Landgrab matters

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16 Jul 12    In Tiny Bean, India’s Dirt-Poor Farmers Strike Gas-Drilling Gold, NYT, GARDINER HARRIS
13 Aug 11   China International Fund: The Queensway syndicate and the Africa trade, economist.com
12 Aug 11   China's oil trade with Africa, economist.com
1 Jun 11   Land & water grab: When the Nile Runs Dry, NYT, LESTER R. BROWN
21 Dec 10   African Farmers Displaced as Investors Move In, NYT, NEIL MacFARQUHAR
27 Jul 10   World Bank warns on ‘farmland grab’ trend, FT, Javier Blas
23 nov 09   Sécurité alimentaire: Marchés agricoles, le grand brouillage, Le Temps, Pierre-Alexandre Sallier
16 Nov 09   Is There Such a Thing as Agro-Imperialism?, NYT Magazine, ANDREW RICE
9 Aug  09  Landgrab: the myopics of the new colonialism, The Independent, Paul Vallely
27 Dec 08   Landownership: Common goods in Islamic and Arab law - Question of fire (oil), Sami ALDEEB




The Independent    August 9, 2009

Wish you weren't here:
The devastating effects of the new colonialists
Paul Vallely

A new breed of colonialism is rampaging across the world, with rich nations buying up the natural resources of developing countries that can ill afford to sell. Some staggering deals have already been done, says Paul Vallely, but angry locals are now trying to stop the landgrabs
Thousand of protesters took to the streets, waving the orange flags of the opposition. Before long, looting began. Buildings were set on fire. But the turning point came when a crowd moved from the main square towards the presidential palace. Amid the confusion, someone panicked and gave the order to the troops guarding the palace to open fire. Scores died. The leaders of the army decided they'd had enough and stormed the palace, causing the president to flee.

A typical African coup d'état? Not quite. Certainly there were allegations of corruption in high places. The president had bought a private jet - from a member of the Disney family - for his own personal use. He was accused of unnecessary extravagance, of mismanaging public funds and confusing the interests of the state with his own. But something else had whipped up the protesters in Antananarivo, the capital of Madagascar, earlier this year, when the government of Marc Ravalomanana was overthrown in the former French colony.

The urban poor were angry at the price of food, which had been high since the massive rise in global prices of wheat and rice the year before. Food-price rises hit the poor worse than the rest of us because they spend up to two-thirds of their income on food. But what whipped them into action was news of a deal the government had recently signed with a giant Korean multinational, Daewoo, leasing 1.3 million hectares of farmland - an area almost half the size of Belgium and about half of all arable land on the island - to the foreign company for 99 years. Daewoo had announced plans to grow maize and palm oil there - and send all the harvests back to South Korea.

Terms of the deal had not originally been made public. But then the news leaked, via the Financial Times in London, that the firm had paid nothing for the lease. Daewoo had promised to improve the island's infrastructure in support of its investment. "We will provide jobs for them by farming it, which is good for Madagascar," a Daewoo spokesman said. But the direct cash benefit to Madagascar would be zero - in a country which can barely produce enough food to feed itself: nearly half of the island's children under the age of five are malnourished.

The government of President Ravalomanana became the first in the world to be toppled because of what the United Nations' Food and Agriculture Organization recently described as "landgrabbing". The Daewoo deal is only one of more than 100 land deals which have, over the past 12 months, seen massive tracts of cultivable farmland across the globe bought up by wealthy countries and international corporations. The phenomenon is accelerating at an alarming rate, with an area half the size of Europe's farmland targeted in just the past six months.

To understand the impotent fury that provokes in impoverished farmers, consider the reaction if something similar happened in Britain. The international development policy consultant Mark Weston has a vivid image to help: "Imagine if China, following a brief negotiation with a British government desperate for foreign cash after the collapse of the economy, bought up the whole of Wales, replaced most of its inhabitants with Chinese workers, turned the entire country into an enormous rice field, and sent all the rice produced there for the next 99 years back to China," he suggests.

"Imagine that neither the evicted Welsh nor the rest of the British public knew what they were getting in return for this, having to content themselves with vague promises that the new landlords would upgrade a few ports and roads and create jobs for local people.

"Then, imagine that, after a few years - and bearing in mind that recession and the plummeting pound have already made it difficult for Britain to buy food from abroad - an oil-price spike or an environmental disaster in one of the world's big grain-producing nations drives global food prices sharply upwards, and beyond the reach of many Britons. While the Chinese next door in Wales continue sending rice back to China, the starving British look helplessly on, ruing the day their government sold off half their arable land. Some of them plot the violent recapture of the Welsh valleys."

Change the place names to Africa and the scenario is much less far-fetched. It is happening already, which is why many, including Jacques Diouf, head of the United Nations Food and Agriculture Organization, has warned that the world may be slipping into a "neo-colonial" system. Even that great champion of the free market, the FT, described the Daewoo deal as "rapacious" and warned it is but the most "brazen example of a wider phenomenon" as rich nations seek to buy up the natural resources of poor countries.

The extent of this new colonialism is vast. The buyers are wealthy countries that are unable to grow their own food. The Gulf states are at the forefront of new investments. Saudi Arabia, Bahrain, Kuwait, Oman, Qatar - which between them control nearly 45 per cent of the world's oil - are snapping up agricultural land in fertile countries such as Brazil, Russia, Kazakhstan, Ukraine and Egypt. But they are ' also targeting the world's poorest countries, such as Ethiopia, Cameroon, Uganda, Zambia and Cambodia.

The amounts of land involved are staggering. South Korean companies have bought 690,000 hectares in Sudan, where at least six other countries are known to have secured large land-holdings - and where food supplies for the local population are among the least secure anywhere in the world. The Saudis are negotiating 500,000 hectares in Tanzania. Firms from the United Arab Emirates have landed 324,000 hectares in Pakistan.

