In recent years detailed studies and reports coming out of the Office of the Prime Minister are becoming quite the conversation starters. The good governance study which was launched last year from the same office sparked quite the controversy in the weeks and months that followed. Once again, a report on the embattled commercial farming sub-sector in the Gambela Regional State has revealed much about the failure in this sector. All in all, the study held that a host of attractive incentive packages such as bank loans, duty free privileges and provision of massive farmlands at rock bottom lease prices has lured in investors who are only after the perks. On the other hand, investors from the region are equally vocal to dismiss the report findings and the conclusion, write Asrat Seyoum and Wudineh Zenebe.
Agriculture is one of the oldest crafts human beings have mastered. According to historical accounts, it is the earliest sign of civilization and organized form of human existence. Like many of the ancient civilized societies in the world, Ethiopia prides its self with a history of over 3000 years and possibly being the cradle of humanity. People in the highlands of Ethiopia are said to have taken up the craft of agriculture early on. But, the progress the country has made in the made sector is much too insignificant especially in the face of its earlier introduction to the craft.
Long story short, agriculture is still the mainstay of the Ethiopian economy accounting for 77 percent of the overall employment and a big chunk of its export volume. Even worse, this prominent economic sector is still dominated by smallholder farmers characterized by a highly rain-dependent and low productivity production process which is mostly done on small and fragmented plots of land. Yes, the average plot of land in Ethiopia’s smallholder agriculture is around half a hectare.
In recognition of this fact, the ruling Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF) turned its focus to this sector early on. And the outcome was the so-called Agriculture Development Led Industrialization (ADLI) strategy, which guided the policy direction of the government for close to a decade before it was overtaken by Plan for Accelerated and Sustained Development to End Poverty (PASDEP). For what it is worth, the focus on this sector did bear fruit in form of fast economic growth driven by mild improvement in productivity and the expansion of the coverage of arable agricultural land in the country. But, one thing that was clear for policymakers was that smallholder agriculture has limits; limits which could be reached shortly given the rate of GDP growth. Hence, what came to the fore is the much talked about commercial farming sub-sector with the hope of mechanization and massive gains in productivity. The government placed much hope on the commercial farming sector to strike a twin goal of achieving food self sufficiency and supplying the nascent manufacturing sector with inputs and surplus labor.
Aided by the 2008/09 global food price surge, Ethiopia started massive campaign to draw in international and local crop producers to this sector alluring them with large tract of fertile agricultural land at rock-bottom prices, bank loans, duty free privileges and tax breaks. Well, the pitch worked as well as it is expected. In the years that follow, some 50 FDI companies from India, Turkey, Pakistan, Saudi Arabia, Sudan and Singapore, close to 5,000 local and not less than 200 diaspora investors poured to the sector with hope of lucrative returns to their capital investment.
Basic consumption crops like rice and wheat, industrial input like cotton and crops used for energy such as bio fuel were chosen to cover what were once untouched virgin fertile lands of Ethiopia’s lowland areas. Billions were poured to these farms from the nation’s policy lender Development Bank of Ethiopia (DBE) and the giant Commercial Bank of Ethiopia (CBE).
In midst of all this, an international campaign against this endeavor has started to garner support. Soon, these fertile lowlands and some of well-known global crop producers like Karuturi Global Limited and Saudi Star Agricultural Development PLC, which have acquired massive tract of land in these areas, found themselves under heavy fire from rights groups on account of accusation of land grab in these areas.
In matter of six to seven years, the hype surrounding commercial farming in Ethiopia appears to be subsiding; perhaps the government is now picking up the pieces of one of its ambitious policy experiments in recent years. And this week, one of the hotspots for commercial farming in Ethiopia—Gambella—was put on the spotlight for its miserable failure to live up to the nation’s dreams.
According to a study commissioned by the Prime Minister Hailemariam Dessalegn, Gambella’s commercial farming investment is in shambles at the moment. The study systematically investigated the investor recruitment procedure, land allocation process, performance of invested farms, provision of financing, follow up of investors and many other research topics which are of great interest to the stakeholder. It suffices to say, the study team found things disturbingly out of place in Gambella.
