6 Mar 2018

Imperialism in disguise: land grabs in Africa

Phillip writes:*

In the 1970s and 1980s, most African nations faced a deteriorating economic situation and rapidly increasing debt levels. Affected governments saw themselves confronted with two choices: they could either turn to the IMF and World Bank for loans, or witness the collapse of the states they were struggling to build. The Bretton Woods institutions, understandably sceptical about the borrowers’ ability to eventually repay the loans, agreed to lend more money to the indebted governments, but tied the credits to strict conditions. These measures, to be implemented by the recipient countries, are commonly known as the Structural Adjustment Programs (SAPs).

The controversial SAPs left most of the continent in a situation where spending on education, public healthcare and environmental protection was limited, primary resources were exported in great quantities at low prices, and the development of domestic manufacturing sectors hindered. The agricultural sector was hit especially hard by these reforms. Heavily subsidised and cheap produce from Europe and the US flooded African markets, outcompeting domestic farmers. As a result (among other factors), more and more Africans are now migrating from rural to urban areas, hoping to make a living in cities. If you are interested in how exactly these mechanisms work, I recommend  Africa since 1940 by Frederick Cooper.

Why am I telling you all this? First, to give some context and an idea of how much bargaining power small scale farmers in Africa usually have. Second, because SAPs paved the way for a phenomenon which is currently taking place on the African continent: land grabbing (p.55).

Rural-urban migration may shift the population to cities, yet agricultural and fertile lands remain, and thanks to the SAPs, they are “up for grabs” by financially strong developers. Most of these foreign investors are, by default, not very interested in the socio-economic development of African countries. Much rather, they want to extract value and resources from the land to secure a return on their investments. As a result, the focus of these projects is mostly on cash crops, such as sugar cane or soy, to be exported and consumed in economies around the world. The few remaining subsistence farmers are commonly chased off their lands after an area is sold or leased to the highest bidder. This procedure is facilitated by the fact that land is often cultivated by squatters, who are tolerated, but do not have pronounced land tenure rights as is the case in the western world.

The problem is that investors often turn land that was mostly cultivated by subsistence farmers into large-scale mono cultures. Next to the obvious social costs, such practices often lead to soil degradation, deforestation, excessive pesticide use, groundwater contamination and depletion, and a loss of biodiversity. These costs, however, are imposed on the host country and the poorest of its residents, not on the international investors. The public-private Africa Agriculture and Trade Investment Fund (AATIF) and its involvement in Zambia serve as an example for such practices. The AATIF co-finances agricultural projects; in this case it contributed $10 million to a project run by the agribusiness company Chobe AgriVision. It promised 1,600 jobs to the government, in return for leasing the agricultural lands. However, most employment is only seasonal, and most processes on the plantations are automated and mechanised anyways. In fact, the company only employs about 200 people at max, which is fewer than before it got involved. At the same time, local farmers are complaining about water shortages and pollution, caused by the large concern that now cultivates the land that previously belonged to them.

Do you find such projects concerning? In fact, you are actually co-financing similar projects with the taxes you pay. In this case, the AATIF was founded by Germany’s Federal Development Ministry. Interestingly, the set-up of the AATIF is based on a cascading system. The Development Ministry (again, financed with your money) bears the greatest risks, followed by banks, followed by private investors. In order to attract private investments, returns are distributed in the reverse order: first investors, then banks, then the ministry. (Fun fact: the investment fund could not be established in Germany, as local laws do not allow for such a set-up. Instead, it is simply located in the tax haven of Luxemburg.)

It is hard to say what’s more frustrating: the fact that international development aid for Africa hasn’t lost any of its imposing character, or the fact that European tax money is financing businesses under the guise of sustainable development.

Bottom line: European tax money is used to co-finance large-scale agricultural development in developing countries. These projects, under the guise of sustainable development, often kill jobs and degrade natural environments to the detriment of current and future generations.

* Please help my environmental economics students by commenting on unclear analysis, other perspectives, data sources, etc. (Or you can just say something nice :)