But they are not the only buyers. Countries with large populations such as China, South Korea and even India are acquiring swathes of African farmland to produce food for export. The Indian government has lent money to 80 companies to buy 350,000 hectares in Africa and recently lowered the tariffs under which Ethiopian agri-products can enter India. One of the biggest holdings of agriculture land in the world is a Bangalore-based company, Karuturi Global, which has recently bought huge areas in Ethiopia and Kenya.

Food is not all the new colonialists are after. About a fifth of the massive new deals are for land on which to grow biofuels. British, US and German companies with names such as Flora Ecopower have bought land in Tanzania and Ethiopia. The country whose name became a byword for famine at the time of the Live Aid concerts has had more than 50 investors sign deals or register an interest in the cultivation of biofuel crops on its soil.

From Ethiopia's point of view, the economic logic is straightforward: the country is an importer of oil and is therefore vulnerable to price fluctuations on the world market; if it can produce biofuels it will lessen that dependency. But at a cost. To keep the foreign biofuel investors happy, the government doesn't force any companies to carry out environmental impact assessments. Local activists claim that 75 per cent of the land allocated to foreign biofuel firms are covered in forests that will be cut down.

More worrying is the plan by a Norwegian biofuel company to create "the largest jatropha plantation in the world" by deforesting large tracts of land in northern Ghana. Jatropha, which can be cultivated in poor soil, produces oily seeds that can produce biodiesel. A local activist, Bakari Nyari, of the African Biodiversity Network, has accused the company of "using methods that hark back to the darkest days of colonialism... by deceiving an illiterate chief to sign away 38,000 hectares with his thumbprint". The company claims the scheme will bring jobs, but the extensive deforestation which would result would deprive local people of their traditional income from gathering forest products such as shea nuts.

The failed Daewoo land deal in Madagascar may have been intended to be the biggest landgrab planned to date, but it is far from the only one.

So what is the cause of this sudden explosion of land acquisition across the globe? It has its roots in the food crisis of 2007/8, when prices of rice, wheat and other cereals skyrocketed across the world, triggering riots from Haiti to Senegal. The price spike also led food-growing countries to slap export tariffs on staple crops to minimise the amounts that left their countries. That tightened the supply still further, meaning food prices were driven up more by a situation of policy-created scarcity than by supply and demand.

This situation also made many rich countries that are reliant on massive food imports question one of the fundamentals of the global economy: the idea that every country should concentrate on its best products and then trade. Suddenly having unimaginable quantities of cash from oil was not enough to guarantee you all the food you needed. The oil sheikhs of the Gulf states found that food imports had doubled in cost over less than five years. In the future it might get even worse. You could no longer rely on regional and global markets, they concluded. The rush to grab land began.

The logic was clear. The highly populous South Korea is the world's fourth-biggest importer of maize; the Madagascar deal would replace about half of Korea's maize imports, a Daewoo spokesman boasted. The Gulf states were equally open: control of foreign farmland would not only secure food supplies, it would eliminate the cut taken by middlemen and reduce its food-import bills by more than 20 per cent.

And the benefits could only increase. The fundamental conditions that had led to the global food crisis were unchanged, and might easily worsen. The UN predicts that by 2050, the world population will have grown by 50 per cent. Growing the food to feed nine billion people will place enormous pressure on the Earth, eroding soils, denuding forests and draining rivers. Climate change will make all that worse. Oil prices will continue to rise, and with them the cost of fertiliser and tractor fuel. Demand for biofuels would further cut land available for food crops. The 2007/8 price crunch might just be a foretaste of something worse. The times of plenty are already over. Next, there might not be enough food to go round, even for those with lots of money.

We have not really noticed it here, because the UK, like the US, still instinctively seems to place unlimited faith in the ability of the market to provide. But other countries have begun to devise a long-term strategic response.

The clearest public sign of that came in June when, just before the meeting of world leaders at the G8 in Italy, the Japanese prime minister, Taro Aso, asked: "Is the current food crisis just another market vagary?" He replied to his own question: "Evidence suggests not; we are undergoing a transition to a new equilibrium, reflecting a new economic, climatic, demographic and ecological reality."

But the market is having its say, too: the cost of land is rising. Prices have jumped 16 per cent in Brazil, 31 per cent in Poland, and 15 per cent in the midwestern United States. Veteran speculators such as George Soros, Jim Rogers and Lord Jacob Rothschild are snapping up farmland right now. Rogers - who between 1970 and 1980 increased the value of his equities portfolio by 4,200 per cent, and who made another fortune predicting the commodities rally in 1999 - last month said: "I'm convinced that farmland is going to be one of the best investments of our time."

After the disastrous involvement of financial speculators in housing - the global recession had its roots in the development of mortgage-based derivatives - it is hardly reassuring that the same financial whiz-kids are turning to land as a new source of profit. "The food and financial crises combined," says the Philippines-based food lobby group Grain, "have turned agricultural land into a new strategic asset."

In one way, that ought to be a good thing for poor countries. Land is what they have in plenty. And the agricultural sector in developing countries is in urgent need of capital. Aid once provided this, but the share of that which goes to farming fell from $20bn a year in the 1980s to just $5bn a year in 2007, according to Oxfam. A mere 5 per cent of aid now goes to rural-development agriculture, even though in the poorest places such as Africa, more than 70 per cent of the population rely on farming for their income. Decades of low investment have meant stagnating production and productivity.

Landgrab deals ought, at least, to rectify that by injecting much-needed investment into agriculture in these countries. That ought to bring new jobs and a steady income to the rural poor. It should bring new technology and know-how to local farmers. It should develop rural infrastructure, such as roads and grain-storage systems, to the good of the entire community. It should build new schools and health posts that will benefit all. It should give African governments much-needed taxes to invest in developing their countries. All of which should lessen dependency of food aid. Landgrabs should produce a win-win situation.