The first controversial issue raised by the report is the fact that both regional and sub-regional bodies have no clear information as to how much investors are currently farming in regions. Two regional bureaus (the investment agency and the environmental protection, forest and land administration bureau) have given conflicting numbers as to the total number of investors in the region where the agency says are 806 and the data from the bureau indicating that 780 investors are found in the region. The woreda level figures, however, contradicts both saying 623 investors are currently undertaking farming practices in seven woredas in Gambella Regional State. Out of this, 192 investors were licensed by the federal investment commission.
Traditionally, regional states are solely responsible to license, allocate and charge land lease fees to investors since it is guaranteed by the Constitution of Ethiopia. Over the years, the federal government started to express dissatisfaction over the administration of farmland by regional bodies; especially the lack of uniformity with regards to large scale commercial farming.
Hence, in 2009, the then Ministry of Agriculture decided that it wanted in on the action. It was then decided that millions of hectares of arable agricultural land are to be transferred to the federal land depository giving the ministry a caretaker administrative role over regional land. Although a bit controversial with respect to sovereign regional administrations, close to 3.18 million hectares of agricultural land was transferred to the ministry in a matter months. Gambella was one of these regions and handed over 1.2 million hectares to the ministry.
The allocation of land is where the most shocking revelation of the report came to the surface. According to the findings, the allocation of land has been highly mismanaged in Gambella. All in all, the 623 investors have been given a total of 630, 518 hectares, out of which 202,812 hectares was allocated by the federal government while the overwhelming 409,706 hectares was given by the regional authorities. Some eight foreign investors have received 190,012 hectares from the federal authority while 37 local investors were given 30,800 hectares from the federal jurisdiction.
By far, the Gambella Surrounding and Etang woredas have seen the highest concentration of investors, 200 and 146, respectively, with large tract of agricultural land, 119,038 hectares and 236,664 hectares, respectively, allocated to investors. At the fundamental level, the lack of rules and regulations to administer allocation of land in the region is a fundamental problem. Hence, plots are indentified and allocated to investors via rules of thumb such as the identification of unoccupied plots by officials, professionals, brokers and the investors themselves.
According to the study, the uptake in investors’ interest in the region started to been seen around 2014 following the change of policy at DBE to provide loan to rain fed farming practice. The numbers do corroborate this story with 191 and 171 investors acquiring land in Gambella region alone in 2015 and 2016, respectively. One of the outstanding criticisms against commercial farm practice in Ethiopia, which is offering large tract of arable fertile land at rock-bottom price, seems to hold water in Gambella.
Until 2014, the region charged 20 to 30 birr per hectare at which time the regional administration decided to stick to the federal lease rate of 111/hectare for rain fed agriculture investment and 158/hectare for irrigation. The 50-year lease contract among other things has a number of loopholes such as lack of clear penalty structure for defaulters, detail rights and obligations of both parties, detail conditions to terminate the contract and the like. But, to everyone’s surprise, almost 119 investors have not yet paid a single lease payment since they started operation; while, the 148 have been on and off with their lease payments.
According to the report, some 104 farms in the seven woredas do not have proper title deeds and 11 of them lack any Ground Control Points (GCP). The report spoke of the wildest title deed issuance and controlling procedure being practiced in Gambella. If the findings are to be taken at face value, land title deeds in Gambella are widely issued outside of the municipality offices; mostly in private quarters and local khat joints. With that comes large scale malpractice and corruption. Investors acquire deeds at the recommendation of individual officials, professionals and brokers, the report found.
Consequently, some 381 investments have serious issues with overlap of their title deeds with total overlapped plot going as high as 45,225 hectares. Better yet, the report even shows that the overlap is not limited to investors’ plots but extends to woreda. Woreda to woreda overlap in allocation of plots to investors is exhibited in five of the seven woredas with overlap covering 4,173 hectares.
Obviously, the highlight of the report was the performance of the sector with regards to crop production. So far, out of 630, 518 hectares accessed by both local and foreign companies in the region only 64, 010 has been covered with crop and another 68, 054 has been cleared. This is 15.8 percent of the plot that should have been covered with crops, the report said. Gog woreda is where the worst performance was recorded with only five percent or 3,103 hectares of land covered in crops, followed by Etang 9.18 percent or 14,037 hectares compared to 152, 940 hectares that needs to be cultivated. All in all 405, 572 percent of total transferred land is expected to be cultivable. The performance of the handful of foreign investors in the region is even worse which fares below both the national average and their local counterparts who took land from the federal jurisdiction. The foreign companies did even worse than their local counterparts. Furthermore, 349 of these investors have no camp facilities and 397 do not have farm equipment in spite of the loan access by some of these companies for camp and equipments purposes.
