May 5th 2011 | from the print edition of ‘The Economist
The farmers of Makeni, in central Sierra Leone, signed the contract with their thumbs. In exchange for promises of 2,000 jobs, and reassurances that the bolis (swamps where rice is grown) would not be drained, they approved a deal granting a Swiss company a 50-year lease on 40,000 hectares of land to grow biofuels for Europe. Three years later 50 new jobs exist, irrigation has damaged the bolis and such development as there has been has come "at the social, environmental and economic expense of local communities", says Elisa Da Vià of Cornell University.
When deals like this first came to international attention in 2009, it was unclear whether they were "land grabs or development opportunities", to quote a study published that year. Supporters claimed they would bring seeds, technology and capital to some of the world’s poorest lands. Critics, such as the director of the UN’s Food and Agriculture Organisation, dubbed them "neo-colonialist". But no one had hard evidence to back up their claims. Now they do. Two years on, a conference at the Institute of Development Studies (IDS) of the University of Sussex, the biggest of its kind so far, examined over 100 land deals. Most judgments are damning.*
Land grabs have been strikingly popular. Preliminary research by the International Land Coalition, a non-governmental organisation, reckons almost 80m hectares have been subject to some sort of negotiation with a foreign investor, more than half in Africa (see chart). This estimate is far higher than a previous one, by the World Bank, which last year said that foreign investors had expressed interest in 57m hectares. It is higher still than one by the International Food Policy Research Institute (IFPRI) which put the figure in a 2009 study at 15m-20m hectares. It would be wrong to draw a line between these numbers so as to conclude that land deals have grown fourfold. Since most are secret, knowing what to count is difficult, and the figures refer to different periods.
Yet each time someone has looked at the phenomenon, the result has been a figure roughly twice the earlier estimate. It is also clear that the overall scope is vast: 80m hectares is more than the area of farmland of Britain, France, Germany and Italy combined. And land deals are continuing, possibly even speeding up. Over a tenth of the farmland of South Sudan has been leased this year-even before the country has formally got its independence. GRAIN, an advocacy group, says it has seen proposals that would allow Saudi business groups to take control of 70% of the rice-growing area of Senegal.
It is not just the size of land deals that remains uncertain. Their contractual basis often is, too. Few contracts have been made public, so details are sketchy. But an investigation of 12 that have been, by Lorenzo Cotula of the International Institute for Environment and Development, declares many "not to be fit for purpose". The rights and obligations of each side, Mr Cotula says, are usually extremely vague, while traditional land-use rights are frequently ignored. As one farmer asked when a British company acquired forestry rights in Tanzania: "How come others are selling our land?"
Even after the contract is signed, there is no guarantee a land deal will go ahead in accordance with it. A survey by the World Bank† showed that in the Amhara region of Ethiopia, only 16 of 46 projects were working as intended (the rest lay fallow or had been rented back to smallholders). In Mozambique only half the projects were working as planned.
Still, some conclusions seem warranted. When land deals were first proposed, they were said to offer the host countries four main benefits: more jobs, new technology, better infrastructure and extra tax revenues. None of these promises has been fulfilled.
Locals usually regard jobs as the most important of these. But so far they have been scarce, and only partly because many projects are not yet up and running. In Mozambique, the World Bank found, one project had promised 2,650 jobs and created a mere 35-40 full-time positions. A survey by Thea Hilhorst of 99 smaller projects in Benin, Burkina Faso and Niger reported "hardly any" rural job creation. Only one of the publicly available contracts studied by Mr Cotula even specifies a number of new jobs to be created. And when there are jobs, foreign investors often bring in outsiders to staff them, leading to "conflict or accusations of cheating", according to the World Bank. The manager of one project was killed during an argument about jobs.
Evidence of the transfer of technology and skills is mixed. Ms Hilhorst found almost no impetus towards greater professionalism in farming, although she concedes that closer links with food processors and distributors might improve matters. The World Bank’s study argued that technological improvements in Ukraine and Mexico had helped reduce rural out-migration (though this was surprising: you might have expected new labour-saving technologies to encourage underemployed farmers to leave the land). Mr Cotula’s study of land-deal contracts found few examples in which the foreign investor was obliged to exchange materials or ideas with local farmers. At the moment, land-grabbing foreigners seem to be creating islands for themselves, cut off from the poverty-stricken countryside.
Grabbing without giving
Some projects’ operators have done better in building new schools, clinics and other "social infrastructure". Madagascar may be a surprising example as it witnessed what is perhaps the most notorious land grab of all: a South Korean company was offered half the country’s arable land-a proposal that fuelled protests which eventually toppled the government who approved the deal. Two years later Perrine Burnod of CIRAD, a French research organisation, found that the number of land deals on the island had fallen by two-thirds. And those that remained had begun to look more like aid projects, with investors committing themselves to building schools and clinics. Local mayors were welcoming them in to help finance projects no longer supported by the cash-strapped central government.
Yet this is atypical. Most land deals contribute little or nothing to the public purse. Because markets for land are so ill-developed in Africa and governments so weak, rents are piffling: $2 per hectare per year in Ethiopia; $5 in Liberia. Tax and rent holidays are common. Indeed, it is not unusual for foreign investors to pay less tax than local smallholders. And upfront compensation to local farmers for use of their land is derisory: often just a few months of income for agreeing to a 100-year lease.
"The risks associated with such investments are immense," concludes the World Bank. "In many cases public institutions were unable to cope with the surge in demand…Land acquisitions often deprived local people, in particular the vulnerable, of their rights…Consultations, if conducted at all, were superficial…and environmental and social safeguards were widely neglected."
So why are land deals popular? That is surprisingly easy to answer: strong demand and willing suppliers. The big investors tend to be capital-exporting countries with large worries about feeding their own people. Their confidence in world markets has been shaken by two food-price spikes in four years. So they have sought to guarantee food supplies by buying farmland abroad. China is by far the largest investor, buying or leasing twice as much as anyone else.
Local elites have also played a vital role in spreading land deals. In a Tanzanian project described by Martina Locher of the University of Zurich, "local people who refer to customary law have a very low level of knowledge [and cannot] defend their land rights." In contrast, she writes, "state law is mainly represented by district officials, who…enjoy a high level of respect by local people."
Then there is corruption. Many of the west African "land grabbers" described by Ms Hilhorst are local politicians, civil servants and other urban elites who bribe local chiefs with gifts of motorbikes. Madeleine Fairbairn of the University of Wisconsin, Madison, argues that in Mozambique, an informal division of the spoils has emerged. Local bigwigs use their influence to get "facilitation fees", while national leaders manipulate the law and promote (or obstruct) projects to their own and their supporters’ advantage.
Many development projects work this way. What makes land grabs unusual is their combination of high levels of corruption with low levels of benefit. Ruth Meinzen-Dick, one of the authors of the IFPRI study, says that in 2009 the balance of costs and benefits was genuinely unclear. Now, she argues, the burden of evidence has shifted and it is up to the proponents of land deals to show that they work. At the moment, they have precious few examples to point to.