That was the kind of big billing which the government in Kenya gave to the deal it did recently with the state of Qatar. Just one per cent of land in the Arab emirate is cultivable, so Qatar is heavily reliant on food imports. The deal was that Qatar would get 40,000 hectares of land to grow food in return for building a $2.5bn deep-water port at Lamu in Kenya.

Unfortunately, even as the negotiations with Qatar proceeded, the Kenyan government was forced to announce a state of emergency because a third of Kenya's population of 34 million was facing food shortages. President Mwai Kibaki declared the situation a national disaster and appealed for international food relief. Hungry voters often fail to understand the long-term attractions of the economic advantages which could be brought to Kenya by creating what would be only its second deep-water port and opening up a third of the country - in the arid and neglected north-east - to development. This is a country, after all, where people kill for land, as was shown after the botched elections in 2007.

If the world food crisis tightens, as everyone seems to predict, it will become ever more unpalatable politically for a government such as Kenya's to countenance the massive export of food at a time of shortage. That is even more true in a continent as politically unstable as Africa.

There is, in any case, already fierce opposition from many to projects like this. The land offered to Qatar is in the Tana River delta. It is fertile with abundant fresh water but it is home to 150,000 farming and pastoralist families who regard the land as communal and graze 60,000 cattle there. They have threatened armed resistance. They are supported by opposition activists, who object less to the land being developed, but want it to grow food for hungry Kenyans. Then there are the environmentalists, who say a pristine ecosystem of mangrove swamps, savannah and forests will be destroyed.

The environment is another major worry in many of the great rash of land deals. Growing food crops in huge plantations is dominated by large-scale intensive monoculture production using large quantities of fertiliser and pesticides. The results are spectacular at first - which might satisfy the yen of the outside investors for short-term profit. But it risks damaging the long-term sustainability of tropical soils unsuited for intensive cultivation and can do serious damage to the local water table. It reduces the diversity of plants, animals and insect life and threatens the long-term fertility of the land through soil erosion, waterlogging or increased salinity. The intensive use of agrochemicals could lead to water-quality problems, and irrigating the land-holdings of foreign investors may take water away from other users.

Water is a key issue. In a sense, these aren't landgrabs so much as water grabs, suggests the chief executive of Nestlé, Peter Brabeck-Letmathe. With the land comes the right to draw the water beneath it, which could be the most valuable part of the deal. "Water withdrawals for agriculture continue to increase rapidly. In some of the most fertile regions of the world (America, southern Europe, northern India, north-eastern China), over-use of water, mainly for agriculture, is leading to sinking water tables. Groundwater is being withdrawn, no longer as a buffer over the year, but in a structural way, mainly because water is seen as a free good."

The world needs to begin to think more urgently about water. The average person in the world uses between 3,000 and 6,000 litres a day. Barely a tenth of that is used for hygiene or manufacturing. The rest is used in farming. And the world's lifestyle, with factors such as increased meat-eating, is exacerbating the problem. Meat requires 10 times more water per calorie than plants. Biofuels are one of the most thirsty products on the planet; it takes up to 9,100 litres of water to grow the soya for one litre of biodiesel, and up to 4,000 litres for the corn to be transformed into bioethanol. "Under present conditions, and with the way water is being managed," the Nestlé chief says, "we will run out of water long before we run out of fuel".

Indeed, in many places underground, aquifers are falling; in some regions by several metres a year. Rivers are running dry due to over-use. And the worst problems are in some of the world's most important agricultural areas. If current trends hold, Frank Rijsberman of the International Water Management Institute has warned, soon "we could be facing annual losses equivalent to the entire grain crops of India and the US combined". Between them, they produce a third of all the world's cereals.

Is there a way forward? The Washington-based International Food Policy Research Institute believes so. It has recently produced a report containing recommendations for a binding code of conduct to promote what Japan, the world's largest food importer, called for at the G8 in Italy - responsible foreign investment in agriculture in the face of the current pandemic of landgrabs.

It wants a code "with teeth" to ensure that smallholders being displaced from their land can negotiate mutually beneficial terms with foreign governments and multinationals. It wants measures to enforce any agreement, if promised jobs, wage levels or local facilities fail to materialise. It wants transparency, and it wants legal action in their home countries against firms that use bribes, rather than relying on prosecutions in the Third World. It wants respect for existing land rights - not just those which are written, but those which exist through custom and practice. It wants compulsory sharing of benefits, so that schools and hospitals get built and those living in areas around landgrabs get properly fed. It suggests shorter-term leases to provide a regular income to farmers whose land is taken away for other uses. Or, better still, it would like to see contract farming that leaves smallholders in control of their land but under contract to provide to the outside investor. It demands proper environmental impact assessments. And it says foreign investors should not have a right to export during an acute national food crisis.

No one is fooled that this will be easy. The local elites in developing countries have a vested interest in the lucrative deals on offer. The government in Cambodia has massively promoted landgrabbing, taking advantage of the fact that many land titles were destroyed under the terror of the Khmer Rouge. Mozambique has signed a $2bn deal that will involve 10,000 Chinese "settlers" on its land in return for $3m in military aid from Beijing. The strategic considerations are clear. "Food can be a weapon in this world," as Hong Jong-wan, a manager at Daewoo, put it.

But things are ratcheting up on the other side, too. Landgrabs are "a grave violation of the human right to food", in the words of Constanze von Oppeln of the big German development agency Welthungerhilfe, one of the most prominent campaigners in the field. She speaks for many who have no voice internationally - although they are making their presence felt well enough in their own countries. A huge public outcry erupted in Uganda when its government began talking to Egypt's ministry of agriculture about leasing nearly a million hectares to Egyptian firms for the production of wheat and maize destined for Cairo. Mozambicans have similarly resisted the settlement of the thousands of Chinese agricultural workers on its leased lands. Earlier this year, angry Filipinos successfully blocked a deal by the Philippines government with China which involved an astounding 1,240,000 hectares. And last month the same activists exposed what they call a "secret agricultural pact" between their government and Bahrain. With 80 per cent of the 90 million population landless, the deal is "unlawful and immoral", activists there say.

