impact assessments or performance-monitoring plans, Keeley said.

In 2008 the government began leasing land for as little as $1 (R10) per hectare per year. At the time, it projected that within five years, commercial farmers would be producing food on about 900 000ha.

As of last month, only about 10 000ha had been developed out of 400 000ha allocated, Prime Minister Hailemariam Desalegn said on October 20.

Karuturi is not the only company struggling. Saudi Star Agricultural Development, owned by Ethiopian-born Saudi billionaire Mohamed al-Amoudi, grows rice on 350ha of a 10 000ha lease as it completes an irrigation canal that will allow it to ramp up cultivation.

Ruchi Agri, based in Mumbai, obtained 25 000ha in Gambella. After three years, it was growing soya beans on 1 000ha and had cleared another 2 000ha of scrub at a cost of $1 500 a hectare, technical manager Rameshsingh Pardesi said. If all went to plan, the operation might become profitable by 2020, he said.

Other major investors had had their leases cancelled, Keeley said. One was Hunan Dafengyuan from China, which took a lease to grow sugarcane on 25 000ha in Gambella.

In November 2010, Karuturi said it would have “developed” its 100 000ha by June this year. In the final quarter of last year, Karuturi harvested its maiden maize crop from about 4 percent of the concession.

Karuturi’s stock has slumped from a peak of 36.30 rupees (R5.80) on November 9, 2010, to 1.60 rupees on the stock exchange in Mumbai.

Most of Karuturi’s farm is still covered in a thick scrubland of bushes and trees. A plaque to commemorate its opening now lies in land taken back by the government after confusion over exactly where the company’s lease was.

The company was given 300 000ha by the regional government before officials in Addis Ababa reduced the plot size by two-thirds in 2010.

Karuturi said there was now a plan to rent out the idle tractors, harvesters and crop-spraying machines to other farmers. – Bloomberg
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