Friday, November 14, 2014

Bailing out the capitalists

Development funds from European governments have helped to rescue a Canadian company that pays workers as little as $1 per day to toil on some of Africa's largest palm oil plantations in the impoverished Democratic Republic of Congo (DRC). Government-backed investment funds from Britain, France and Spain, designed to help poor countries develop, stepped in to buy 60 percent of Toronto-listed Feronia Inc for about $35 million in two separate investments in 2012 and 2013. The investments came after shareholders fled the Cayman Islands-registered company as its share price fell about 95 percent.  Feronia was set up by Canadian hedge fund TriNorth Capital Inc and venture capitalist Ravi Sood in 2008 to buy three plantations in the DRC and is now one of the country's largest employers with more than 3,500 workers.

When Feronia and Sood initially promoted the purchase of the three DRC plantations to investors, they sold it as a potentially high-yield deal in a country emerging from five years of civil war, which ended in 2003. Memories of record-high food prices were still fresh in investors' minds and the future initially looked bright for Feronia, a company incorporated in the Cayman Islands to avoid "double taxation" in Canada and the DRC.

But rights groups question whether the investment in the DRC is a suitable use of public funds, with the cash propping up a loss-making company shunned by private investors that has done little to help workers, paying them about half the minimum wage. "Workers are living in crumbling homes, in severe disrepair. There is malnutrition in the communities near the plantations," said Jean Francois Mombia, a campaigner with RIAO-RDC, a non-governmental organisation that works with labourers at Feronia's operations.

Devlin Kuyek, a researcher with GRAIN, a Spain-based land rights organisation following the DRC, raised similar concerns. "Feronia has not brought improved working conditions on the plantations or improved living conditions for the local communities, or even decent returns for the people whose money was used for the investment," Kuyek said.

Scrutiny of Feronia follows a wave of foreign investment in African farmland that has raised ethical questions about "land grabs" and led to unrest on some projects. Badly devised investments can harm or displace local people, according to US-based non-profit Landesa that works to secure land rights for the world's poorest farmers, but development agencies have in some cases backed hedge funds with projects considered ethically dubious by some activists.

Activists resent that Feronia's purchase of the plantations, partly with public funds, has not led to improved conditions for workers beyond maintaining their jobs. Most are poorly paid, often earning just more than $1 a day.

Sood, Feronia's CEO, agreed that wages are "too low" but stressed it was challenging to get the company into the black.

Mombia said unions are currently negotiating with the company over wages and benefits. "They are not taking care of the workers ... None of the schools [for the children of employees in the remote area] are functioning," he said.

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