Food touches something very deep in the human psyche. Do not expect either side to give up without a fight.




Financial Times    July 27 2010   21:02

World Bank warns on ‘farmland grab’ trend
By Javier Blas in London

Investors in farmland are targeting countries with weak laws, buying arable land on the cheap and failing to deliver on promises of jobs and investments, according to the draft of a report by the World Bank.

“Investor interest is focused on countries with weak land governance,” the draft said. Although deals promised jobs and infrastructure, “investors failed to follow through on their investments plans, in some cases after inflicting serious damage on the local resource base”.

In addition, “the level of formal payments required was low”, making speculation a key motive for  purchases. “Payments for land are often waived ... and large investors often pay lower taxes than smallholders ... or none at all.”

The report, The Global Land Rush: Can it yield sustainable and equitable benefits?’ is the broadest study yet of the so-called “farmland grab”, in which countries invest in overseas land to boost their food security, or  investors – who are mostly locals – buy arable land. The “farmland grab” trend gained notoriety after an  attempt in 2008 by South Korea’s Daewoo Logistics to secure a large chunk of land in Madagascar for a very  low price and vague promises of investment. The deal contributed to a coup d’état in the African country.

Large land transfers
The draft was leaked to the Financial Times by a person who said they wanted to prevent the World Bank  releasing the report in the middle of the summer holiday period.

The Washington-based body said the report was a work in progress and revisions were being made. “When it  is released in August, we believe it will contribute much-needed data and other information to this complex  subject.”

The World Bank advocated in its draft the launch of a Land Transparency Initiative modelled on the  Extractive Industry Transparency Initiative, which commits governments, mainly in developing countries, to  disclose revenues from oil and mining groups to improve transparency on the deals. Critics noted that eight  years after its launch, only Liberia, Timor-Leste and Azerbaijan, were full members of the EITI. But the  draft said: “By establishing a consistent format for reporting on land acquisition and monitoring [the] process  over time, it could provide access to information sorely missing.”

The draft highlighted a few successes in land acquisition – mostly in Latin America and also in Tanzania –  but the overall picture it gave was one of exploitation, warning that investors either lacked the necessary  expertise to cultivate land or were more interested in speculative gains than in using land productively.

It stated that “rarely if ever” were efforts made to link land investments to “countries’ broader development  strategy”.

“Consultations with local communities were often weak,” it added. “Conflicts were common, usually over  land rights.”

The report said some countries allocated land to investors that was within the boundaries of local  communities’ farmland.

Data on farmland deals is sketchy, mostly relying on local media reports. But the World Bank’s draft report  said official data for a few countries showed large transfers, including 3.9m hectares in Sudan and 1.2m in  Ethiopia between 2004 and 2009. The demand for farmland is unlikely to slow down due to higher  commodity demand and prices.





December 21, 2010

African Farmers Displaced as Investors Move In
By NEIL MacFARQUHAR

SOUMOUNI, Mali — The half-dozen strangers who descended on this remote West African village brought its hand-to-mouth farmers alarming news: their humble fields, tilled from one generation to the next, were now controlled by Libya’s leader, Col. Muammar el-Qaddafi, and the farmers would all have to leave.

“They told us this would be the last rainy season for us to cultivate our fields; after that, they will level all the houses and take the land,” said Mama Keita, 73, the leader of this village veiled behind dense, thorny scrubland. “We were told that Qaddafi owns this land.”

Across Africa and the developing world, a new global land rush is gobbling up large expanses of arable land. Despite their ageless traditions, stunned villagers are discovering that African governments typically own their land and have been leasing it, often at bargain prices, to private investors and foreign governments for decades to come.

Organizations like the United Nations and the World Bank say the practice, if done equitably, could help feed the growing global population by introducing large-scale commercial farming to places without it.

But others condemn the deals as neocolonial land grabs that destroy villages, uproot tens of thousands of farmers and create a volatile mass of landless poor. Making matters worse, they contend, much of the food is bound for wealthier nations.

“The food security of the country concerned must be first and foremost in everybody’s mind,” said Kofi Annan, the former United Nations secretary general, now working on the issue of African agriculture. “Otherwise it is straightforward exploitation and it won’t work. We have seen a scramble for Africa before. I don’t think we want to see a second scramble of that kind.”

A World Bank study released in September tallied farmland deals covering at least 110 million acres — the size of California and West Virginia combined — announced during the first 11 months of 2009 alone. More than 70 percent of those deals were for land in Africa, with Sudan, Mozambique and Ethiopia among those nations transferring millions of acres to investors.

Before 2008, the global average for such deals was less than 10 million acres per year, the report said. But the food crisis that spring, which set off riots in at least a dozen countries, prompted the spree. The prospect of future scarcity attracted both wealthy governments lacking the arable land needed to feed their own people and hedge funds drawn to a dwindling commodity.

“You see interest in land acquisition continuing at a very high level,” said Klaus Deininger, the World Bank economist who wrote the report, taking many figures from a Web site run by Grain, an advocacy organization, because governments would not reveal the agreements. “Clearly, this is not over.”

The report, while generally supportive of the investments, detailed mixed results. Foreign aid for agriculture has dwindled from about 20 percent of all aid in 1980 to about 5 percent now, creating a need for other investment to bolster production.

But many investments appear to be pure speculation that leaves land fallow, the report found. Farmers have been displaced without compensation, land has been leased well below value, those evicted end up encroaching on parkland and the new ventures have created far fewer jobs than promised, it said.

