From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Fri Jan 01 2010 - 17:15:39 EST
Ethiopian Farms Lure Investor Funds as Workers Live in Poverty
By Jason McLure
http://www.bloomberg.com/apps/data?pid=avimage&iid=im2ToP4RWcSw
Dec. 31 (Bloomberg) -- Until last year, people in the Ethiopian settlement
of Elliah earned a living by farming their land and fishing. Now, they are
employees.
Dozens of women and children pack dirt into bags for palm seedlings along
the banks of the Baro River, seedlings whose oil will be exported to India
and China. They work for Bangalore- based
<http://www.bloomberg.com/apps/quote?ticker=KARG%3AIN> Karuturi Global Ltd.,
which is leasing 300,000 hectares (741,000 acres) of local land, an
<http://www.worldatlas.com/webimage/countrys/africa/et.htm> area larger than
Luxembourg.
The jobs pay less than the World Bank's $1.25-per-day poverty threshold,
even as the project has the potential to enrich international investors with
annual earnings that the company expects to exceed $100 million by 2013.
"My business is the third wave of outsourcing,"
<http://search.bloomberg.com/search?q=Sai%0ARamakrishna+Karuturi&site=wnews&
client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filte
r=p&getfields=wnnis&sort=date:D:S:d1> Sai Ramakrishna Karuturi, the
44-year-old managing director of Karuturi Global, said at the company's
dusty office in the western town of Gambella. "Everyone is investing in
China for manufacturing; everyone is investing in India for services.
Everybody needs to invest in Africa for food."
Companies and governments are buying or leasing African land after cereals
prices almost <http://www.fao.org/docrep/011/ai474e/ai474e16.htm> tripled
in the three years ended April 2008. Ghana, Madagascar, Mali and Ethiopia
alone have approved 1.4 million hectares of land allocations to foreign
investors since 2004, according to the <http://www.iied.org/> International
Institute for Environment and Development in London.
Emergent Asset Management Ltd.'s African Agricultural Land Fund opened last
year. On Nov. 23, Moscow-based <http://www.pharosfund.com/index.html>
Pharos Financial Advisors Ltd. and Dubai-based <http://www.miroasset.com/>
Miro Asset Management Ltd. announced the creation of a $350 million private
equity fund to invest in agriculture in developing countries.
'Last Frontier'
"African agricultural land is cheap relative to similar land elsewhere; it
is probably the last frontier," said
<http://search.bloomberg.com/search?q=Paul%0AChristie&site=wnews&client=wnew
s&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfiel
ds=wnnis&sort=date:D:S:d1> Paul Christie, marketing director at
<http://www.eaml.net/templates/Emergent/home.asp?PageId=7&LanguageId=0>
Emergent Asset Management in London. The hedge fund manager has farm
holdings in South Africa, Mozambique and Zimbabwe.
"I am amazed it has taken this long for people to realize the opportunities
of investing in African agriculture," Christie said.
Monsoon Capital of Bethesda, Maryland, and Boston-based Sandstone Capital
are among the shareholders of Karuturi Global, Karuturi said. The company is
also the world's largest producer of roses, with flower farms in India,
Kenya and Ethiopia.
One advantage to starting a plantation 50 kilometers (31 miles) from the
border with war-torn Southern Sudan and a four- day drive to the nearest
port: The land is free. Under the agreement with Ethiopia's government,
Karuturi pays no rent for the land for the first six years. After that, it
will pay 15 birr (U.S. $1.18) per hectare per year for the next 84 years.
More Elsewhere
Land of similar quality in Malaysia and Indonesia would cost about $350 per
hectare per year, and tracts of that size aren't available in Karuturi
Global's native India, Karuturi said.
Labor costs of less than $50 a month per worker and duty- free treaties with
China and India also attracted Karuturi Global, he said. The $100 million
projected annual profit will come from the export of food crops, including
corn, rice and palm oil, he said. The company also is plowing land on a
10,900- hectare spread near the central Ethiopian town of Bako.
The project will give the government revenue from corporate income taxes and
from future leases, as well as from job creation, said Omod Obang Olom,
president of Ethiopia's Gambella region and an ally of Prime Minister
<http://search.bloomberg.com/search?q=Meles+Zenawi%3Fs&site=wnews&client=wne
ws&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfie
lds=wnnis&sort=date:D:S:d1> Meles Zenawi's ruling party.
"This strategy will build up capitalism," he said in an interview in
Gambella. "The message I want to convey is there is room for any investor.
We have very fertile land, there is good labor here, we can support them."
The government plans to allot 3 million hectares, or about 4 percent of its
arable land, to foreign investors over the next three years.
Surprised Workers
Workers in Elliah say they weren't consulted on the deal to lease land
around the village, and that not much of the money is trickling down.
At a Karuturi site 20 kilometers from Elliah, more than a dozen tractors
clear newly burned savannah for a corn crop to be planted in June. Omeud
Obank, 50, guards the site 24 hours a day, six days a week. The job helps
support his family of 10 on a salary of 600 birr per month, more than the
450 birr he earned monthly as a soldier in the Ethiopian army.
Obank said it isn't enough to adequately feed and clothe his family.
"These Indians do not have any humanity," he said, speaking of his
employers. "Just because we are poor it doesn't make us less human."
One Meal
Obang Moe, a 13-year-old who earns 10 birr per day working part-time in a
nursery with 105,000 palm seedlings, calls her work "a tough job." While the
cash income supplements her family's income from their corn plot, she said
that many days they still only have enough food for one meal.
The fact that the project is based on a wage level below the World Bank's
poverty limit is "quite remarkable," said Lorenzo Cotula, a researcher with
the London-based IIED.
Large-scale export-oriented plantations may keep farmers from accessing
productive resources in countries such as Ethiopia, where 13.7 million
people depend on foreign food aid, according to a June report by Olivier De
Schutter, the United Nations special rapporteur on the right to food. It
called for ensuring that revenue from land contracts be "sufficient to
procure food in volumes equivalent to those which are produced for exports."
Karuturi said his company pays its workers at least Ethiopia's minimum wage
of 8 birr, and abides by Ethiopia's labor and environmental laws.
'Easily Exploitable'
"We have to be very, very cognizant of the fact that we are dealing with
people who are easily exploitable," he said, adding that the company will
create up to 20,000 jobs and has plans to build a hospital, a cinema, a
school and a day-care center in the settlement. "We're going to have a very
healthy township that we will build. We are creating jobs where there were
none." The project may help cover part of the $44 billion a year that
the UN <http://www.fao.org/> Food and Agriculture Organization says must be
invested in agriculture in poor nations to halve the number of the world's
hungry people by 2015.
"We keep saying the big problem is, you need investment in African
agriculture; well here are a load of guys who for whatever reason want to
invest," David Hallam, deputy director of the FAO's trade and markets
division, said in an interview in Rome. "So the question is, is it possible
to sort of steer it toward forms of investment that are going to be
beneficial?"
Buntin Buli, a 21-year-old supervisor at the nursery who earns 600 birr a
month, said he hopes Karuturi will use some of its earnings to improve
working conditions and provide housing and food. "Otherwise we would
have been better off working on our own lands," he said. "This is a society
that has been very primitive. We want development."
To contact the reporter on this story:
<http://search.bloomberg.com/search?q=Jason+McLure&site=wnews&client=wnews&p
roxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=
wnnis&sort=date:D:S:d1> Jason McLure in Addis Ababa via the Johannesburg
bureau at <mailto:abolleurs@bloomberg.net> abolleurs@bloomberg.net.
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