For instance, the reports shows that for the purpose of building camp sites some 175 investors have accessed 326, 876, 702 birr from DBE out which 1 farm have no formal camp site and other 19 with barely acceptable facilities. Meanwhile, some 123 investors have been provided with loans from both DBE and CBE in tune of 592,474,521 birr to finance the purchase of 251 tractors whereas seven of these were not to account for during the field visit of the study team.
All in all, the report indentified that some 4.3 billion birr loan was disbursed by DBE to close to 200 investors. And in this group, the expected development on the land including clearing work has not exceeded 33 percent, the report found. Apart from that, out of 623 investors in Gambella, 242 have actually activated their duty free privileges on the books while the field visit of the research team revealed that only 225 farms which have used their privileges are actually engaged in farming activities.
Apart from the raw findings of this report, the interpretation and implication of these findings appears to be more shocking. The report claims that most of the investors in the region are lured to the sector by a host of incentives and benefits such as duty free privileges and bank loans. In fact, the surge in the investors’ interest into Gambella which started to increase around 2014 is explained by this ill motive many of them have, the report argued.
This is in fact was central most controversial topic during the week. In a stakeholder meeting held this week at Ghion Hotel, investors in large scale commercial farming sub-sector come out in full force to downplay the study which was conducted by the Office of the Prime Minister over the past one year. The investors take issue with the study staring with the organization of the team which according to their argument excluded investors deliberately. Yemane Seifu, President of the Gambella Investors Association, says that his association was blocked from participating in the study team and hence the views expressed are highly partial as far as investors are concerned.
In a written comment he sent to The Reporter, Yemane argued that the study, although detailed, deliberately avoided presenting the size of plots, loan facilities and the overall development of plots for local and foreign investors separately. According to him, this is done to cover up the failure of the federal agency itself and its darling foreign investors in the region. As far as Yemane is concerned, three billion of the 4.9 billion birr DBE availed to investors in Gambella is accessed by six foreign investors. “The 240,000 hectares of land was also given to six foreign investors none of whom have delivered on their promises,” he argued.
“We all know that local investors who have accessed bank loans have met 94 percent of the expected production in their allotted plots; however, nowhere in study were there mention of these success stories,” he said.
In fact, many investors present at the stakeholder meeting spoke strongly about, what they said was a deliberate gross aggregation by the study. They said that there were many investors who have been developing their plots appropriately without even accessing bank loans and other privileges.
Hadush Girmay, from the Ethiopian Cotton Growers Association, is of the view that it is rather disorganized support structure of the government agencies which is at fault regarding commercial farming in Gambella and other regions. He cites the recent government policy to discontinue bank loans to the agricultural sector on the pretext of a few investors abusing the facilities provided by the government. “It is highly unorthodox to penalize an entire sub-sector because of some investors in some regions,” Hadush argued.
Apart from that, many investors presented a counter narrative to the one carried by the study. For one, they said that lack of proper market structures for agricultural products has been stifling the sector for so long. Furthermore, severe labor shortage during harvest season, lack of critical infrastructure in these farm locations, government agencies violating contractual terms entered into with investors and many others were also presented as impediment to achieve targets in the sector.
Adhana Seyoum, vice president of Gambella Investors Association, was most vocal in expressing his disappointment with the overall take of the study. He rejected the sentiment that the majority of investors in the region are after short-term advantages. “I don’t understand why we are treated as criminals for coming this far and be willing to respond to the country’s development calls,” Adhana said at the meeting. The report, he argued, have serious factual errors but where its mistakes become glare is in its attempt to categorize all investors in the same box as rent-seekers.
The likes Teame Anbaye (MD), representing the diaspora investment in the commercial farming sector, gave shocking rendition of the plight of investors in Ethiopia. Having joined the sector seven years ago, Teame says that he was unable to start production until last year all because the government has not fulfilled the critical infrastructure which it promised to fulfill seven years ago. “Just when hope revived and we started to make preparation to start production DBE suspended its loan facility,” he said passionately. “Now, I want to reclaim my investment so that I can leave the sector,” he said, “I don’t think the diaspora would be interested in investing if the government treats those who have come in such a way,” he concluded.