The breathtaking scope of some deals galvanizes opponents. In Madagascar, a deal that would have handed over almost half the country’s arable land to a South Korean conglomerate helped crystallize opposition to an already unpopular president and contributed to his overthrow in 2009.

People have been pushed off land in countries like Ethiopia, Uganda, the Democratic Republic of Congo, Liberia and Zambia. It is not even uncommon for investors to arrive on land that was supposedly empty. In Mozambique, one investment company discovered an entire village with its own post office on what had been described as vacant land, said Olivier De Schutter, the United Nations food rapporteur.

In Mali, about three million acres along the Niger River and its inland delta are controlled by a state-run trust called the Office du Niger. In nearly 80 years, only 200,000 acres of the land have been irrigated, so the government considers new investors a boon.

“Even if you gave the population there the land, they do not have the means to develop it, nor does the state,” said Abou Sow, the executive director of Office du Niger.

He listed countries whose governments or private sectors have already made investments or expressed interest: China and South Africa in sugar cane; Libya and Saudi Arabia in rice; and Canada, Belgium, France, South Korea, India, the Netherlands and multinational organizations like the West African Development Bank.

In all, Mr. Sow said about 60 deals covered at least 600,000 acres in Mali, although some organizations said more than 1.5 million acres had been committed. He argued that the bulk of the investors were Malians growing food for the domestic market. But he acknowledged that outside investors like the Libyans, who are leasing 250,000 acres here, are expected to ship their rice, beef and other agricultural products home.

“What advantage would they gain by investing in Mali if they could not even take their own production?” Mr. Sow said.

As with many of the deals, the money Mali might earn from the leases remains murky. The agreement signed with the Libyans grants them the land for at least 50 years simply in exchange for developing it.

“The Libyans want to produce rice for Libyans, not for Malians,” said Mamadou Goita, the director of a nonprofit research organization in Mali. He and other opponents contend that the government is privatizing a scarce national resource without improving the domestic food supply, and that politics, not economics, are driving events because Mali wants to improve ties with Libya and others.

The huge tracts granted to private investors are many years from production. But officials noted that Libya already spent more than $50 million building a 24-mile canal and road, constructed by a Chinese company, benefiting local villages.

Every farmer affected, Mr. Sow added, including as many as 20,000 affected by the Libyan project, will receive compensation. “If they lose a single tree, we will pay them the value of that tree,” he said.

But anger and distrust run high. In a rally last month, hundreds of farmers demanded that the government halt such deals until they get a voice. Several said that they had been beaten and jailed by soldiers, but that they were ready to die to keep their land.

“The famine will start very soon,” shouted Ibrahima Coulibaly, the head of the coordinating committee for farmer organizations in Mali. “If people do not stand up for their rights, they will lose everything!”

“Ante!” members of the crowd shouted in Bamanankan, the local language. “We refuse!”

Kassoum Denon, the regional head for the Office du Niger, accused the Malian opponents of being paid by Western groups that are ideologically opposed to large-scale farming.

“We are responsible for developing Mali,” he said. “If the civil society does not agree with the way we are doing it, they can go jump in a lake.”

The looming problem, experts noted, is that Mali remains an agrarian society. Kicking farmers off the land with no alternative livelihood risks flooding the capital, Bamako, with unemployed, rootless people who could become a political problem.

“The land is a natural resource that 70 percent of the population uses to survive,” said Kalfa Sanogo, an economist at the United Nations Development Program in Mali. “You cannot just push 70 percent of the population off the land, nor can you say they can just become agriculture workers.” In a different approach, a $224 million American project will help about 800 Malian farmers each acquire title to 12 acres of newly cleared land, protecting them against being kicked off.

Jon C. Anderson, the project director, argued that no country has developed economically with a large percentage of its population on farms. Small farmers with titles will either succeed or have to sell the land to finance another life, he said, though critics have said villagers will still be displaced.

“We want a revolutionized relationship between the farmer and the state, one where the farmer is more in charge,” Mr. Anderson said.

Soumouni sits about 20 miles from the nearest road, with wandering cattle herders in their distinctive pointed straw hats offering directions like, “Bear right at the termite mound with the hole in it.”

Sekou Traoré, 69, a village elder, was dumbfounded when government officials said last year that Libya now controlled his land and began measuring the fields. He had always considered it his own, passed down from grandfather to father to son.

“All we want before they break our houses and take our fields is for them to show us the new houses where we will live, and the new fields where we will work,” he said at the rally last month.

“We are all so afraid,” he said of the village’s 2,229 residents. “We will be the victims of this situation, we are sure of that.”

This article has been revised to reflect the following correction: Correction: December 22, 2010 An earlier version of this article misspelled the given name of an economist at the United Nations Development Program in Mali. He is Kalfa Sanogo, not Kalfo.




economist.com        Aug 12th 2011

China's oil trade with Africa
Does the government in Beijing control the China International Fund?

SOME international observers have concluded that the Queensway syndicate is  a front for the Chinese government. The argument goes that Sam Pa and his  partners help China to purchase much-prized resources while keeping official  hands clean. Indeed, there are some links. Mr Pa has military contacts in China  from selling arms to Angola during the Cold War. The Chinese ambassador in  Venezuela appeared alongside him on "Aló Presidente". The China International  Fund office in Angola is run by a former Chinese colonel. And in a company  filling, a Beijing address for Wu Yang, one of the syndicate’s original members,  matches an address associated with the ministry of state security.

Yet it would be wrong to assume that the syndicate is controlled from Beijing.  The Chinese government has made at least three strongly worded statements  denying any link with the Queensway syndicate. It has repeated them to  Western diplomats in private. China was so wary of corruption surrounding oil  deals that in 2004 its secret service supposedly gave the Angolan president a  list of 20 top officials who were trying to skim off money.

China’s protestations appear to be mostly genuine. There are at least four  pieces of evidence in its favour. First, the Angolans, including Mr Vicente, seem  to have gained a significant hold on the syndicate. Recent company fillings in  Singapore show that China Sonangol now owns China International Fund, the  original vehicle.

Second, when two Chinese state oil firms had a chance three years ago to buy  their first stakes in an Angolan oilfield, Sonangol intervened to scupper the $1.3  billion deal, making sure the field went to China Sonangol instead—a strategic  loss to China, which is dependent on Angolan oil.

Third, when Mr Vicente and China Sonangol signed their vast deal with the junta  in Guinea they shut out a range Chinese state-owned firms from future  concessions, even though some of them were already entrenched. Why would  China sponsor a private company to undermine its national champions?

Fourth, the syndicate’s founder Mr Wu, who may have had a link with the  ministry of state security, no long has any influence in the syndicate—last year  Mr Wu sued the other founders, saying they no longer allowed him access to  company documents. This year he failed to appear in official records as a  director. He was pushed out.

The syndicate looks as if it is a private enterprise. The Chinese state may see it  as a necessary evil, letting it operate in Angola and thus insulating Chinese  state companies from the corruption that sometimes surrounds large resource  deals.




economist.com    Aug 13th 2011

China International Fund
The Queensway syndicate and the Africa trade
China’s oil trade with Africa is dominated by an opaque syndicate.
Ordinary  Africans appear to do badly out of its hugely lucrative deals.

WHEN the man likely to become China’s next president meets an African oil  executive, you would expect the dauphin to dominate the dealmaker. Not,  though, with Manuel Vicente. On April 15th this year the chairman and chief  executive of Sonangol, Angola’s state oil firm, strode into a room decorated  with extravagant flowers in central Beijing and shook hands with Xi Jinping, the  Chinese vice-president and probable next general secretary of the Communist  Party. Mr Vicente holds no official rank in the Angolan government and yet, as if  he were conferring with a head of state, Mr Xi reassured his guest that China  wants to “strengthen mutual political trust”.

Angola—along with Saudi Arabia—is China’s largest oil supplier and that alone  makes Mr Vicente an important man in Beijing. But he is also a partner in a  syndicate founded by well-connected Cantonese entrepreneurs who, with their  African partners, have taken control of one of China’s most important trade  channels. Operating out of offices in Hong Kong’s Queensway, the syndicate  calls itself China International Fund or China Sonangol. Over the past seven  years it has signed contracts worth billions of dollars for oil, minerals and  diamonds from Africa.
 

These deals are shrouded in secrecy. However, they appear to grant the  Queensway syndicate remarkably profitable terms. If that is right, then they  would be depriving some of the world’s poorest people of desperately needed  wealth. Because the syndicate has done deals with the regimes in strife-torn  places, such as Zimbabwe and Guinea, it may also have indirectly helped  sustain violent conflicts.

The Economist repeatedly put these accusations to the people who feature in  this article, asking for their side of the story. But—with one exception, noted  below—we heard nothing. In short, it looks as if the fortunes of entire African  countries depend to a significant degree on the actions of a little-known, opaque  and unaccountable business syndicate. “Buccaneers are cutting themselves a  large slice of Africa’s resource cake,” says Gavin Hayman of Global Witness, a  watchdog that mapped the syndicate’s deals.

The Queensway rules
The syndicate is built on links forged during the cold war. It is largely the  creation of a man known as Sam Pa. Though he uses several names, he was  born Xu Jinghua. After attending a Soviet academy in Baku four decades ago,  say people who have looked into his career, he traded with Angola during its  civil war, which lasted from 1975 to 2002 and over the years was a proxy  battleground for several outside powers, including China, America, Cuba, the  Soviet Union and South Africa. Mr Pa is a private and rarely photographed  person. His name appears in few syndicate documents. He is believed to exert  control through Veronica Fung, who may be a member of his family. She  controls 70% of a core company, Newbright International. The two frequently  travel in Africa, using the syndicate’s fleet of Airbus jets. They are said  sometimes to bypass customs.

Mr Pa has several Chinese partners, according to a 2009 American  congressional report. The daughter of a Chinese general, Lo Fong Hung,  married to Wang Xiangfei, a well-connected banker, controls 30% of Newbright.  Mrs Lo is the public face of China International Fund and China Sonangol. She is  listed as a director of dozens of interconnected companies. The business’s  operations were initially entrusted to the head of a privatised engineering firm  from the mainland, Wu Yang. Later, African partners took over.

Although the Queensway syndicate has sometimes been suspected of being an  arm of the Chinese government, there is little evidence of that. Indeed, it has  often been the butt of criticism from Chinese officials. More likely it was set up  to take advantage of a new strategy by the Chinese government, known as the  “going out” policy. In 2002, after decades of commercial isolation, China started  encouraging entrepreneurs to venture abroad. Short of contacts, Mr Pa teamed  up with Hélder Bataglia, a Portuguese trader who had grown up in Angola and  had links to Latin America. Together in 2004 they visited Néstor Kirchner, the  president of Argentina, and Hugo Chávez, the president of Venezuela. Mr  Chávez welcomed them on his weekly television show “Aló Presidente”, where  Mr Pa grandiloquently declared: “This is an historic day because we are taking  part in your programme.”

The syndicate initialled several deals in Latin America but none of them came to  much. The idea was to trade minerals for infrastructure—in return for  commodities, Chinese contractors would build housing and highways. But  Argentina and Venezuela already had a fair amount of both, so the syndicate  turned to new markets.

In late 2004 Mr Pa travelled to Angola. He knew President José Eduardo dos  Santos, having first met him as a student in Baku and later traded with his  guerrilla army. Mr Pa’s new partner, Mr Bataglia, also knew the guerrillas from  having supplied them with food during the civil war. They were joined by a third  trader, Pierre Falcone, a French Algerian who has long enjoyed close links with  the Angolan elite and particularly the president.

Together the men persuaded the Angolan elite to channel their fast-expanding  oil exports to China through a new joint venture, called China Sonangol. Mr  Vicente, boss of Angola’s Sonangol, became its chairman. Contracts, signed in  2005, gave the company the right to export Angolan oil and act as middleman  between Sonangol and Sinopec, one of China’s oil majors.

China Sonangol threw itself into the business, according to Angolan oil ministry  records and applications for bank loans backed by oil shipments. The official  statistics are incomplete, but good sources have concluded that almost all of  China’s imports of oil from Angola—worth more than $20 billion last year— come from China Sonangol. By contrast, China’s state-owned oil companies  have no direct interest in Angolan oilfields, one of their two biggest sources of  crude. Their names do not show up on the map of concessions.

To Guinea and Zimbabwe
By 2009 the syndicate was trading a lot of Angolan oil and decided to expand to  other African countries. Mr Vicente, both head of the Angolan state oil company  and of China Sonangol, flew to Guinea in 2009 to arrange a deal for the  syndicate. One of the people he met was Mahmoud Thiam, Guinea’s minister of  mines, whose government had come to power the same year in a coup. Mr  Thiam is an American citizen who studied at Cornell University and had  previously worked as a Wall Street banker at Merrill Lynch and UBS.

With Mr Thiam’s support, the syndicate won the chance to become a partner in  a new national mining company. This would control the state’s share of existing  projects and, much more important, gain control of future projects in what is a  relatively undeveloped mineral territory. Guinea contains the world’s largest  reserves of bauxite and its largest untapped reserves of high-grade iron ore.  Under a contract signed by Mr Vicente, the syndicate got an 85% share in a  venture called the African Development Corporation. The government received  the other 15%. The venture won exclusive rights to new mineral concessions in  Guinea, including the right to negotiate oil-production contracts in the Gulf of  Guinea. In return, the syndicate promised to invest “up to $7 billion” in housing,  transport and public utilities, according to the government of Guinea (GDP $4.5  billion).

Ultimately this deal foundered on a Guinean election, but at the time the  Queensway syndicate was so pleased that it reportedly gave Guinea’s military  ruler a helicopter as a present. Mr Thiam began to travel with representatives  for the syndicate—though in a response to our questions (and as the only  person to reply to us) he says he was representing the Guinean government’s  shareholding in the joint venture and he denies ever having become one of its  employees. Mr Thiam went to Madagascar for the negotiation of a deal  modelled on the one he made on Guinea’s behalf. Simultaneously, he carried  on as mines minister for another year.

Around the same time, Zimbabwe also caught the syndicate’s eye. Mr Pa met  Happyton Bonyongwe, the head of the Central Intelligence Organisation (CIO),  the country’s notorious secret police, which helps to keep Robert Mugabe in  power. Mr Pa’s plane frequently showed up at the Harare airport and he bought  properties in the capital, including the 20-storey Livingstone House. His two  original partners, Mrs Fong and Mrs Lo, became directors in a new company,  called Sino-Zimbabwe Development Limited, which received rights to extract oil  and gas, and to mine gold, platinum and chromium. In return, the company  publicly promised to build railways, airports and public housing. These pledges  were valued at $8 billion by Mr Mugabe’s government.

By 2009 the Queensway syndicate spanned the globe from Tanzania and Côte  d’Ivoire to Russia and North Korea and on to Indonesia, Malaysia and America.  It had bought the JPMorgan Chase building at 23 Wall Street in New York.

A sad, sad Songangol
Nobody should begrudge an entrepreneur commercial success. And China needs  the raw materials that the Queensway syndicate can supply. However, there  are three worries about the syndicate’s conduct.

The first is personal gain. The terms under which China Sonangol buys oil from  Angola have never been made public. However, several informed observers  say that the syndicate gets the oil from the Angolan state at a low price that  was fixed in 2005 and sells it on to China at today’s market prices. The price at  which the contract was fixed is confidential, but Brent crude stood at just under  $55 a barrel in 2005; today it is trading above $100. In other words, the  syndicate’s mark up could be substantial. Over the years, considering the  volume of oil that is being sold to China, its profit could amount to tens of  billions of dollars. The Economist ’s requests for comment have gone  unanswered. No public statement suggests the terms have been renegotiated  since 2005.

In return for Angolan oil, the syndicate promised to build infrastructure,  including low-cost housing, public water-mains, hydroelectric plants, cross- country roads and railways, according to the government. The country  desperately needs such things, to be sure. But their value is unlikely to exceed  several billion dollars. That looks like a poor deal for the Angolan people.

In Angola accusations of personal enrichment percolate up towards the top of  the state structure. In 2006 the head of the external intelligence service,  General Fernando Miala, alleged that $2 billion of Chinese money intended for  infrastructure projects had disappeared. He claimed that the funds had been  transferred to private accounts in Hong Kong by senior officials, though without  naming people mentioned in this article. The general was swiftly sacked, tried  and imprisoned (he may, however, now be about to make a comeback to  government).

Parts of the Angola-China oil trade appear to be contaminated by conflicts of  interest. The Angolan president’s son is said to be a director of China Sonangol,  the main trading partner of the state oil company. The Economist’s requests for  comment to the companies went unanswered. As well as running both the state  oil company and its main customer, Mr Vicente is a director of private shell  companies linked to the syndicate. Although these may exist for tax purposes,  a report on foreign corruption, prepared last year by the American Senate,  reveals that Sonangol was deemed so corrupt in 2003 that Citibank closed all its  accounts. The report also says that Mr Vicente personally owns 5% of  Sonangol’s house bank which has assets worth $8.2 billion. According to the IMF  and the World Bank, billions of dollars have disappeared from Sonangol’s  accounts. At one point, Sonangol awarded Mr Vicente a 1% ownership stake in  the company he chairs. He was forced to give it back after a public outcry in  Angola.

In Guinea criticism is focused on the former mines minister. An unpublished  2009 WikiLeaks cable quotes an American mining executive, whose company  stood to lose business in Guinea because of the syndicate, complaining that Mr  Thiam has “personally benefited from promoting [the] China International  Fund”. Mr Thiam denies this. As a former Wall Street banker, he already had  money before he returned to the country of his birth.

The deserted railway
The second complaint about the Queensway syndicate is that in Africa it has  failed to meet many of the obligations it took on to win mining licences.  Zimbabwe is still awaiting even a fraction of its promised infrastructure. Guinea  never received the 100 public buses that were meant to arrive within 45 days of  the 2009 deal.

The situation in Angola is more complicated, though also disappointing. Chinese  contractors have built some housing and railway lines and the projects were at  first financed by the syndicate. Signs saying “China International Fund”  appeared on construction sites. But in recent years they have been replaced by  those of other Chinese companies. According to Western diplomats and Chinese  businessmen, the syndicate stopped paying bills for more than eight months in  2007. All work stopped, 2,000 Angolan day labourers were fired on the  Benguela railway project and only a Chinese cook remained on duty. Western  diplomats suspected the syndicate was banking on being bailed out by the  Angolan government, which had staked its legitimacy on infrastructure  development. Soon enough, the government issued treasury bonds worth $3.5  billion to finance the projects. Subcontractors are now paid directly by the  Angolan state.

Angola’s wealth isn’t trickling down
Six years after the syndicate arrived more than 90% of the residents of the  capital, Luanda, remain without running water. Meanwhile, the syndicate has  continued to prosper.

The third complaint against the Queensway syndicate is that its cash props up  certain political leaders and thereby fuels violent conflicts. For instance, in  Guinea the syndicate came to the rescue of the junta. In September 2009  government men went on the rampage, raping women by the score and  massacring more than 150 protesters in a sports stadium, which triggered EU  and African Union sanctions. A month later, the syndicate signed its minerals  deal, transferring $100m to the cash-strapped junta. Bashir Bah, a member of  the opposition, condemned the deal. “First of all it is immoral, and second of all  it is illegal,” he said.

The deal caused outrage even inside the government. The prime minister,  Kabine Komara, a relatively powerless figure, protested about ministers’  conduct to other officials. A memo from the prime minister’s office, dated  November 26th and leaked to Global Witness, declared: “The council of  ministers did not discuss or bring up the question of creating a national mining  company. What’s more it is not acceptable that a foreign company could  become a shareholder in such a company, as it would grant the company, ipso  facto, the ownership of all the current and future wealth of the country.” Mr  Thiam denies any knowledge of Mr Komara’s complaint.

According to international institutions, the military leaders, who backed Mr  Thiam, needed the syndicate’s money if they were to hold on to power. A World  Bank official told Western diplomats the junta would “sell the country short on  mining revenues and tell the international donors to get lost”. The junta  eventually fell and, following elections last year, the minerals deal is now in  limbo.

In Zimbabwe the situation is even more egregious. The finance minister, an  opposition member of the governing coalition, has blocked extra funding for the  CIO, presumably because it backs Mr Mugabe. And yet, it is suddenly flush with  cash. In recent months it has reportedly doubled the salaries of agents,  acquired hundreds of new off-road vehicles and trained thousands of militiamen  who are now in a position to intimidate voters during next year’s elections.  Several sources who have looked at the deal concluded that the money came  from Mr Pa. They say he struck a side deal with the CIO that gives him access  to Zimbabwe’s vast diamond wealth—controlled in part by the CIO. The  diamonds were for some years banned from reaching international markets  because of global industry prohibitions over violence routinely inflicted on  Zimbabwean miners. Yet, Mr Pa is said to buy them and apparently makes  payments directly to the CIO, bypassing government coffers.

Little is certain about China Sonangol and China International Fund. Our  repeated questions to the companies and their representatives went  unanswered. The documents and witnesses we tracked down around the world  paint an incomplete picture. But they raise questions of immense public  interest.

Who benefits?
Oversight of the Queensway syndicate’s businesses is almost non-existent. A  decade ago Mr Vicente forbade foreign oil companies in Angola to publish even  routine data, on threat of ejection. Since then Sonangol has published some  information on its operations. But oil contracts are treated as state secrets.  Revenues from deals with the syndicate go to an opaque agency controlled by  the president whose accounts are off-limits even to government ministers.  Although Sonangol scores reasonably for some criteria, such as revenue, in  rankings by Transparency International and Revenue Watch, two lobbies for  corporate openness, it still receives bottom rankings for safeguards against  corruption.

The syndicate itself is even more opaque. Who ultimately benefits by how much  from the lucrative deals is not clear from public records. The syndicate’s  corporate structure is fiendishly complex. Individual companies are not  vertically integrated—it is not a group in the usual sense. There is no holding  company, though the same people keep cropping up as directors in the records  of affiliated companies, which are often owned by shell companies registered in  lightly regulated tax shelters. Final beneficial ownership is impossible for an  outsider to establish.

All this means that the syndicate taints China’s “going out” policy, a cornerstone  of the country’s rise in recent years. When the policy works, African resources  are swapped for aid, commercial financing and payments in kind such as public  infrastructure. But with the syndicate, billions of dollars meant for schools,  roads and hospitals have apparently ended up in private accounts. Rather than  fixing Africa’s lack of infrastructure, Chinese entrepreneurs and Africa’s  governing elites look as if they are conspiring to use the development model as  a pretext for plunder.